Court of Appeal for Ontario
Date: 20231208 Docket: C70373
Before: Benotto, Trotter and Zarnett JJ.A.
Between: The Rosseau Group Inc. Plaintiff (Respondent)
And: 2528061 Ontario Inc. Defendant (Appellant)
Counsel: J. Thomas Curry and Aoife Quinn, for the appellant Stephen Schwartz and Emily Quail, for the respondent
Heard: March 20, 2023
On appeal from the judgment of Justice Kendra D. Coats of the Superior Court of Justice dated January 24, 2022, with reasons reported at 2022 ONSC 486.
Zarnett J.A.:
Overview
[1] When a vendor breaches an agreement to sell real estate, the normal measure of the innocent purchaser’s damages is the difference between the purchase price and the market value of the property on the date the sale was to be completed. Among other issues, this appeal raises the question of whether a departure from the normal measure of damages is appropriate because the subject of the sale was land the purchaser intended to develop.
[2] The respondent (“Rosseau Group”) was the purchaser, and the appellant (“252”) was the vendor, under an agreement for the sale of development lands (the “APS”). The purchase price was $350,000 per acre based on the number of developable acres within the property, and was ultimately set, subject to final adjustment at about $6.6 million.
[3] The purchase did not close. Rosseau Group brought an action alleging that 252 breached the agreement. Rosseau Group did not, however, seek the normal measure of damages for that breach, and led no expert appraisal evidence that the property was worth more on the closing date than the contractual purchase price. Instead, it sought the profits it claimed it would have earned had it acquired the property and developed it into serviced residential lots over a period of about six years after closing.
[4] The trial judge found that 252 had breached the APS. She held that this was an appropriate case to depart from the normal measure of damages and awarded Rosseau Group over $11 million as a “reasonable estimate” of its “lost expected profit”.
[5] 252 appeals. It argues that the trial judge erred in finding that 252 breached the APS. And it argues that the trial judge erred by awarding an “exceptional measure of damages”.
[6] For the reasons that follow, I would allow the appeal in part. I reject the argument that the trial judge erred in concluding that 252 breached the APS. But in my view, the trial judge did err in departing from the normal measure of damages. A new hearing to assess the damages on the proper measure is required.
Factual Background
[7] On January 20, 2017, the parties entered into the APS. Under it, Rosseau Group was to purchase property of about 45.71 acres in Caledon, Ontario from 252. At the time of the APS, the property was undeveloped and consisted of a residential house, wetlands, and vacant farmland. It was zoned for agricultural and conservation uses.
[8] The APS initially contemplated a purchase price of $10.5 million, but provided that the ultimate purchase price was tied to the number of “developable acres”. It stated that the $10.5 million purchase price was “based on…approximately 30 ac[res] be[i]n[g] [d]evelopable and designated for [r]esidential development, allowing [t]ownhouses, [s]emis and [s]ingle homes”. The purchase price was to be adjusted in the event the “number of developable ac[r]es is changed…based on a price of $350,000.00 per developable acre”.
[9] The APS provided for an initial deposit of $50,000. It was conditional, for a period of 90 days, during which Rosseau Group was to satisfy itself on a number of issues, including the economic feasibility of the development of the site. If the conditions were not waived during the due diligence period, the APS would be null and void and the deposit of $50,000 would be returned in full. On waiver of the conditions, a further deposit of $400,000 was to be paid by Rosseau Group. The closing was to be 60 days after the removal of all conditions set out in Schedule A of the APS.
[10] After signing the APS, 252 was advised by its consultants that the net developable area was 18.9 acres, over 10 acres less than initially thought. 252 relayed this information to Rosseau Group, which prompted discussions between both parties including about changes to the payment terms. One of the changes discussed was 252’s request that Rosseau Group assume the first mortgage on the property in favour of Bank of Montreal (the “BMO Mortgage”). The trial judge found that a representative of Rosseau Group told a representative of 252 that Rosseau Group would agree to that request if the requirement for the $400,000 further deposit was deleted.
