IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Newman v. Beta Maritime Ltd.,

 

2018 BCSC 1442

Date: 20180827

Docket: S162704

Registry: Vancouver

Between:

Jonathan Newman

Plaintiff

And

Beta Maritime Ltd.

Defendant

Corrected Judgment: The text of the judgment was corrected at paragraphs 38, 48, 57,124, 175 and the Subheadings before paragraphs 87, and 125 on
September 14, 2018.

 

Before: The Honourable Madam Justice Matthews

 

Reasons for Judgment

Counsel for the Plaintiff:

Paul Jaffe

Counsel for the Defendant:

David S. Jarrett

Anne Amos-Stewart

Place and Date of Trial:

Vancouver, B.C.

March 26 - 29, 2018

Place and Date of Judgment:

Vancouver, B.C.

August 27, 2018


 

I. INTRODUCTION

[1]             The plaintiff, Jonathan Newman, paid money to the defendant, Beta Maritime Ltd., towards the purchase of a submarine owned by Beta Maritime. The purchase did not complete because the named purchaser on the contract of purchase and sale, Australian Oceanographics Pty Ltd. (“AOP”), controlled by an individual named Don Schofield, repeatedly failed to pay the balance of the purchase price. Mr. Newman sought to complete the purchase without AOP after Beta Maritime declared the contract to be at an end. Beta Maritime declined to complete the sale to Mr. Newman and refused to return the monies that Mr. Newman had paid to date, asserting that the monies paid were non-refundable.

[2]             Mr. Newman’s claims are based on the doctrines of unjust enrichment, money had and received, mistake of fact and resulting trust. Mr. Newman disputes that the funds were non-refundable. In the alternative, he argues that the non-refundable provision was not applicable if Beta Maritime did not deliver the submarine. He argues that, given that Beta Maritime did not deliver the submarine when he tendered the balance of the funds, it cannot rely on the non-refundable provision. Mr. Newman claims he paid the funds under mistake of fact that Mr. Schofield would pay his share of the purchase price and the purchase and sale agreement would complete.

[3]             Beta Maritime’s position is that the contract for purchase and sale (the “August 2014 contract”), and a subsequent extension of time to complete the contract (the “October 2014 extension”), provided for all amounts paid to be non-refundable. Beta Maritime relies on the terms of the contract with AOP as a juristic reason to retain the funds. With regard to money had and received and mistake of fact, Beta Maritime asserts that those are not stand alone causes of action but are subsumed in unjust enrichment. It also submits there is no mistake of fact and, finally, that a resulting trust cannot arise on the facts of this case.

II. ISSUES

[4]             The issues are:

a)    Were the funds paid pursuant to contractual terms that they were non-refundable that provide a juristic reason for Beta Maritime to keep the funds?

b)    Were the funds paid money had and received?

c)     Were the funds paid under mistake of fact?

d)    Did the monies paid cause a resulting trust to arise?

e)    If Mr. Newman is entitled to the return of all or some of the monies paid, what is the remedy: constructive trust or monetary damages?

[5]             In his closing submissions, Mr. Newman’s counsel also referred to equitable estoppel and promissory estoppel. Neither was pleaded. Counsel did not explain why they were raised without having been pleaded and the arguments were not sufficiently developed to permit analysis. I decline to consider them.

III. Background Findings of Fact

[6]             AOP, as purchaser, and Beta Maritime, as seller, entered into the August 2014 contract for purchase and sale of a dual deep worker submarine (“DDW”) on August 12, 2014. The purchaser and seller agreed to the October 2014 extension of the closing date on certain terms. I will refer to the August 2014 contract and the October 2014 extension by those terms when referring to them independently. When referring to them collectively, I will refer to them as the “contract”.

A. Key Personnel

[7]             Mr. Newman is a submarine pilot who is in the business of submersible vehicles. He operates a business called UVI, which stands for Underwater Vehicles Inc. Mr. Newman brokers the sales of new and used submarines and runs courses on operating submersible vehicles through UVI.

[8]             Mr. Schofield did not testify. He is a businessman who is apparently involved in a variety of industries including the oil and gas industry and underwater research, the latter through AOP. Those who did testify, including Mr. Newman and Michael McDowell, testified that Mr. Schofield appeared to be a wealthy, successful and respected business man.

[9]             Mr. Newman met Mr. Schofield in 2009. Mr. Newman had shown Mr. Schofield submarines from time to time over the years, including the DDW that is the subject of this litigation. In 2014, Mr. Schofield and Mr. Newman decided to buy the DDW together through their respective companies. They developed business plans that involved the DDW, including film work, charter work, research work and training in submersible piloting.

[10]         There were several people involved in the sale on the side of the seller. Mr. McDowell is involved in ocean exploration. Prior to the events of this case, he had dealings with Mr. Schofield and with a businessman, Ray Dalio. Those dealings involved the Alucia, an ocean research vessel to which the DDW was appended. He is not employed by Beta Maritime but nonetheless, apparently with the permission or at the behest of Mr. Dalio, took on the role of liaison between Beta Maritime and Mr. Schofield over the sale of the DDW.

[11]         Alex Flemming is employed by Beta Maritime as the operations manager for the Alucia. He handled the sale of the DDW for Beta Maritime.

[12]         Tim Sinchak is the legal counsel and vice president of Beta Maritime.

[13]         Finally, Mr. Dalio was described by Mr. Flemming as the “top of the tree” on the seller’s side. While Mr. Dalio is not employed by Beta Maritime and does not hold any director or officer position with Beta Maritime, the company is run at the direction of Mr. Dalio for the purposes of the matters in this litigation. The evidence of Mr. McDowell and Mr. Flemming was that Mr. Dalio had all final decision-making authority for Beta Maritime in the sale of the DDW.

B. The Initial Purchase and Sale Negotiations and Agreement

[14]         The discussions pertaining to the purchase and sale of the DDW began in the spring of 2014. I pause to note that many of the discussions took place by email. The emails in evidence have dates and times on them. The individuals sending these emails were located in disparate time zones including Australia, Vancouver, the US east coast and Europe. The date and time stamps on the emails in do not include a time zone reference so it is possible that some of them were sent on one day and received on another day by the recipient. Nothing turns on the particular hour or day that a communication was sent.

[15]         In 2014, the DDW was owned by Beta Maritime and was available for sale. It was located at an underwater research centre in Massachusetts called Woods Hole. The asking price was $650,000 USD. Mr. Schofield contacted Mr. McDowell about it. Mr. McDowell said he had no brief from Beta Maritime to start initial discussions so he went to Beta Maritime to get clearance to act as a facilitator, which he received.

[16]         On the purchaser side, Mr. McDowell dealt with Mr. Schofield exclusively. They communicated primarily by email and by telephone at times. Mr. Newman testified that he understood that Mr. Schofield and Mr. McDowell were friends and had a good relationship. On this basis, Mr. Newman was content to let Mr. Schofield handle the negotiations.

[17]         Mr. McDowell testified that Mr. Dalio asked him if Mr. Schofield would be willing to pay $500,000 to $600,000 for the DDW. The price that was eventually agreed upon was $375,000 USD. The initial payment schedule discussed was $200,000 USD non-refundable on signing and the balance over three to six months. AOP and Beta Maritime eventually agreed to a $50,000 USD deposit on signing and the balance paid on or about September 30, 2014 on the delivery of the DDW.

[18]         The $50,000 deposit in the August 2014 contract was described this way: “non-refundable for any reason other than the failure of Seller to deliver the DDW submersible with warranties described”.

[19]         Mr. Schofield/AOP paid $25,000 USD as one half of the $50,000 USD non-refundable deposit. Mr. Newman paid the other half of the non-refundable deposit, and an additional $137,000 USD pursuant to and at the time of the October 2014 extension. In February 2015, when the balance of the funds had not been received because Mr. Schofield did not pay them, Beta Maritime declared the contract at an end, refused to allow Mr. Newman to complete the deal, refused to deliver the DDW and refused to return the funds paid to date.

IV. Discussion

A. Unjust Enrichment

[20]         An action in unjust enrichment restores money or property to a plaintiff who can establish:  (1) the defendant was enriched; (2) the plaintiff suffered a corresponding detriment; and (3) the absence of a juristic reason for the enrichment:  Kerr v. Baranow, 2011 SCC 10 at para. 32.

[21]         For the first element, enrichment, the plaintiff must show that he or she paid something to the defendant which the defendant received and retained: Kerr at para. 38. The retention need not be permanent, but it must be a benefit which enriched the defendant.

[22]         While a claim for unjust enrichment will not lie against a party who received “incidental collateral benefits” from the plaintiff’s payment (Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762 at 797), the case law does not require the payment to flow directly from the plaintiff to the defendant: Innovex Foods 2001 Inc. v. Harnett, Rovers et al, 2004 BCSC 928 at paras. 15-26.

[23]         The second element, corresponding detriment, requires the plaintiff to prove that the benefit the defendant received corresponds to a deprivation the plaintiff has suffered: Kerr at para. 39.

[24]         The third step, juristic reason, is often the central issue in a claim for unjust enrichment, as it is in this case. In considering juristic reason, the court must consider whether there is “no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention ‘unjust’ in the circumstances of the case”: Kerr at para. 40.

[25]         A two-step analysis ensures that the presence or absence of a juristic reason is not assessed on a purely subjective basis: Kerr at para. 43. First, the plaintiff must show that none of the established categories of juristic reasons that would deny recovery applies. The established categories are: a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations. If the case does not fit into an established category, the plaintiff has made out a prima facie case for an absence of juristic reason. Under the second step, the defendant can rebut the prima facie absence of juristic reason by showing another reason to deny recovery. At this stage, the court looks at the circumstances as a whole to determine whether there is another reason to deny recovery, having regard to the reasonable expectations of the parties and public policy considerations. The two step analysis is described in Garland v. Consumers’ Gas Co., 2004 SCC 25 at paras. 44-46.

[26]         In this case, the parties agree that Beta Maritime was enriched by the funds and that Mr. Newman suffered a corresponding deprivation. The question is whether the contract between Beta Maritime and AOP serves as a juristic reason.

i. Juristic Reason Analysis

Step 1: Were the Funds Paid Pursuant to Contractual Terms That They Were Non-Refundable?

[27]         Beta Maritime relies on the contract between AOP and Beta Maritime as a juristic reason. Mr. Newman is not a party to the contract, but he has pleaded that the relationship between Beta Maritime and himself was governed by the contract. He agreed in evidence that he paid the funds pursuant to the contract. Although he takes the position that the contract had a provision that the funds would be returned if the sale of the DDW did not complete, Mr. Newman does not argue that the contract cannot act as a juristic reason. Rather, he says that on the facts of this case, and in particular the terms of the contract, it does not act as a juristic reason.

