Leasehold improvements—sale—unjust enrichment—enrichment—juristic reasons

Mark Hobson wanted to open a restaurant called Cosa Nostra. Haxton Holdings owned a building that, with considerable renovations, would provide suitable premises. To that end, Haxton Holdings entered into a collection of contracts with Hobson and Cosa Nostra Inc that included a lease and a loan for $400,000. Cosa Nostra then separately contracted with Designs by Marlynn and 1361556 Alberta Ltd (“136”) to perform respectively design and construction services. That work was done and the restaurant opened, but the business failed in less than a year. Because Cosa Nostra still owed more than $360,000 to Haxton Holdings, the parties entered into a new set of agreements that included a surrender of the lease and a sale of the restaurant’s “equipment, assets and leasehold improvements, and inventory” (at [36]). Haxton Holdings then leased the premises to another party that wanted to operate an Italian restaurant. By that point, both Hobson and Cosa Nostra were judgment-proof. Consequently, since neither had received contractual payment from Cosa Nostra, Designs by Marlynn and 136 sued Haxton Holdings for, inter alia, unjust enrichment.

Decision: Claims dismissed.

Held: (1) The elements of enrichment and corresponding deprivation require a “transfer of wealth between the parties” (at [66]). “The plaintiff must have either made a direct contribution causing the defendant’s unjust enrichment or an indirect contribution that is causally connected to the defendant obtaining a benefit that rightfully ought to have accrued to the plaintiff” (at [67], citing Moore v Sweet 2018 SCC 52, [41]; [2020] LMCLQ 121). “Haxton Holdings did not receive anything at all directly from [either plaintiff]. Everything acquired by Haxton Holdings was the result of the contract it entered into with Cosa Nostra … to purchase the assets, inventory, equipment and leasehold improvements .... Therefore, the first element of enrichment has not been made out” (at [72]). (2) “Likewise, the deprivation suffered by [the plaintiffs] was a result of Cosa Nostra’s not fully paying for the goods and services … in accordance with the contract[s] that it entered into .... Haxton Holdings acquired the goods indirectly, through its own