[11] The APS was amended by a document in writing dated March 10, 2017 that addressed the reduced number of developable acres and changes in the payment terms. The amending provisions, which were “inserted” into the APS, stipulated that (i) the purchase price was reduced to $6,615,000 to reflect the reduced net developable acres [1] and (ii) Rosseau Group agreed to assume “subject to approval” the BMO Mortgage in the amount of $1,660,000, give a mortgage back to 252 (a “VTB” mortgage) in the amount of $3,115,000, and pay a balance on closing of $1,790,000. The amending provisions noted that these three amounts, plus the $50,000 initial deposit, totalled the purchase price of $6,615,000 [2]. The document amending the APS did not expressly refer to the $400,000 further deposit, and although it deleted certain paragraphs of the original APS, it did not expressly delete the schedule to the original APS that had provided for the $400,000 further deposit.
[12] On June 7, 2017, Rosseau Group waived all conditions, but did not provide a $400,000 further deposit. On June 13, 2017, 252 communicated to Rosseau Group that it was treating the failure to provide a further deposit as a repudiation of the APS. 252 later sent a certified cheque purporting to return the $50,000 initial deposit.
[13] Rosseau Group took the position that the APS was not at an end. In August 2017, Rosseau Group’s lawyer indicated that it was “ready, willing and able to complete the purchase.” It set closing dates of September 4, and then September 19, 2017.
[14] No closing took place. Neither side tendered, 252 taking the position that it had no obligation to close as the APS was at an end, and Rosseau Group taking the position that it was relieved of any obligation to tender because 252 had clearly indicated it would not close the APS.
[15] The trial judge found that when 252 took the position that the APS was at an end, its principal knew the value of the property had increased from January 2017 when the original APS was agreed to. She referred to the fact that 252 received an offer for the property of $11 million in April 2017. It also received a Letter of Intent at $640,000 per developable acre in September 2017, and an offer for the property that same month of $14 million.
The Action and the CPL
[16] Rosseau Group commenced an action in August 2017 claiming specific performance and, in the alternative, damages. It obtained a Certificate of Pending Litigation (“CPL”) and registered it against the property.
[17] 252 moved successfully to vacate the CPL. In his decision vacating the CPL dated December 14, 2017, Trimble J. found that the property was not unique as Rosseau Group intended to resell, not develop, and that Rosseau Group was not ready, willing, and able to close as it had taken no steps to assume the BMO Mortgage.
[18] Rosseau Group subsequently abandoned the claim for specific performance.
The Trial Judge’s Decision
[19] The trial judge found that 252 breached the APS by refusing to complete the transaction because the $400,000 further deposit had not been paid. She found that there was no provision for the $400,000 further deposit in the amended APS, which was consistent with the negotiation that led up to the amendments to the APS, as Rosseau Group had indicated it would agree to assume the BMO Mortgage if the requirement to post a further $400,000 deposit was dispensed with.
[20] The trial judge also found that Rosseau Group was ready, willing, and able to carry out the APS. Despite the reduction in developable acreage, Rosseau Group wanted to close the transaction – it conducted due diligence, was prepared to assume the BMO Mortgage and had, or could acquire, the required funds to pay the balance due on closing. She considered that 252’s conduct relieved Rosseau Group of any obligation to tender.
[21] The trial judge rejected 252’s argument that Rosseau Group was estopped from asserting the “uniqueness” of the property and that it was ready, willing, and able to close because those points were determined against Rosseau Group on the motion to vacate the CPL. She held that Trimble J.’s determinations were not binding at trial.
[22] Turning to the question of damages, the trial judge considered this a proper case to depart from the normal measure of damages, namely the difference between the market value of the property on the date of closing and the contractual purchase price. She found that Rosseau Group was entitled to damages based on the estimated profit it would have earned had the transaction closed. She noted that it had acquired the property with the intention of earning a profit by developing it; these were special circumstances known to the parties at the time the APS was made.
[23] The trial judge accepted the expert evidence of Martin Quarcoopome. Although not an appraiser or business valuator, he was a development consultant with experience in helping landowners determine the financial cost and profit of real estate development. She rejected an objection that he was not impartial, and found him qualified to give opinion evidence in the areas of planning approvals; land use planning, development, and their costs; as well as estimated profits of proposed developments.
[24] Mr. Quarcoopome estimated the profits that Rosseau Group would have earned, if it had developed the property over a six-year period following the closing date, including rezoning the property to permit residential uses and creating 49 serviced lots, to be between $10,141,345.27 and $12,103,345.27. No expert evidence on damages was called by 252.