[28]         A contract is an established category, hence the burden is on Mr. Newman to show that the contract does not serve as a juristic reason.

[29]         Mr. Newman argues that the contract did not provide for the monies paid to be non-refundable or, alternatively, they were only non-refundable if Beta Maritime delivered the submarine. This issue calls on the court to interpret the contract between Beta Maritime and Mr. Schofield.

[30]         The goal of contractual interpretation is to ascertain the objective intent of the parties. In undertaking this exercise, a decision-maker must read the contract as a whole, giving the words their ordinary and grammatical meaning consistent with the circumstances known to the parties at the time of making the contract. The factual matrix is always considered because the meaning of words can vary depending on the context in which they are used. However, the court must guard against permitting the context to overwhelm the words of the contract such that the court creates a new agreement: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 49 and Athwal v. Black Top Cabs Ltd., 2012 BCCA 107 at paras. 42-47.

[31]         In Athwal at para. 43, the Court of Appeal points out that this demands objective evidence; the court does not concern itself with the actual intentions of the parties but rather with their manifested intentions.

[32]         In some cases, the surrounding circumstances considered by the court can include post-execution conduct. Where there is more than one reasonable interpretation to be given to a contractual provision, or where the conduct indicates an agreed modification of the contract between the parties, evidence of the conduct or post-execution negotiations is admissible: Canadian National Railways v. Canadian Pacific Ltd. (1978), 95 D.L.R. (3d) 252 (B.C.C.A.), aff’d [1979] 2 S.C.R. 668; Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. (1995), 24 O.R. (3d) 97 (C.A.) at para. 24; Salminen v. Garvie, 2011 BCSC 339 at paras. 23-32; Clarke, Irwin & Co. v. George G. Harrap & Co. [1980], 1 A.C.W.S. (2d) 363 (Ont. S.C.).

[33]         In any case, evidence of surrounding circumstances is limited in scope to objective evidence of the background facts that were or ought to have been within the knowledge of both parties, before or at the time of the execution of the contract: Sattva Capital at paras. 58-60.

a. Was the $25,000 USD Payment Paid Pursuant to a Contractual Term that it was Non-Refundable?

[34]         In August 2014, AOP and Beta Maritime reduced the terms of the purchase and sale to writing. Mr. Schofield sent the agreement to Mr. Newman in draft who provided comments on it back to Mr. Schofield.

[35]         The August 2014 contract was executed by Mr. Schofield for AOP on August 12, 2014 and by Mr. Sinchak on August 11, 2014. In summary, its terms are:

a)    Beta Maritime agrees to sell and AOP agrees to buy the DDW and specified spare parts;

b)    The purchase price is $375,000 USD, payable by $50,000 as a non-refundable deposit for any reason other than Beta Maritime failing to deliver the DDW with warranties as described in the August 2014 contract and $325,000 on delivery of the DDW;

c)     Beta Maritime shall deliver the DDW to AOP at Woods Hole on or about September 30, 2014;

d)    Beta Maritime warrants that it has good and marketable title to the DDW, it has full authority to sell the DDW, the DDW is free and clear of all liens, claims and encumbrances, and Beta Maritime is not aware of any damage or material defects that have occurred with the DDW since it passed its last annual survey; and

e)    The DDW is sold in an “as is” condition with Beta Maritime disclaiming any warranty of merchantability of fitness, or working order conditions.

[36]         For the purposes of this case, the key provision is s. 2, which I set out in full as follows:

2. Buyer agrees to pay to Seller and Seller agrees to accept as the total purchase price for the DDW submersible the sum of Three Hundred Seventy Five Thousand (US$375,000) Dollars, payable in cash or immediately available funds as follows: 1) US$50,0000.00 payable upon the execution of this Agreement, which amount Buyer agrees shall be non-refundable for any reason other than the failure of Seller to deliver the DDW submersible with warranties described in 4, below, and b) $325,000.00 on the delivery of the DDW submersible as provided below.

[37]         The words of the August 2014 contract, on their face, do not allow for more than one meaning with regard to the $50,000 USD deposit. It was non-refundable unless Beta Maritime failed to deliver the DDW.

[38]         The context in which the August 2014 contract was made support this interpretation. Mr. McDowell testified that in selling these kinds of vessels, a non-refundable deposit is typical to provide the seller with value for taking the submarine off the market. Mr. Flemming testified that the reason for the non-refundable deposit was to show intent and, in the event that the sale did not close, the seller would have some leverage on expenses.

[39]         Mr. Flemming testified that there were others interested in the DDW at the time that Beta Maritime was introduced to Mr. Schofield. Once the deal with Mr. Schofield was put together, those other interested parties were no longer in play.

[40]         Mr. Newman agreed that in his experience as a submarine broker a deposit is usually required. He testified that some deposits are refundable, some are not and that is usually spelled out in the agreement. Mr. Newman said that in this case, the deposit was to “move things along” and to show Beta Maritime that they were serious about purchasing the DDW. Mr. Newman did not challenge the evidence pertaining to the reason for the non-refundable deposit or the status of the DDW at the time of the sale or at present. I conclude that Mr. Newman’s evidence of the reason for the deposit is consistent with that of Mr. McDowell and Mr. Flemming – it was to induce Beta Maritime to commit to sell the DDW to AOP, including taking it off the market. Beta Maritime took it off the market.

[41]         In their communications during the negotiations pertaining to the deposit, which was reduced from $200,000 USD to $50,000 USD, AOP and Beta Maritime always described the deposit as non-refundable.

[42]         I have no difficulty concluding that AOP and Beta Maritime intended the $50,000 deposit to be a non-refundable payment unless Beta Maritime failed to deliver the DDW.

[43]          In August 14, 2014, Mr. Newman wired $25,000 USD to Beta Maritime for the purchase of the DDW. Mr. Schofield paid the other half of the $50,000 USD deposit required by the purchase agreement. Mr. Newman agreed that his payment was made pursuant to the terms of the contract. He and Mr. Schofield had an agreement between themselves to share the purchase costs of the DDW equally.

[44]         Subject to Mr. Newman’s argument that the Beta Maritime failed to deliver the DDW, Mr. Newman has not shown that the contract should not be a juristic reason for Beta Maritime to keep the $25,000 USD that Mr. Newman paid.

b. Was the $137,000 USD Paid Pursuant to a Contractual Term that it was Non-Refundable?

[45]         The August 2014 contract provided that the balance of the purchase price was due “on or about September 30, 2014”. Mr. Schofield was not ready with his share of the payment and neither he nor Mr. Newman made a payment on or about September 30, 2014. Instead, Mr. Schofield asked Beta Maritime for an extension.

[46]         Beta Maritime asserts that the extension was agreed to on terms that an immediate non-refundable payment of $137,000 USD be made and that the balance be paid by no later than November 30, 2014.

[47]         Mr. Newman submits that the $137,000 USD was a progress payment, there was no non-refundable term and no November 30, 2014 drop dead date.

[48]         Mr. McDowell and Mr. Schofield had the most direct communications about the extension. On this issue and on other issues Mr. McDowell’s evidence was not internally cohesive and he had trouble remembering the events and timing. Despite the obvious problems he was having with recall, he stated certain things with abundant but misplaced confidence. In some cases, his evidence is contradicted by emails he wrote. These were recurring issues with Mr. McDowell’s testimony that impaired its reliability. I approach his evidence with caution when it is on contested issues unless it is corroborated by other evidence.

[49]          Mr. McDowell testified that he made it very clear to Mr. Schofield that the extension was granted on the condition that the $137,000 USD payment was non-refundable. Mr. McDowell initially testified that he did not recall when Mr. Schofield first asked for an extension, but it was sometime before September 30, 2014. He was asked about an email exchange that referenced a telephone conversation between himself and Mr. Schofield while he was on board the Alucia on September 29, 2014. He recalled being on the Alucia at that time and he remembered a telephone call with Mr. Schofield but he did not recall the contents of the call in detail. He testified that Mr. Schofield talked about cash flow problems he was having because the price of oil was dropping and adversely affecting a deal he was trying to close. Later in his testimony, Mr. McDowell denied that Mr. Schofield raised problems with an oil and gas deal on that call but rather communicated vaguely about cash flow problems and that he was not ready to close.

[50]         Since Mr. Newman was not involved in the request for an extension, he has no first-hand evidence of the terms. However, he received an email from Mr. Schofield on September 29, 2014 in which Mr. Schofield reports to Mr. Newman about his telephone call with Mr. McDowell when Mr. McDowell was on board the Alucia. In that email, Mr. Schofield said in part:

He [Mr. McDowell] said that if you (Jon) can do your part now that Ray will consider the contract terms satisfied from the timing standpoint and I can send my half after completion of the company takeover when my shares go live or the proceeds of the FAU sale – whichever ever happens first. The mood was very positive.

[51]         The only written evidence confirming what the parties to the August 2014 contract agreed upon is an email dated October 2, 2014 from Mr. Schofield to Mr. McDowell and copied to Mr. Flemming confirming the terms as follows:

My partner in the DDW purchase has his funds in USD ready now and so subject to confirmation from Alex in writing that we are good to go with the arrangements, we will transfer an additional $137,000 this week.

The arrangements referred to are:

1. Payment of additional $137,000 now,

2. Payment of balance prior to picking up the DDW from WHOI which should be in 30 days but not more than 60 days.

[52]         Mr. McDowell testified that the email set out what they agreed to. Later in his evidence, he retracted that statement and said he had no brief to agree to anything on behalf of Beta Maritime; he was simply relaying information back and forth.

[53]         Mr. Schofield’s email was forwarded to Mr. Dalio by Mr. Flemming with a cover email describing the $137,000 USD payment as non-refundable. Mr. McDowell sent an email in the same chain in which he wrote that he was confident that Mr. Schofield would come up with the money and, with the additional $137,000 USD non-refundable payment, Mr. Dalio was well protected. Mr. Dalio provided his okay. Mr. Flemming then replied to Mr. Schofield’s email confirming the terms that Mr. Schofield laid out. His email to Mr. Schofield did not include any statement that the payment would be non-refundable.

[54]         Mr. Flemming caused Beta Maritime to draft an amendment to the August 2014 contract which read as follows:

Amendment dated as of October 3, 2014 to that certain Purchase Agreement (the “Agreement”) dated August 12, 2014 between Australian Oceanographics Pty. Ltd. (“Buyer”) and Beta Maritime Limited (“Beta”) for the purchase and sale of a certain Dual Deep Worker submersible.

