Sale Of Land

Agreement purchase of sale – breach of – Damages – Specific performance – Assessment of damages – limiting factors – Duty to mitigate – sale of land.

Southcott Estates appealed the court of appeal decision reducing the damage award in a breach of an agreement of purchase and sale of land because of its failure to mitigate (lesson) its losses. Southcott was a corporation with only one focus, and had no assets. It was created for the sole purpose of developing property. When the seller, the Toronto Catholic District School Board (the “Board”), did not satisfy a condition and would not extend the closing date, Southcott sought specific performance of the contract (to have the sale of land forced through). The trial judge found that the Board breached the agreement of purchase and sale of land and had failed to prove that Southcott could have lessened its damages. The court awarded damages for the loss of ability to make a profit. The Court of Appeal decided that Southcott had unreasonably failed to take any steps available to them to lessen its loss and reduced the damage award given at trial to a nominal sum. Southcott maintained that they could not avoid the losses. The issue raised in the appeal was whether a single-purpose corporation was excused from trying to lessen its losses when the seller breaches an agreement of purchase and sale of land, and especially when it started an action to force the contract through. The further issue was whether the trial judge made a mistake in deciding that there were no other “comparable” properties available for Southcott to buy to lesson its loss.


Held: Appeal was turned down. Generally with the sale of land, a plaintiff will not be able to get back losses that could have been avoided by taking reasonable actions to lessen the loss. As a separate legal entity, Southcott must try to lessen its loss by making reasonable efforts to find someone offering the sale of land instead of the property that they had contracted to buy. Those who choose the advantages of incorporation must also accept the corresponding disadvantages and hurdles. The responsibility to take steps to lessen those losses are one such responsibility. There may be situations in which a plaintiff’s inaction is acceptable even though it failed to obtain an order for specific performance where circumstances reveal “some fair, real, and substantial justification” for its claim or “a substantial and legitimate interest” in seeking specific performance. This does not mean that a plaintiff in these circumstances should not try to lessen; rather it recognizes that such a claim for specific performance informs what’s is reasonable behavior for the plaintiff in lessening its loss. If the plaintiff has a substantial justification or a substantial and legitimate interest in specific performance, its refusal to purchase other property may be reasonable, depending upon the facts in each circumstance. This case was not a situation where the buyer could do that. The land not unique to Southcott than a good investment. A plaintiff deprived of an investment property does not have a “fair, real, and substantial justification” or a “substantial and legitimate” interest in specific performance unless it can show that money is not a complete replacemet due to the land having “a particular and special value” to it. Southcott could not claim this and its inaction could not be justified. Where it is alleged that a plaintiff has failed to lessen damages, the onus of proof on a balance of probabilities lies with the defendant, who must show that not only did the plaintiff failed to take reasonable efforts to find a substitute property, but additionally that a reasonable profitable substitute could be found. The Court of Appeal correctly decided that the Board showed that other investment properties were available in the relevant time period to lesson the losses.


Southcott Estates Inc. v. Toronto Catholic District School Board. (2012) S.C.J. No. 51, Supreme Court of Canada, MacLachlin C.J. and LeBel, Deschamps, Abella, Rothstein, Cromwell and Karakatsanis JJ., October 17, 2012. Digest No 3226-010