[25] The trial judge selected the midpoint of Mr. Quarcoopome’s range as a reasonable estimate of the lost expected profit. She rejected the argument that Rosseau Group failed to mitigate its losses by purchasing and developing another property, finding that 252 had not satisfied her that it had been possible for Rosseau Group to purchase a similar property.
[26] The trial judge gave judgment in favour of Rosseau Group for $11,122,345.27 and dismissed 252’s counterclaim which was premised on Rosseau Group having had, and breached, an obligation to post a further $400,000 deposit.
Analysis
(a) The Liability Appeal
[27] 252 makes three arguments in relation to its appeal from the trial judge’s finding that it breached the APS rendering it liable for damages. First, it submits that the trial judge erred in finding that the amendments to the APS removed the requirement that Rosseau Group post a further $400,000 deposit. Second, it argues that the trial judge erred in finding that Rosseau Group was not required to tender. Third, it argues that the trial judge erred in finding that Rosseau Group was ready, willing, and able to tender and in any event erred by not considering herself bound by the finding on the motion to vacate the CPL that Rosseau Group was not ready, willing, and able to close the transaction on the closing date.
[28] I reject these grounds of appeal. I agree with trial judge’s liability finding.
(i) The Further Deposit Issue
[29] Whether the amended APS did away with the requirement for a $400,000 further deposit is an issue of contractual interpretation. Absent an extricable legal error, the trial judge’s interpretation is entitled to deference on appeal: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50, 52. In my view, the trial judge did not make an extricable legal error.
[30] 252 contends the trial judge misunderstood the legal nature of a deposit as something that is credited against the purchase price. According to 252, this led her to the erroneous conclusion that “there was a practical difficulty with the $400,000 deposit and the amended APS co-existing”. It submits the trial judge mistakenly thought that because the amended APS said that the initial $50,000 deposit was to be credited against the balance due on closing, but made no such provision relating to a further deposit, payment of a further deposit would increase the total that Rosseau Group had to pay, which could not have been the parties’ intention.
[31] In my view, the trial judge did not make this error. She was not construing the legal effect of a deposit in a situation where the parties had not specified what that effect would be. She was deciding what effect should be given to the language the parties used in the amendment to the APS. In the amendment, the parties set out the precise components of the purchase price − the assumption of the BMO Mortgage, the VTB mortgage, the initial deposit and the balance to be paid on closing. These four amounts were expressly described in the amendment as totalling the full purchase price. The initial deposit was referred to in the amendment as being credited against the balance payable on closing, and future changes to net developable acres were to be adjusted from the VTB mortgage. It was thus significant that the amendment did not refer to the further deposit as a component of the purchase price at all, let alone state how, or against what component of the purchase price, the further deposit was to be credited.
[32] Although the amendment did not expressly say that the Schedule to the original APS that provided for the further deposit was deleted, the trial judge was required to construe the APS as a whole, post-amendment, including reconciling apparently inconsistent terms. In doing so she was entitled to consider whether the express language of the amendment should be given priority over a Schedule to the original APS that was inconsistent with it. The trial judge was entitled to conclude that the parties’ express treatment, in the amendment, about the components of the purchase price including the initial deposit, without any reference to the further deposit, was tantamount to deleting any continuing requirement for the further deposit. In other words, she was entitled to conclude that the parties deleted the requirement for the further deposit by the language of the amendment.
[33] 252 also submits that the trial judge’s interpretation is tainted by her reference to Rosseau Group’s communicated position that it would agree to assume the BMO Mortgage if the further deposit requirement were dropped, and by her failure to advert to the entire agreement clause in the APS.
[34] I do not accept these arguments.
[35] The genesis of the amendment, in the sense of the identification of points the parties were expecting it to address, was relevant objective evidence of “background facts at the time of the execution of the contract”. The trial judge used those facts properlyto deepen her understanding of the language of the amended APS, not to overwhelm that language. She reached an interpretation that was grounded in the text: Sattva, at paras. 57-8.
[36] The trial judge’s interpretation is not affected by the entire agreement clause. Such a clause does not prevent the court from considering relevant surrounding circumstances in interpreting the meaning of the contract: Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592, at para. 62.