WHEREAS, the parties have agreed to extend the closing date provided for in the Agreement,

And

WHEREAS, the Buyer has agreed to increase the amount of the deposit provided for.

NOW, THEREFORE, in consideration for the mutual promises and covenants contained herein, the parties hereby agree as follows:

1.     The Buyer has deposited an additional amount of $136,980 towards the purchase price, making the total despot paid a total of $186,965.00. Buyer agrees that said amount is non-refundable except as provided in the Agreement.

2.     The delivery date provided for in Section 3 has been extended until November 30, 2014.

Except as provided for herein, the Agreement shall remain in full force and effect.

[55]         This amendment was signed by Beta Maritime’s counsel, Mr. Sinchak, on behalf of Beta Maritime, but not by Mr. Schofield. There is an email dated October 6, 2014 purporting to send it to Mr. Schofield, but the hard copy of the email put into evidence does not have an attachment nor is it clear that there was an attachment to the email. There is no evidence that Mr. Schofield received the draft amendment. There is no evidence why he did not sign it if he did receive it. Mr. Newman, to whom Mr. Schofield had sent the August 2014 contract before he signed it, testified that he was not aware that Beta Maritime had prepared an amendment until much later in the events when Beta Maritime declared the August 2014 contract at an end and relied on the unexecuted amendment to keep all the monies paid.

[56]         Beta Maritime relies on Crosse Estate (Re), 2012 BCSC 26, for the proposition that an unsigned contract can be enforced. In that case, the Court held that there is no general requirement that an agreement be signed, and that acceptance can be implied by conduct. I agree with that proposition. However, in this case there is one set of terms, those contained in the October 2, 2014 email to which the parties confirmed their agreement, and another set of terms, differing in a material regard, which was signed by one party and not the other.

[57]         In the circumstances, I do not accept the unexecuted amendment as confirming the terms of the extension. Its terms are different from the October 2, 2014 email the terms of which were confirmed by the parties. I find that the October 2, 2014 email set out about above contains the agreed upon terms of the October 2014 extension.

[58]         The question then becomes whether the October 2, 2014 email terms should be interpreted such that the $137,000 USD payment was made on a term that it was non-refundable.

[59]         Given the parties specified that the $50,000 USD deposit was non-refundable, the absence of that term with regard to the $137,000 USD payment is some evidence that demonstrates that they did not form the mutual intention that the payment be non-refundable at the time they agreed to the extension and the payment was made. This evidence must be considered along with the other contextual evidence and the circumstances under which the contract was made.

[60]         It is clear that Beta Maritime understood Mr. Schofield’s reference to “an additional $137,000 now” to mean $137,000 USD non-refundable notwithstanding that the words “non-refundable” had not been used in the communications exchanged between Mr. Schofield and Beta Maritime. At the same time, it is clear from Mr. Newman’s testimony and Mr. Schofield’s email to Mr. Newman on September 29, 2014, set out above, that Mr. Newman understood that the $137,000 USD was to be a progress payment towards the ultimate purchase price.

[61]         Mr. McDowell was asked in direct examination whether Beta Maritime required anything in return for the extension and he said he could not recall but added that Beta “would” want restatement of a reasonable schedule of non-refundable payments.

[62]         Mr. Newman testified that he made the payment to move the purchase forward and that it was a progress payment, not a deposit. When his prior affidavit evidence that he paid the $137,000 USD to “salvage the investment" was put to him, he said by salvage he meant to continue the agreement going forward.

[63]         Mr. McDowell said that the fact that all payments, including the $137,000 USD, were non-refundable was stated in a number of emails. Mr. McDowell was insistent on this point, saying that he told Mr. Schofield on each occasion that they discussed payments that the money was non-refundable. On cross-examination, counsel for Mr. Newman asked Mr. McDowell to identify the emails in which funds paid after the initial deposit were described as non-refundable.

[64]         Mr. McDowell identified several communications which he said fit that description. However, only one pertains to funds paid after the initial deposit. That is an email between himself and Mr. Schofield in February 2015, after Mr. Schofield had failed to pay the balance of the purchase price, when Mr. McDowell wrote to him that Mr. Dalio had had enough of the delays and “the very clear agreement was that all payments were Non-Refundable in the case of default.”

[65]         In closing submissions, Beta Maritime also pointed to an email dated January 1, 2015 from Mr. McDowell to Mr. Schofield in which Mr. McDowell stated that they need to set an absolute drop dead date by which Mr. Schofield makes final payments “or otherwise default and lose the 50% paid to date”.

[66]         These communications do not support Mr. McDowell’s assertion that he made it clear at all times that all money paid under the contract was non-refundable or establish that this was the mutual intention of the parties. The only communications that purport to do that were made during the timeframe immediately leading up to and including the juncture at which Beta Maritime declared Mr. Schofield in default and asserted it was keeping all monies paid to date.

[67]         Mr. McDowell asserted that he also made the non-refundable point clear to Mr. Schofield when he spoke with him. Mr. McDowell’s evidence was that most of his communications with Mr. Schofield were by email, but when they spoke by telephone, one or the other of them would follow up with an email. Mr. McDowell said he wanted to create “a paper trail”. In his evidence the only oral conversation he referred to specifically was the telephone call when he was on the Alucia and Mr. Schofield was seeking an extension. Mr. McDowell recollection was not good about that call and Mr. Schofield’s emails summarizing it do not use the words non-refundable.

[68]         On cross-examination, Mr. McDowell ultimately agreed that when the $137,000 USD payment was made by Mr. Newman, he did not communicate in writing to Mr. Schofield that that payment would be non-refundable. He said he did not put anything specifically in writing on that point because he thought it was unnecessary. That evidence contradicts his evidence that he wanted to create a paper trail of the discussions he had with Mr. Schofield.

[69]         Based on all the evidence, in particular that of Mr. McDowell, it stands to reason that if the $137,000 USD payment was discussed to be non-refundable in a telephone call, there would be an email confirming that. There is not.

[70]         Mr. Flemming was also involved in the discussions pertaining to the $137,000 USD payment. Mr. Flemming testified that he recalls being onboard the Alucia with Mr. McDowell. While he and Mr. McDowell were having dinner, Mr. McDowell left to take a call and returned saying that he had received a phone call from Mr. Schofield. Mr. Flemming testified that Mr. McDowell told him that the DDW deal would close the next day. When it was put to Mr. Flemming that Mr. McDowell actually told him that Mr. Schofield had asked for an extension to which Mr. McDowell agreed, Mr. Flemming said that was not possible as that would have to have been sanctioned by Mr. Dalio. He then agreed that Mr. McDowell probably reported to him about the request for an extension but that Mr. Dalio’s permission was needed.

[71]         Notwithstanding that Mr. Flemming testified that he could not recall the discussion that led to the extension being granted, he testified that there was a clear understanding that $137,000 USD would be non-refundable.

[72]         Mr. Flemming’s evidence about the clarity is undermined by an email he wrote to Mr. McDowell, on February 26, 2015, in which he asked Mr. McDowell whether Mr. Schofield was clear that the $137,000 USD payment was part of the non-refundable deposit. In that email to Mr. McDowell, Mr. Flemming said he did not want to “put you [Mr. McDowell] in an awkward place”. Counsel for Mr. Newman suggested to Mr. Flemming that the potential awkwardness for Mr. McDowell was because Mr. McDowell had not made the matter clear. Mr. Flemming said he thought it was awkward for Mr. McDowell because Mr. McDowell’s friendship was being pulled two ways between Mr. Schofield and Mr. Dalio.

[73]         Mr. McDowell replied by email: “He understood that clearly. I said it in e mails a number of times.” As I have found, there is not one email in evidence in which the $137,000 USD payment was described as being part of the non-refundable deposit before or at the time it was made.

[74]         Given that five months after the extension was granted Mr. Flemming could not recall whether a non-refundable payment was a term of the extension, he could not have a better recollection at the time of trial, three and a half years later. In addition, Mr. Flemming replied to the email from Mr. Schofield confirming the terms of the October 2014 extension set out by Mr. Schofield. Those terms did not describe the $137,000 USD payment as non-refundable. If Mr. Flemming was being clear that the payment was non-refundable, he would have done so in that email. Mr. Flemming testified that he could not recall whether he ever discussed with Mr. Schofield, before Mr. Newman made the $137,000 USD payment, that it would be treated as a non-refundable deposit.

[75]         Mr. Newman sent the $137,000 USD by wire transfer on October 3, 2014. Mr. Flemming acknowledged receipt on behalf of Beta Maritime by email. However, when Mr. Flemming was first asked about the receipt of the $137,000 USD at trial, he said the funds were not paid. When counsel asked the question again he corrected his evidence and said that it came soon after they made the agreement to extend the closing date.

[76]         Mr. McDowell was also asked about the receipt of the $137,000 USD payment at which point his evidence become confusing because he seemed to be under the impression that the payment had not been made. He testified that he believed in Mr. Schofield and Mr. Schofield simply said he needed more time. He later agreed that the payment had been made. He said he did not know when it was paid, but he said he was very clear that it was non-refundable.

[77]         Beta Maritime points to a January 2016 text to Mr. Schofield in which Mr. Newman asked Mr. Schofield to call him to sort things out because he was concerned that they were going to lose the “1/2 paid to date”. Mr. Newman agreed that at that time he was of the view that Mr. Schofield’s failure to deal with the matter could cost them the DDW purchase or the entire amount paid. January 2016 was 11 months after Beta Maritime had asserted the right to keep the entire amount paid. Mr. Newman had been trying to convince Beta Maritime to sell him the DDW or to refund the amount paid. Beta Maritime had agreed to refund a portion of the amount paid if there was a release from AOP and Mr. Newman. Mr. Newman was having trouble getting Mr. Schofield to deal with the release. That communication in those circumstances is not evidence that at the time the $137,000 USD was paid, AOP and Beta Maritime intended it be non-refundable.

[78]         Beta Maritime argues that the relevant context includes that the deal to buy the DDW at $375,000 was a very good deal and for that reason, Mr. Newman was prepared to advance the $137,000 USD on a non-refundable basis.

[79]         This line of argument rests in part on Beta Maritime’s contention that Mr. Newman knew from the outset that Mr. Schofield was going to have a hard time coming up with his share of the funds. Beta Maritime argues that Mr. Newman did not want to lose the deal so he started looking for investors.

[80]         Mr. Newman was cross-examined extensively on this point. Mr. Newman was asked about correspondence and working drafts of plans to involve investors. It is clear from these documents that Mr. Newman was looking for investors on a variety of submersible projects that he and Mr. Schofield were considering, totalling millions of dollars of assets to be acquired, not just the purchase of the DDW.

[81]         There are also communications between Mr. Newman and Mr. Schofield, prior to the $50,000 USD deposit being made, in which Mr. Newman wrote that he had his half of the money ready. He also wrote that unless Mr. Schofield had his money ready to go, they would not be able to purchase the DDW without assistance. Mr. Newman agreed that he thought an investor would be preferable for the purchase of the DDW, partly because of cash flow but also because generally in business he likes to use someone else’s money.

[82]         Mr. Newman testified that despite his preference for an investor, they were prepared to fund the purchase themselves. He believed Mr. Schofield would come up with the money based on his past experience with him. I note that Mr. McDowell expressed the same sentiment even though, during the negotiations, the deposit amount was reduced at Mr. Schofield’s request due to cash flow problems. Accordingly, both Mr. Newman and Mr. McDowell testified that based on their past dealings with Mr. Schofield, they felt he would meet his financial obligations even though he showed signs of cash flow issues before the deposit was made.

[83]         Mr. Newman agreed that he was trying to urge Mr. Schofield on. He agreed that he was concerned that it was a good deal and wanted Mr. Schofield to move efficiently on it. He rejected the proposition that it was such a good deal that he was prepared to pay the $137,000 USD on terms that it was non-refundable.

[84]         A related argument put forward by Beta Maritime was that Mr. Newman was under pressure from certain potential charter customers to get the DDW into operation. Mr. Newman testified that there was work to do on the vessel but no one was applying pressure.

[85]         I accept Mr. Newman’s evidence on why he was seeking out investors and his views on timing, including the reasons for them. He agreed with many suggestions put to him in cross-examination. His evidence did not conflict with written communications he made except in non-material way. He presented his evidence in a straightforward manner.

[86]         Considering the written agreement between the parties, the email that contains the agreed upon terms of the extension, the communications between the parties and the evidence of the context in which the deal was made, I conclude it was not the mutual intention of Beta Maritime and AOP for the $137,000 USD payment to be non-refundable. The contract is not a juristic reason for Beta Maritime to retain the $137,000 USD paid by Mr. Newman.

c. If Any of the Funds Were Non-Refundable, Is There An Exception because Beta Maritime Failed to Deliver the Submarine?

[87]         Mr. Newman argues that since contract provided that the monies paid were non-refundable unless Beta Maritime failed to deliver the DDW, since he tendered the full amount and Beta Maritime refused to deliver the DDW, any money paid as a non-refundable deposit lost the quality of being non-refundable.

[88]         Having decided that only the first payment of $25,000 USD made by Mr. Newman was non-refundable under the terms of the contract, this argument is only applicable to that payment.

[89]         The provision of the contract Mr. Newman relies upon in this argument is s. 2 of the August 2014 contract. The important portion of that section for this argument is:

… US$50,000.00 payable upon the execution of this Agreement, which amount Buyer agrees shall be non-refundable for any reason other than the failure of Seller to deliver the DDW submersible with warranties described in 4, below…  

[Emphasis added.]

[90]          Beta Maritime says that the full payment was never tendered, and if it was, it was tendered out of time and did not give rise to an obligation on Beta Maritime’s part to deliver the submarine. The contract was over.

[91]         At the crux of this argument is whether Beta Maritime agreed to extensions for payment that were still in play by the time Mr. Newman said he could tender the entire balance owing given Mr. Schofield’s failure to do so. This requires an analysis of the terms of the contract after September 30, 2014. Above, I found that Mr. Schofield’s email sets out the terms of the October 2014 extension and, together with the August 2014 contract, formed the contract between AOP and Beta Maritime.

[92]         Mr. Newman’s position is that no November 30, 2014 deadline was in the contract or the extension terms. However, it is clear from Mr. Schofield’s email confirming the extension, which Mr. Flemming also confirmed, that the parties agreed to an extension of 30, but no more than 60, days. If calculated from the original closing date which was “on or about September 30, 2014,” the new closing date would be on or before November 29, 2014. If calculated from the date of the email, October 2, 2014, the new closing date would be on or before December 1, 2014. Beta Maritime refers to it as a hard date of November 30, 2014. I will refer to this date for ease of reference as whether it was November 29, 30 or December 1 makes no difference as matters unfolded.

[93]         Mr. Newman asserts that there could not have been such a deadline because Mr. Schofield never said anything about such a deadline. But Mr. Newman, although having a much more flexible mindset about dates in contracts for purchase and sale of submersibles, acted as though he understood there was a deadline. He prepared a “to do” list pertaining to the projects that he and Mr. Schofield were working on together. The first item on the list described the final payment to be made by Mr. Schofield on the DDW being due the first week of December 2014.

[94]         I find that at the time of Mr. Schofield’s email, AOP and Beta Maritime agreed upon a firm extension date of no later than November 30, 2014 and it was their mutual intention that the balance be paid and the DDW be delivered on or before that date. The balance was not paid.

[95]         Beta Maritime asserts that time was of the essence in this contract and when Mr. Schofield did not pay the balance by November 30, 2014, the contract became null and void. It argues that the contextual evidence supports that time was the of the essence. I turn to the contextual evidence and objective evidence to determine the intention of the parties to the contract.

[96]         The first piece of contextual evidence that Beta Maritime relies on to support the argument that time was of the essence is that the DDW deal was a good deal for the purchaser and Mr. Newman and Mr. Schofield knew they had to snap it up before someone else did. Second, Beta Maritime’s counsel put to Mr. Newman that given the plans that Mr. Newman and Mr. Schofield had for the DDW, they needed to take delivery of it and get it working due to commitments they were already making in the summer and fall of 2014.

[97]         I have already set out my findings on this issue in relation to the perspective of Mr. Newman, who was not a contract to the party. I am looking for objective evidence of the intentions of the purchaser. I accept Mr. Newman’s evidence that, objectively, the plans he and Mr. Schofield had for the DDW do not establish that time was of the evidence.

[98]         With regard to the objective evidence as between the parties to the contract, at the time that AOP and Beta Maritime were negotiating the deal, the DDW was on the market for $650,000 USD. Beta Maritime agreed to sell it to AOP for $375,000 USD at the outset of the negotiations. While the amount of the deposit changed during the negotiations before the August 2014 contract was executed, the total selling price remained the same. Despite the steep discount from the initial asking price, Mr. McDowell testified that he thought the deal was good for both parties. Mr. Flemming testified there had been other interested buyers for the DDW before the deal was made. He said that Beta Maritime was prepared to sell it to AOP because they thought AOP was a good operation and would use the DDW for purposes that aligned with Beta Maritime’s philosophy. He did not testify that the price they accepted was less than they thought the market value for the DDW was. The obvious inference, and there is no evidence to refute it, is that Beta Maritime pursued the deal with AOP because it was the best opportunity for it to sell the DDW on terms that were agreeable to it. The evidence falls far short of establishing that this deal was so good that Mr. Newman and Mr. Schofield needed to snap it up.

[99]         There is no evidence in the communications between Mr. Schofield and Beta Maritime to alter this conclusion. They are to the contrary, as I will describe.

[100]     Mr. Newman argues that the conduct of the representatives of Beta Maritime after November 30, 2014 was consistent with Beta Maritime serially agreeing to extensions after the end of November 2014 up to early February 2015, when, Mr. Newman asserts, Beta Maritime irrationally refused to deliver the DDW even though the full purchase price had been tendered.

[101]     Mr. McDowell testified that in mid-November 2014, Mr. Flemming was getting nervous as to whether Mr. Schofield would pay the balance of the purchase price and pay it on time. Mr. McDowell testified that he had also been in contact with Mr. Dalio who had asked him what was going on. Mr. McDowell sent Mr. Schofield an email on November 18, 2014 in which he asked about timing of the final payment “by the end of November as agreed”. He also advised that there would be no more extensions. Mr. Schofield replied to that email that there was a chance that things might slip by a few days such that he would have the funds early in the week of December 1, 2014. Mr. McDowell replied to that email on November 20, 2014 acknowledging receipt of the information and asking for an update by the end of the week. There is at least one email between Mr. McDowell and Mr. Schofield after that and before the end of November 2014 in which the deadline for tendering the final payment is not mentioned.

[102]     Mr. McDowell testified that it was clear at the time of this email exchange that if the payment was not made by November 30, 2014, the contract was at an end. He testified that he visited Mr. Dalio at his home in Connecticut and they sat in Mr. Dalio’s hot tub where Mr. Dalio made it clear to him that the contract was abrogated and the matter was finished. However, in the November 18, 2014 email, Mr. McDowell wrote that he met with Mr. Dalio on board the Alucia at that time. Mr. McDowell testified and wrote emails about a visit to Mr. Dalio’s Connecticut home in February 2015 at which time he had a conversation with Mr. Dalio in Mr. Dalio’s hot tub during which Mr. Dalio insisted that the deal was at an end. I find that the hot tub conversation took place in February 2015 not in the fall of 2014.

[103]      On December 3, 2014, Mr. Schofield sent an email to Mr. Newman in which he reported that he had just finished a conversation with Mr. Flemming who was understanding about the reason for delay. There is no evidence to substantiate that this call took place.

[104]     Between that time and January 2015 there are several emails from Mr. Schofield to Mr. Flemming and to Mr. McDowell with updates on the timing for the payment. Each email relayed facts pertaining to an oil and gas deal Mr. Schofield was trying to close and from which he would be sourcing the funds to complete the DDW purchase. Mr. Flemming testified that he believed that Mr. McDowell was responding to those emails.

[105]     Mr. McDowell’s evidence was that by December 2014 he had given up on Mr. Schofield and saw no point in responding to his various emails about the timing of funds from the oil and gas deal because the DDW deal was over. However, he testified that he thought that Mr. Flemming was holding open the chance that the DDW deal could still complete. He also testified that he thought that both he and Mr. Flemming had in the backs of their minds that if they could get Mr. Schofield to come up with the funds a little late they would be able to go to Mr. Dalio and convince him to complete the deal.

[106]     Despite Mr. McDowell’s evidence that by December 2014 he was no longer responding to Mr. Schofield because he considered the DDW deal dead, Mr. McDowell sent emails to Mr. Schofield on December 23, 2014 and January 1, 2015. There is nothing of consequence in the December 23, 2014 email but also nothing consistent with Mr. McDowell’s evidence that by that time he saw the deal as over. On January 1, 2015, Mr. McDowell wrote in part as follows in response to an update email from Mr. Schofield about the timing for the funds:

I note your information below. There needs of course to be an end game here as we have extended this payment 4 months already.

Basically the deal never including [sic] waiting for another third party deal to close.

Alex needs to chime in on this but I suggest there needs now to be an absolute drop dead by which time you need to make payment or otherwise default and lose the 50% paid to date.

I want to be fair to you but Ray needs complete respect as well. he [sic] has been very accommodating in granting such a long extension which he emphasises is not his normal way of doing business.

Alex what do you say to an absolute drop dead date of January 20 as a target but no more extensions beyond that.

[107]     There is no evidence of any response from Mr. Flemming to that email. Mr. Flemming testified that he disagrees that the extensions had been ongoing and that as of November 30, 2014, the deal was over. This is despite the fact that on February 3, 2015, Mr. Flemming sent Mr. Schofield an email, copied to Mr. McDowell, Mr. Dalio and others which said:

Don,

We need to discuss your DDW purchase urgently!!

You indicated yesterday that you where [sic] arranging alternative finances as your business deal was slowing due to numerous factors: quote “Meanwhile I have been arranging a personal loan for the balance of the amount required to finish paying for the DDW in case my public company deal ultimately takes too long. Working on whichever way will be the fastest.”

I infer from your recent request to the Dalio Foundation that you have having [sic] trouble getting the remaining funds?

Of course we don’t want to jump to conclusions without the facts, so let’s have a call and sort this out. Where are you in the world?  Should I call you on your US cell?

[108]     It makes no sense that Mr. Flemming would send this email unless, up to that time, the parties still had a mutual intention to close the deal.

[109]     The next day, Mr. Dalio sent an email which appears in the same chain as the email quoted above. It is followed in the chain by an email from Mr. McDowell replying to it. Accordingly, I conclude that Mr. Dalio sent his email to at least Mr. Flemming and Mr. McDowell in response to Mr. Flemming’s February 3, 2015 email to Mr. Schofield set out above. Mr. Dalio’s email said:

I’m done with him. I don’t want to sell it to him. He’s run out of extra chances. Its not a matter of money – its [sic] a matter of principle. If my kids behaved like this with someone, I’d want that person to do exactly what I’m doing so that they would learn how to behave.

Also, since Mike stood up for the guy and assured me that this wouldn’t happen and he shouldn’t have, his credibility took a ding so I hope that he will know to be more careful in the future.

“A man’s word is his bond.” I really believe that.

[110]     Mr. McDowell wrote another email to Mr. Schofield dated February 3, 2015. Based on the email chains in which these emails appear, this email came after Mr. Flemming’s email quoted above of the same date or perhaps even the next day given time zone changes. The email stated as follows:

Hi Don,

Unfortunately Don this is not going to work.

I went up to Connecticut yesterday and met with Ray on a variety of subjects and the situation with the DDW sale was raised.

Ray advised that he has had enough of the delays for final payment and that after 5 month [sic] of extensions his patience is finished.

He has advised me to pass on to you that the deal is in default from your side for non payment of the remaining due amount.

The very clear agreement was that all payments made were Non Refundable in the case of default.

Ray considers the payment agreement to be in default and no more extensions are to be given.

[111]     Another email from Mr. McDowell refers to this meeting as the hot tub meeting with Mr. Dalio. Early February 2015 was slightly more than four months after the original closing date of September 30, 2014. Mr. McDowell was cross-examined on what he meant by five months of extensions. Mr. McDowell's testified that the extension to November 30, 2014 was five months of extensions because the original agreement was made in June 2014. This is patently incorrect. When further cross-examined on this, Mr. McDowell declared that he could not remember all of the communications and that emails between he and Mr. Schofield did not count for anything because neither of them were “legal wizards" and that any extensions they discussed were “verbal extensions” not “contractual extensions”. His demeanour on this occasion and on others led me to believe that he was not giving his evidence as a disinterested witness but rather as a person who has ongoing relationships with Mr. Dalio and the Beta Maritime group of companies which he values and because of which he is eager to see this litigation resolved in favour of Beta Maritime.

[112]     While the timing does not make precise sense, it is apparent that Mr. McDowell was expressing that there had been extensions for five months beyond the original September 30, 2014 closing date, which means that there had to have been extensions beyond the end of November 2014.

[113]     Mr. Flemming was copied on the February 3, 2015 email from Mr. McDowell. At the time, he did not correct it or clarify that the only extension was a two month extension to November 30, 2014, as of which time the contract was at an end. When questioned at trial about the description of five months of extensions, Mr. Flemming said that he understood that Mr. McDowell wrote the email in the way he did because he was in an uncomfortable position having vouched for Mr. Schofield with Mr. Dalio.

[114]     The evidence of the two persons representing Beta Maritime on whether there were extensions after November 30, 2014 is internally inconsistent and contradicted by the emails they wrote at the time. I prefer the logical interpretation of the emails they wrote at the time to their testimony before me. I conclude that Beta Maritime remained open to a completion of the purchase and sale of the DDW after November 30, 2014 and up to early February 2015.

[115]     At the time of the February 4, 2015 email from Mr. Dalio in which he says “I’m done”, he communicated to Mr. Flemming that Mr. Schofield would have no more chances. Mr. McDowell conveyed that to Mr. Schofield in two emails, both dated February 3, 2015. From that time on, Beta Maritime clearly communicated to Mr. Schofield that Beta Maritime was no longer prepared to sell the DDW to AOP.

[116]     Beta Maritime, by asserting that AOP was in default and the contract was at an end, gave notice that it viewed AOP’s failure to tender the funds as a fundamental breach of the contract.

[117]     Failure to perform resulting in fundamental breach is a failure by one party to perform a primary obligation such that the other party is deprived of substantially the whole benefit of the contract: Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha Ltd. (1961), [1962] 2 Q.B. 26 (Eng. Q.B.), aff’d (1961), [1962] 2 Q.B. 26 at 41 (Eng. C.A.), said to be the law in Canada in Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc. [2008], 233 O.A.C. 74 (C.A.). See also Fridman’s The Law of Contract in Canada, 6th ed. (Toronto: Thomson Reuters, 2011) at 574-76. The innocent party is entitled to treat the contract as at an end and is excused from further performance: Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 at para. 106.

[118]     AOP’s failure to tender the balance of the purchase price amounts to a fundamental breach of the contract which entitled Beta Maritime to treat the contract as at an end and excused it from further performance under the contract. Once Beta Maritime repudiated it, AOP could not enforce and neither could Mr. Newman in his own capacity or by virtue of having made payments to Beta Maritime for AOP. At no point, prior to February 3, 2015 or on February 3, 2015, did Mr. Newman offer to tender the balance of the purchase price balance immediately and take delivery of the DDW.

[119]     On February 5, 2015, Mr. Schofield sent an email to Mr. Newman saying he had been told by Mr. Dalio’s submarine manager (Mr. Flemming) that Mr. Dalio would consider the agreement in default unless they gave him “a firm direction in the next 24 hours or so”. That email communication is a false summary of the decision that Beta Maritime made and communicated to Mr. Schofield.

[120]     In any event, Mr. Newman testified that at that time he began communicating directly with Mr. Flemming. He described these communications as trying to “relight” or do a new deal. He agreed with the proposition that Beta Maritime would have to agree with whatever was proposed. I find that he was not trying to enforce the contract by tendering the full payment for the DDW.

[121]     This conclusion is sufficient to dispose of the argument that Beta Maritime cannot rely on the non-refundable provision because it did not deliver the DDW. I also conclude that the efforts made by Mr. Newman and Mr. Schofield to tender the funds after this date were not in accordance with the contract as they did not meet any of the extensions for payment agreed to between the parties as described above.

[122]     These efforts include apology letters written to Mr. Dalio, offers to have funds paid by various dates (including some months in the future) and a letter from Mr. Newman’s bank confirming the funds were available. Mr. Dalio was not prepared to agree to any of this.

[123]     The first time Mr. Newman tendered the balance of the purchase price in full was on February 19, 2015. The first time Mr. Schofield attempted to tender the balance of the purchase price in full (with Mr. Newman’s money) was on March 18, 2015. Beta Maritime was excused from further performance of the contract due to AOP’s fundamental breach after February 3, 2015. I conclude that the funds were not tendered during the timeframe when the parties still had an agreement for purchase and sale.

[124]     Accordingly, I do not accept that the failure to deliver the DDW vitiates the non-refundable character of the $50,000 USD deposit in accordance with the terms of the contract. Beta Maritime did not fail to deliver the DDW; rather it was no longer required to deliver it because the contract was at an end.

d. Was There Donative Intent?

[125]     Donative intent is another established category of juristic reason. In Peter v. Beblow, [1993] 1 S.C.R. 980 at 991-92, the Court defined donative motivation as the “intentional giving to another without the expectation of remuneration.” On this issue, the relevant intent is that of Mr. Newman.

[126]     Beta Maritime submits that Mr. Newman had a donative intent because Mr. Newman made both payments knowing that at that time Mr. Schofield did not have the funds to complete and knowing that they were non-refundable.

[127]     I find that Mr. Newman intended to pay a non-refundable deposit on the DDW in exchange for Beta Maritime committing to the DDW to AOP and taking it off the market. Accordingly, it was his intention that the deposit would be forfeited to Beta Maritime if the balance of the payment was not made. Donative intent serves a juristic reason for Beta Maritime to retain the $25,000 USD payment made by Mr. Newman in addition to the contract.

[128]     In my view, the evidence of the circumstances under which the $137,000 USD were paid does not lead to the same conclusion. At the time that payment was made, Mr. Newman did not know Beta Maritime considered the payment to be non-refundable. He did not know that until after Beta Maritime refused to refund the money when it repudiated the contract for AOP’s failure to pay the balance of the purchase price.

[129]     Beta Maritime argues that Mr. Newman’s attempts to find investors means that he knew or was concerned that Mr. Schofield was not going to be able to make the payment and that he thought he needed to come up with funds through investors or he would lose the payments made to date. In my view, this is simply another argument that the funds paid were non-refundable and the answer is the same.

[130]     On the evidence, Mr. Newman’s intention with regard to the $137,000 USD payment was to make his share of the balance of the purchase price payment to keep the contract moving towards completion. He therefore expected, through this payment, to facilitate AOP completing the purchase, after which he would own the DDW with AOP.

[131]     I conclude that donative intent does not serve as a juristic reason for Beta Maritime to retain the $137,000 USD payment.

Step 2: Reasonable Expectations of the Parties and Public Policy Considerations

[132]     I have concluded that the contract serves as a juristic reason for Beta Maritime to retain Mr. Newman’s $25,000 USD of the $50,000 USD paid as a non-refundable deposit. However, the plaintiff has made out a prima facie case that the contract does not serve as a juristic reason for Beta Maritime to retain the $137,000 USD paid by Mr. Newman pursuant to the October 2014 extension. I will now consider whether, despite the absence of an established category of juristic reason, there is another reason to deny recovery.

[133]     The onus is on Beta Maritime to prove that the reasonable expectations of the parties or public policy considerations are such that Beta Maritime should be entitled to keep the $137,000 USD: Garland at paras. 45-46 cited with approval in Kerr at para. 43

[134]     Beta Maritime makes several arguments on this second step of the juristic reason analysis including:

(a)   the agency relationship between the plaintiff and Mr. Schofield which it says binds the plaintiff to the contractual relations between AOP and Beta Maritime;

(b)   Mr. Newman had a donative intent (I have considered this argument above as it is an acknowledged exception to juristic reason);

(c)   reasonable expectations of the parties; and

(d)   public policy.

a. Agency Relationship

[135]     First, Beta Maritime says that the agency relationship between the plaintiff and AOP is such that the contract is a juristic reason to keep the funds even though Mr. Newman was not a party to the contract. Because Mr. Newman does not argue that the contract cannot act as a juristic reason, but rather that it does not because of its terms, I do not find it necessary to resort to principles of agency to decide this.

[136]     Beta Maritime also argues that agency principles are a stand alone juristic reason to keep the funds. It relies on Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55. In Jedfro, the plaintiff and two other businessmen purchased a piece of land pursuant to a joint venture agreement. Each partner contributed to part of the purchase, and the remainder of the price was covered by a secured loan from the vendor. When the loan went into default, one of the other partners caused the defendant company—which was not a party to the joint venture—to pay the vendor and obtain an assignment of the security. After the plaintiff rejected a proposal to restructure the original partnership agreement, the defendant company exercised foreclosure and acquired clear title to the land. The plaintiff then demanded restitution of the value that he had lost and the defendant gained.

[137]     The Court held at para. 33 that the plaintiff could not succeed on an unjust enrichment argument because he had “voluntarily contracted to invest money for the purpose of acquiring and maintaining the property, without providing for any right to have the money repaid under the circumstances that eventually arose”. Those circumstances, unlike the circumstances at bar, were that the property was delivered under the purchase and sale contract but due to risks inherent in the original investment, the property was lost to foreclosure. Both the contract that the plaintiff had with his fellow joint venture participants and the contract he had made on the security note acted together as a juristic reason to prevent repayment of the plaintiff’s investment.

[138]     Jedfro does not assist in this case because it turns on the contracts and security arrangements that were said to form a juristic reason. In this case, I found that the contract is not a juristic reason to keep the $137,000 USD.

[139]     The agency argument is a derivative of the contract argument. If the contract is not a juristic reason, the fact that Mr. Newman had an arrangement to co-own the DDW with Mr. Schofield cannot, on its own, provide a juristic reason for Beta Maritime to keep the $137,000 USD.

[140]     Beta Maritime also makes a related argument. It says that Mr. Newman made the payments pursuant to the separate contract he had with AOP to co-own the DDW and to share in its purchase on a 50/50 basis. Beta Maritime says that Mr. Newman’s contract with AOP is a separate juristic reason for the plaintiff’s deprivation. This argument is best considered as part of the “reasonable expectation of the parties” argument and I will approach it that way.

b. Reasonable Expectation of the Parties

[141]     At this stage, the analysis is no longer solely from the perspective of the parties to the contract as it was for the contractual interpretation analysis, but rather it is about the parties who paid the funds (on the funds in issue, Mr. Newman) and the party which received the funds, Beta Maritime.

[142]     Beta Maritime argues that the $137,000 USD payment was a further deposit and as a deposit, it was non-refundable. Mr. Newman argues it was a payment towards the purchase, and therefore refundable because the DDW was not delivered.

[143]     In this regard, the law pertaining to deposits is germane. Under the law of deposits, it must be determined whether the second payment was made to guarantee performance of the contract or whether it was a part payment on the purchase price of the submarine. As stated by John D. McCamus in The Law of Contracts, 2nd ed. (Toronto: Irwin Law Inc., 2012) at 1049, the general rule is that monies paid as a part payment rather than a deposit are recoverable.

[144]     This distinction is described in 375186 B.C. Ltd. v. Coquitlam Enterprises Ltd. (1997), 38 B.C.L.R. (3d) 247 (B.C. S.C.), varied (1998), 61 B.C.L.R. (3d) 160 (C.A.), and cited as follows at paras. 10-11 of Conner v. Bulla, 2010 BCCA 457:

[10]      …As I have noted, it is my opinion that the monies paid on account of the price should properly be characterized as a partial payment of the purchase price and not as a deposit. A useful discussion of the law governing this type of situation is to be found in the case of 375186 B.C. Ltd. v. Coquitlam Enterprises Ltd. (1997), 38 B.C.L.R. (3d) 247 (B.C. S.C.), a decision of Levine J. (as she then was), varied [1998] B.C.J. No. 3086 (B.C. C.A.). She said this in the course of her reasons:

[23] It appears to be settled law that when a payment is made as part payment on the purchase price of property, on a repudiation of the contract by the vendor, though by reason of the purchaser's default, the purchaser is entitled to the money back unless the contract contains a forfeiture clause. When the money is paid as a deposit, however, which is the equivalent of a forfeiture clause, or the purchaser has repudiated the contract, the vendor is entitled to retain the payment.

[24] In Stockloser v. Johnson, [1954] 1 All E.R. 630 (C.A.), Lord Denning stated the law as follows at p. 637:

It seems to me that the cases show the law to be this. (i) When there is no forfeiture clause, if money is handed over in part payment of the purchase price, and then the buyer makes default as to the balance, then, so long as the seller keeps the contract open and available for performance, the buyer cannot recover the money, but once the seller rescinds the contract or treats it as at an end owing to the buyer's default, then the buyer is entitled to recover his money by action at law, subject to a cross-claim by the seller for damages. ... But when there is a forfeiture clause or the money is expressly paid as a deposit (which is equivalent to a forfeiture clause), then the buyer who is in default cannot recover the money at law at all.

[11]      She went on to say:

[27] While the purchaser will generally be entitled to a return of a part payment when the vendor repudiates, the opposite appears to be true when it is the purchaser who repudiates. In 216927 Alberta Ltd. v. New Town of Fox Creek, [1990] 3 W.W.R. 321 (Alta. C.A.), Foisey J.A. stated at p. 329:

While at common law it would seem that the purchaser could recover the purchase price, the situation is different if the purchaser has repudiated. Where the purchaser repudiates the contract, and the vendor elects to accept the repudiation, the purchaser loses his right to recover his purchase money at common law. There is a distinct difference between a rescission of a contract and an accepted repudiation....

Where the purchaser has repudiated the contract, the purchaser cannot thereby effect rescission of the contract as the law does not encourage taking advantage of one's own wrong....

The result of a finding of repudiation is thus that the purchaser loses his right at common law to recover the purchase money.

[Emphasis added.]

[145]     If the $137,000 USD payment was a part payment on the purchase price then Mr. Newman is to recover his money because I have found that Beta Marine repudiated the contract, albeit by reason of AOP’s default. But if the contract contained a forfeiture clause or if the payment was made as a deposit, then Beta Maritime is entitled to retain it. Beta Maritime argues that there is a forfeiture clause in the unexecuted amendment agreement. I have found that the October 2, 2014 email contains the terms under which the $137,000 USD was paid, not the unexecuted amendment agreement. Accordingly, the question becomes whether, absent language that the payment was non-refundable or subject to forfeiture, the payment was nevertheless a non-refundable or “true” deposit.

[146]     A “true” deposit, as the Court of Appeal describes in Conner at paras. 9-11, is an exception to the general rule that a sum subject to forfeiture is an unlawful penalty (unless it is a genuine pre-estimate of damages).

[147]     The seminal authority on the nature of a deposit is the English Court of Appeal’s decision in Howe v. Smith (1884), 27 Ch. D. 89 (Eng. C.A.). The buyer in that case paid £500 “as a deposit and in part payment of the purchase money” under the contract, which was an agreement to purchase premises for a price of £12,500. The buyer failed to complete on the specified date and on an extended date. Lord Justice Fry’s judgment is generally regarded as the leading one in Howe: Tang v. Zhang, 2013 BCCA 52 at para. 22. In his analysis he stated:

Taking these early authorities into consideration, I think we may conclude that the deposit in the present case is the earnest or arrha of our earlier writers; that the expression used in the present contract that the money is paid "as a deposit and in part payment of the purchase-money," relates to the two alternatives, and declares that in the event of the purchaser making default the money is to be forfeited, and that in the event of the purchase being completed the sum is to be taken in part payment.

Such being my view of the nature of the deposit, it appears to me to be clear that the purchaser has lost all right to recover it if he has lost both his right to specific performance in equity and his right to sue for damages for its non-performance at law. That the purchaser has by his delay lost all right to specific performance we have already decided.

[148]     In Bowen L.J.’s concurring reasons, he emphasized that whether the buyer was entitled to return of the deposit money must be a question of the terms of the contract.

[149]     Beta Maritime relies on Peterson v. 446690 B.C. Ltd. (Seymour Arm Hotel & Restaurant), 2016 BCSC 158 at paras. 66-69, in which Mr. Justice G.P. Weatherill interpreted a contract that provided that in the event the sale did not complete for any reason, a portion of the deposit was non-refundable and a portion would be repaid to the purchaser. In those circumstances, unlike those before me, the parties made their contractual intentions clear in the contract.

[150]     The question is whether the $137,000 USD payment was a true deposit even though the October 2, 2014 email is silent as to whether the $137,000 USD payment was a deposit and/or non-refundable.

[151]     Looking to the August 2014 contract for assistance on this point, it is noteworthy that it provided for two types of payments: a non-refundable deposit, and the balance to be paid on delivery of the DDW. The non-refundable term of the first payment is clear. The second payment is not described as refundable or non-refundable. The structure of the contract makes this point moot in that the final amount is paid on the delivery of the DDW, which is sold on an “as is” basis with the only warranty being as to title and no material defects of which Beta Maritime is aware. Accordingly, the payment is only made if the DDW is delivered in accordance with the limited warranties. The October 2014 extension provides for a third type of payment: one made after the signing and the $50,000 USD non-refundable deposit, but before delivery of the DDW.

[152]     As for contract interpretation generally, it is appropriate to look to the circumstances leading up to and surrounding the drafting of a contract where the agreement does not clearly state whether the payment is intended to be a deposit as is the case here: see Coquitlam.

[153]     In Coquitlam, as in this case, the agreement did not state that the payment was a deposit. In finding that the parties did not intend for the payment in the option agreement at issue to be a deposit, Levine J. held that in order to conclude the parties intended the option to be a deposit in the absence of language to that effect, there would have to be clear and convincing evidence. She reviewed the negotiations and the circumstances surrounding the drafting of the option and said that the evidence did not convince her that the parties intended to treat the payment as a deposit, despite that it was prepared hastily to accommodate the plaintiff. Levine J. noted that the terms were significantly different from the terms of the previous agreement.

[154]     Beta Maritime argues that the conduct of the parties, viewed from start to finish, shows that Mr. Newman and Mr. Schofield expected that if they did not close on the submarine, all funds paid would be forfeited to Beta Maritime. Beta Maritime also argues that because Mr. Newman was an experienced submarine broker, he should have anticipated that the funds he paid would be a penalty and forfeited if they did not complete the purchase.

[155]     Mr. Newman was cross-examined on this issue. He testified that some deals would have non-refundable deposits. He testified that when that was the case, it would be stated in the contract. He testified that he understood this deal to have a non-refundable deposit on the first payment (except if Beta Maritime failed to deliver the DDW, an issue I have dealt with above) but he understood the $137,000 USD payment to be a progress payment. He testified that he asked for a receipt for the payment for that reason.

[156]     The reasonableness of Mr. Newman’s expectation in this regard is informed by the information he received from Mr. Schofield. On September 29, 2014, Mr. Schofield sent Mr. Newman an email after he spoke to Mr. McDowell by telephone about an extension when Mr. McDowell was onboard the Alucia. Mr. Schofield wrote in part as follows:

Hi Jon

I finally got to talk to Mike McDowell last night. He is aboard the Alucia in Cairns.

Mike was having dinner at the time with Alex Fleming and Rob Munier both from Woods Hole and second in command of the Subs and Alucia respectively. You may remember both were involved in our contract negotiations and Alex signed the contract.

He said that if you (Jon) can do you part now that Ray will consider the contract terms satisfied from the timing standpoint and I can send my half after completion of the public company takeover when my shares go live or the proceeds of the FAU sale – whichever happens first. The mood was very positive.

They are happy to continue to store the DDW for us until fully paid and for a longer time if necessary and that there should be no charge for a reasonable period of time for WHOI.

So – if you would be able to proceed with your transfer we are good to go. I will give you a written commitment for my half based on the above timing.

[157]     I make no finding as to whether Mr. Schofield’s email accurately recounts the conversation he had with Mr. McDowell. I accept it as evidence of what Mr. Newman was told by Mr. Schofield and as such it forms part of the evidentiary basis for Mr. Newman’s expectations.

[158]     Mr. Newman’s understanding was that he was making his share of the payment to complete the purchase and Mr. Schofield would make his later. He did not expect that this was a further non-refundable deposit. He testified that if he had been told it was non-refundable, he would not have made the payment. He testified that when he saw the unexecuted amendment agreement after Beta Maritime refused to complete the deal with him and refused to return the monies paid, he was taken aback.

[159]     I accept that Mr. Newman was never told that the $137,000 USD payment was non-refundable. As I have said, the evidence before me is insufficient to find that even Mr. Schofield was aware of the amendment agreement. If Mr. Flemming did sent it to Mr. Schofield, he did so after the $137,000 USD payment was made pursuant to the October 2, 2014 email terms to which the parties to the contract had agreed.

[160]     I find that Mr. Newman’s expectation was reasonable. It lined up with his experience that payments that are non-refundable are specified as such. It lined up with his experience on this deal, where the first payment was specified to be non-refundable, but according to the information he obtained, the second was not. The information he was given, that the $137,000 USD was a payment by which he was to do his “part now”, supports his understanding and expectation that he was putting forward most of his share of the funds to complete the purchase so that Mr. Dalio would consider the contract terms satisfied from the timing standpoint.

[161]     At the same time, the internal Beta Maritime emails at the time of the October 2014 extension show that Mr. Flemming and Mr. McDowell regarded the $137,000 USD payment to be non-refundable and to offer further protection in the event that the sale did not complete. The question is whether that expectation was reasonable in the circumstances.

[162]     As discussed above, Beta Maritime expressly agreed to the October 2, 2014 email terms which did not include a term that the $137,000 USD was a deposit or that it was paid on terms that it was non-refundable. Beta Maritime had the opportunity to make that important expectation clear. It did with the first payment and did not with the $137,000 USD. When it attempted to make it clear through the amendment agreement, it did so after the funds were received. Nor did it follow up after it purported to send the amendment agreement but did not receive it back. It permitted terms that it had agreed to that did not describe the payment as non-refundable to govern the expectations of Mr. Schofield and of Mr. Newman.

[163]     Beta Maritime says it was not aware of Mr. Newman’s involvement prior to February 2015 when Mr. Newman tried to complete the DDW purchase without Mr. Schofield. Beta Maritime argues that if it was not aware of Mr. Newman, nothing it did could be taken to shape his reasonable expectations or offer him comfort that the $137,000 USD would not be non-refundable. However, the October 2, 2014 email containing the terms the parties agreed upon for the October 2014 extension specifically refers to Mr. Schofield’s partner in the DDW deal. Mr. Newman is the person who sent the $137,000 USD funds and one half of the $50,000 USD non-refundable deposits. Those funds were wired to Beta Maritime by Mr. Newman and show him as the payer. Although Beta Maritime had no contractual obligations towards Mr. Newman, at the time that Beta Maritime agreed to the October 2014 extension it was aware that Mr. Schofield had a partner and that the partner would be mailing the $137,000 USD payment. It should have been aware that its conduct would affect his reasonable expectations.

[164]     In addition, the evidence shows that early in the negotiations, AOP and Beta Maritime discussed a non-refundable deposit of $100,000, which was 26.7% of the purchase price. Mr. Flemming wrote to Mr. McDowell and said that a deposit of almost 30% is more than you normally get on marine deals. I find that Beta Maritime did not reasonably expect a non-refundable deposit of 50% of the purchase price, which is the total paid including the $137,000 USD.

[165]     Beta Maritime also argues that Mr. Newman’s efforts to find investors is evidence that Mr. Newman knew that Mr. Schofield did not have the money to complete the DDW purchase and that he stood to lose the money paid to date. I reject that argument for the same reasons I set out above.

[166]     I conclude that the reasonable expectations of the parties do not provide a juristic reason for Beta Maritime to retain the $137,000 USD.

c. Public Policy

[167]     Beta Maritime argues that certainty and predictability are important public policy concerns that mandate that Beta Maritime retain the funds. It relies on Bul River Mineral Corporation (Re), 2018 BCSC 39 at para. 49, for the proposition that certainty and predictability are the fundamental goals of commercial law. It relies on Jedfro at para. 34, and Sigma Ajax Inc. v. Belovich, 2008 ONCA 445 at para. 6, for the proposition that parties should be held to the bargains they make.

[168]     These public policy arguments are fully addressed in step one of the juristic reason analysis since a contract is a juristic reason to keep funds, thereby holding persons to their bargains and providing for the certainty and predictability that the contract was intended to provide. If the contract, properly interpreted, is such that the amounts were paid on a non-refundable basis, then Beta Maritime has a juristic reason to keep the funds. These public policy arguments do not help Beta Maritime because it did not contract for the $137,000 USD to be non-refundable.

ii. Conclusion on Unjust Enrichment

[169]     Mr. Newman has made out the unjust enrichment claim pertaining to the $137,000 USD payment but not the $25,000 USD payment.

[170]     Mr. Newman’s counsel focussed on unjust enrichment in his submissions and made only cursory submissions pertaining to the other causes of action. Given my conclusion, I will address the other causes of action with regard to the $25,000 USD payment. If I am wrong about unjust enrichment with regard to the $137,000 USD payment, the reason may impact the analysis of whether the other causes of action can be successfully made out. It would be inappropriate for me to hypothesize in that regard and so I will not undertake the alternate analysis.

B. Money Had and Received

[171]     Money had and received is a cause of action which is available where money was paid by mistake, acquired by way of fraud or paid under duress: International Longshore & Warehouse Union Local 502 v. Ford, 2016 BCCA 226 at para. 23.

[172]     A defence to money had and received is available where it would be against the conscience for the payee to return the money because the payee has changed its position based on the mistaken payment. The court may consider the equities on the “change of position defence” but the analysis of the claim of mistake is not a “loose examination of what may be fair”: Longshore at paras. 29-30.

[173]     Beta Maritime argues that money had and received is no longer a stand alone cause of action but has been subsumed into unjust enrichment. However, the Court of Appeal has stated on several occasions money had and received shall continue to be treated as a distinct cause of action: Longshore at para. 24; BSNF Railway Company v. Teck Metals Ltd. 2016 BCCA 350 at paras. 10-11; Barafield Realty Ltd. v. Just Energy (B.C.) Limited Partnership, 2017 BCCA 307 at para. 63.

[174]     Mr. Newman argues mistake. The type of mistake of fact that is an element of money had and received is “the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue”: Kelly v. Solari (1841), 152 E.R. 24, as cited by the Supreme Court of Canada in Storthoaks v. Mobil Oil Canada Ltd., [1976] 2 S.C.R. 147 at 156-57.

[175]     Accordingly the question in this case is whether the $25,000 USD payment was paid under mistake of fact, and if so, whether there is any equitable reason for Beta Maritime to keep the funds.

[176]     Mr. Newman says that he paid the funds under the mistake that Mr. Schofield had the means to complete the sale. He would not have paid non-refundable funds had he understood the facts correctly, i.e.: that Mr. Schofield did not have the means to complete the sale.

[177]     In my view, this is not a mistake of fact that can ground a successful recovery in money had and received. The mistake has to pertain to whether the recipient of the money was entitled to it: Storthoaks at 156-57. The cause of action rests on the principle that it is against conscience to permit the defendant to keep money he or she was never entitled to: Longshore at para. 41; BNSF Railway Company at para. 33.

[178]     There is no mistake in that regard here. Mr. Newman knew he was paying the funds pursuant to the contract Mr. Schofield had with Beta Maritime and he knew its terms. Mr. Newman did not pay the money under a mistake of fact that relates to Beta Maritime’s entitlement to receive and keep the funds.

[179]     Given my conclusion that there was no mistake of fact, it is not necessary for me to determine whether Beta Maritime changed its position in reliance on the receipt of the deposit.

C. Mistake of Fact

[180]     The plaintiff also pleads mistake of fact as a separate cause of action.

[181]     Whether there is a distinction between money had and received as a cause of action and mistake of fact as a cause of action is perhaps even more debatable (and obscure) than the distinction between money had and received and unjust enrichment. Mistake of fact has been described as an element of money had and received which should be the subject of pleadings which “set up the common law action of money had and received for the use of the plaintiff, supported by particulars of the mistake”: Co-Operative Fisheries Ltd. v. Canadian Imperial Bank of Commerce (1969), 7 D.L.R. (3d) 610 (S.K.Q.B.) at para. 65. In A.J. Seversen Inc. v. Qualicum Beach (Village) (1982), 135 D.L.R. (3d) 122 (B.C.C.A.) at 127 the Court of Appeal adopted the following statement from JRS Holdings Ltd. v. Maple Ridge (District) (1981), 27 B.C.L.R. 36 at para. 29: “[a]ctions for return of moneys by mistake of fact or of law are actions for money had and received”.

[182]     On the other hand, and more recently, the Court of Appeal in Longshore described these two concepts in a way which supports them being separate causes of action at para. 23:

[23]      As a cause of action, money had and received resembles and is related to the right of recovery for money paid under mistake….

[183]     Adopting Longshore as the most recent authoritative statement, I consider the two causes of action separately.

[184]     In B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15 at para. 22, Deschamps J. for the Court confirmed the Simms test for recovering money paid under a mistake of fact. The test comes from Barclays Bank Ltd. v. W.J. Simms Son & Cooke (Southern) Ltd., [1979] 3 All E.R. 522 (Q.B.) at 535. It has two parts:

(1)            If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact.

(2)            His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to discharge the payment) by the payer or by a third party by whom he is authorized to discharge the debt; and (c) the payee has changed his position in good faith, or is deemed in law to have done so.

[185]     Mr. Newman argues that he paid the $25,000 USD deposit money under the mistaken fact that Mr. Schofield would complete the purchase of the DDW.

[186]     This is the same mistake of fact that I have concluded could not support a claim for money had and received. However, I have not been directed to any law with respect to mistake of fact as a stand alone cause of action that requires the mistake to be linked to the recipient’s entitlement to the funds as it is for money had and received.

[187]     Although the issue is not directly addressed in B.M.P., the case is of assistance in this regard. The plaintiffs received a cheque for approximately $900,000. They deposited it at their bank and, after a period of some days, the funds were released to them by their bank. It was subsequently discovered that the cheque was a forgery (not by the plaintiffs). By then the plaintiffs had dispersed some of the funds. The issuing bank sought assistance from the bank into which the plaintiffs had deposited the cheque. The deposit bank recovered some funds from accounts into which the plaintiffs had transferred the funds.

[188]     The Supreme Court of Canada held that the banks were entitled to recover the funds from the plaintiffs as money paid under mistake of fact. The mistake was that the cheque was genuine. This is not a mistake relating to the plaintiffs’ right to receive the funds; by all accounts the plaintiffs were entitled to receive funds but had received a forged cheque. Based on B.M.P., I conclude that it is not necessary for the mistake to relate to the recipient’s entitlement to receive the funds.

[189]     I find that the money was paid under Mr. Newman’s mistaken belief that Mr. Schofield would be able to complete the purchase of the DDW. The first step has been made out: there is a prima facie entitlement to return.

[190]     However, the claim pertaining to the $25,000 USD deposit clearly fails under the second step of the Simms test. Mr. Newman knowingly made a non-refundable payment. He intended that Beta Maritime would keep the non-refundable deposit in the event that the purchase did not proceed. I conclude that the payment was made for good consideration based on Mr. Newman’s evidence that he made this payment pursuant to the contract between Beta Maritime and AOP to secure the right to buy the DDW. In exchange for $50,000 USD (one half of which Mr. Newman paid), Beta Maritime took the DDW off the market and committed to sell the DDW to AOP.

D. Resulting Trust

[191]     Mr. Newman relies on the principle that “equity presumes bargains, not gifts” in arguing that the payments he made were not gratuitous transfers. He argues that given that Beta Maritime refused to complete the sale, the payments he made give rise to a resulting trust.

[192]     In Nishi v. Rascal Trucking Ltd., 2013 SCC 33 at para. 21, Rothstein J. describes the purchase money resulting trust as follows:

[21]      The purchase money resulting trust is a species of gratuitous transfer resulting trust, where a person advances a contribution to the purchase price of property without taking legal title. Gratuitous transfer resulting trusts presumptively arise any time a person voluntarily transfers property to another unrelated person or purchases property in another person’s name (D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in Canada (4th ed. 2012), at p. 397).

[193]     Justice Rothstein further explained that the presumption is that a person who advanced purchase money without consideration intended to assume the beneficial interest in the property in proportion to his or her contribution to the purchase price:  Nishi at para. 29.

[194]     The presumption arises if the $25,000 USD paid by Mr. Newman towards the purchase of the DDW was made gratuitously to a person who is unrelated to him and who takes title. If so, the onus shifts to Beta Maritime to rebut the presumption by demonstrating that Mr. Newman did not intend to acquire a beneficial interest in the property.

[195]     Beta Maritime argues that a resulting trust does not “fit” this case. I agree with that observation. A resulting trust usually arises where the parties are acquiring the property and a party who has paid funds but does not take legal title intends to take beneficial title, while legal title is acquired only by the other party:  W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Carswell, 2012), at 21. This is not such a case. In this case, Beta Maritime already had title. Mr. Newman’s intentions about title were to acquire it from the contract between AOP once it completed the purchase from Beta Maritime.

[196]     This case is apt for an unjust enrichment analysis and that is where the parties focussed their arguments. However, I am mindful that claims can be brought in resulting trust in the alternative to unjust enrichment; one does not preclude the other: Nishi at para. 26. There is nothing in the law cited to me that precludes the application of the doctrine in such circumstances and so I will consider it.

[197]     In order for the presumption to arise, the purchase (or transfer) must be gratuitous, i.e.: no consideration has passed: Nishi at para. 29; Rosas v. Toca, 2018 BCCA 191 at para. 37. As I have already found, consideration did pass for the $25,000 USD. Accordingly, the presumption does not arise.

[198]     In case I am wrong on that, I will consider whether there is evidence which rebuts the presumption that Mr. Newman did not intend a gift.

[199]     In Nishi, Rothstein J. said that the key issue is whether there is evidence of intention that rebuts the presumption that the transfer was not a gift. At para. 27, Rothstein J. described the scope of gifts in law as follows:

[27]      … the legal concept of a gift is broad enough to include the type of advance made in this case. Legal gifts do not require philanthropic motivations. The trust-gift dichotomy, as Mr. Nishi describes it, is not restrictive. Rather it reflects the fact that when making a gratuitous transfer of property, the person who makes the transfer must have intended either to pass the beneficial interest (a gift) or retain it (a trust).

[200]     The relevant intention is that of the transferor, and the relevant time is the time at which the payment or transfer was made.

[201]     In MacKinnon v. Donauer, 2017 BCCA 437, the Court of Appeal considered a situation in which a mother had contributed to the purchase of a home for her daughter and son-in-law, on the agreement that she would live in the home’s suite rent free. The relationship broke down and she moved out of the suite. She claimed a beneficial ownership in the house under resulting trust. The Court of Appeal held that she never intended to have a beneficial interest in the home, rather she intended to live in the suite. The arrangement was one of mutual or reciprocal benefits.

[202]     I find this reasoning applicable in this case to a certain extent. While Mr. Newman did intend to acquire an interest in the DDW through AOP, its intentions so far as the $25,000 USD was concerned were mutually reciprocal:  Mr. Newman intended to pay a non-refundable deposit in exchange for Beta Maritime taking the DDW off the market. Mr. Newman knew the payment was non-refundable, and accordingly, it was his intention to make a gift of the $25,000 USD in the event that the sale did not close within the meaning of a legal gift as explained in Rishi.

E. Remedy

[203]     Mr. Newman seeks a declaration that there is a constructive trust in which Beta Maritime holds the funds Mr. Newman paid and/or damages in the same amount.

[204]     Since I have found that there is no legal or equitable basis for Beta Maritime to retain the $137,000 USD, I will consider whether I ought to declare it held by Beta Maritime as a constructive trust or simply make an award for damages.

[205]     In BNSF Railway, Newbury J.A. for the Court of Appeal reviewed the development of the constructive trust in Canada. A remedial constructive trust is available to remedy unjust enrichment and breach of fiduciary duty: BNSF Railway.

[206]     There are two criteria that must be met. The first is that there must be referential property, i.e.: the plaintiff must a demonstrate a substantial and direct link, a causal connection or a nexus between his or her claim and the property which is the subject of the remedial constructive trust to be impressed: Kerr at paras. 50-51; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 92; BNSF Railway at paras. 57 and 60. The second is that the plaintiff must demonstrate that a monetary award is insufficient or inappropriate in the circumstances: Kerr at para. 52; Pro-Sys at para. 92.

[207]     In this case, the first criteria is met. Mr. Flemming testified that the money paid by Mr. Newman was received by Beta Maritime and is in the bank account to which it was deposited. Funds paid can be referential property if the funds can be traced: Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd., 2010 BCCA 357 at paras. 41-43.

[208]     With regard to showing that a monetary remedy is insufficient, the plaintiff need not elect whether to pursue the monetary or the proprietary remedy until able to make an informed choice prior to the pronouncement of judgment:  BNSF Railway at paras. 67-68.

[209]     In this case, Mr. Newman has not articulated an election. More importantly, he has not made a submission that a monetary remedy would be inappropriate. There is no evidence that would support an argument that the plaintiff’s award needs to be attached to the DDW because of insolvency issues with Beta Maritime, because this DDW was unique; because the DDW appreciated in value; because Beta Maritime engaged in morally wrong behaviour such that it would be wrong to permit it to retain a complete interest in the DDW; or anything else that would call for a proprietary remedy:  Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at 678-79.

[210]     I conclude that a monetary remedy will be adequate.

V. Conclusion

[211]     The two payments made by Mr. Newman to Beta Maritime towards the purchase of the DDW enriched Beta Maritime to the detriment of Mr. Newman. Beta Maritime has a juristic reason to retain the first payment of $25,000 USD but not the second payment of $137,000 USD. Mr. Newman is awarded damages for unjust enrichment in the amount of $137,000 USD converted into Canadian funds as of the date of this judgment.

[212]     Mr. Newman’s claims in money had and received, mistake of fact and resulting trust are dismissed.

[213]     Subject to any matters of which I am not aware relating to costs, I award Mr. Newman costs at Scale B. If the parties wish to speak to costs, they shall, within 30 days of these reasons, contact the registry to make arrangements to do so.

“Matthews J.”