(ii) No Requirement to Tender
[37] 252 argues that although it indicated on June 13, 2017 that it was taking the position the APS was at an end, Rosseau Group did not accept the repudiation, and demanded a closing date of September 19, 2017. It submits that Rosseau Group was therefore required not only to be ready, willing, and able to close on that date, but to demonstrate that by tendering the closing funds and other required documents. 252 argues that the trial judge should have treated the failure to tender as fatal to Rosseau Group’s claim.
[38] I disagree.
[39] Because Rosseau Group did not accept 252’s anticipatory repudiation of the APS, but instead rejected it, it kept the APS alive, and both parties remained bound to perform their obligations on the closing date. In order to rely on 252’s failure to close on September 19, 2017, Rosseau Group had to be ready, willing, and able to close on that date: Domicile Developments Inc. v. MacTavish (1999), 45 O.R. (3d) 302, 175 D.L.R. (4th) 334 (C.A.), at paras. 14-15. But that obligation was satisfied if Rosseau Group was (as the trial judge found) actually ready, willing, and able to close. For 252’s argument to be correct, Rosseau Group’s obligation had to extend to include a requirement to tender on a party who had unequivocally indicated that the tender would be useless because it would not close.
[40] I see no error in the trial judge’s conclusion that a tender was not required. Although tendering is one way of showing that a party is ready, willing, and able to close, it is not the only way. “While tender is the best evidence that a party is ready, willing and able to close, tender is not required from an innocent party enforcing his or her contractual rights when the other party has clearly repudiated the agreement or has made it clear that they have no intention of closing the deal” (emphasis added): Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 45, leave to appeal refused, [2019] S.C.C.A. No. 55. The rationale for this is clear: “the law does not require what would be a meaningless or futile gesture”: Time Development Group Inc. (In trust) v. Bitton, 2018 ONSC 4384, at paras. 56-7.
[41] 252’s reliance on the decision of this court in 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, 438 D.L.R. (4th) 566 for the proposition that tender was required is misplaced. 1179 Hunt Club was not a case of a party who was in fact ready, willing, and able to close being denied a contractual remedy because it failed to tender on a party who had indicated that such a tender would be useless.
[42] In 1179 Hunt Club, the vendor rejected the purchaser’s anticipatory repudiation of the agreement, insisted that the transaction close on a specific date, and indicated that there would be immediate pursuit of legal remedies if the purchaser did not perform. The application judge found, and this court agreed, that the vendor was not in fact ready, willing, and able to close on the date it insisted upon, because it was unable to transfer title to the purchaser: at paras. 2, 17, 20, 21, 22 and 27. It was in that context − a party who was in fact not ready to perform insisting on strict performance from the other party − that Lauwers J.A. referred to the failure to tender as being “fatal” to the vendor’s position that it could “render perfection in its own performance”: at para. 23. Later in his reasons, Lauwers J.A. brought those two key aspects together when he explained: “[h]aving set the date, here the vendor did not trouble itself to tender, and in fact could not have tendered because on that day it was incapable of transferring title” (emphasis added): at para. 27.
[43] Accordingly, 1179 Hunt Club does not assist 252, because it does not stand for the proposition that a failure to tender by a party who is ready, willing and able to close precludes their claim.
(iii) The Trial Judge Did Not Err in Finding Rosseau Group Was Ready, Willing, and Able to Close
[44] 252 goes on to argue that the trial judge erred in finding that Rosseau Group was in fact ready, willing, and able to close. It argues that although the trial judge found that Rosseau Group had sufficient funds available from related entities to close the transaction, this was insufficient as it had not taken possession of those funds itself. It also argues that although the trial judge found Rosseau Group could assume the BMO Mortgage, this too was insufficient because it took no steps to do so. And it argues that the trial judge should have considered herself bound by the findings about readiness to close made on the CPL motion.
[45] I disagree.
[46] On the question of funds for closing, the trial judge’s finding that the funds required to close were available to Rosseau Group was sufficient. With that availability, it was ready, willing, and able to close. The added step of symbolically depositing the funds in its own account for a transaction that 252 would not complete would have been “a meaningless or futile gesture” of the type the law does not insist upon.
[47] The obligation of Rosseau Group to assume the BMO Mortgage was an obligation in favour of 252. To perform it, if the transaction were completed, Rosseau Group would have had to make the mortgage payments that 252 had committed to − it would be in breach of that obligation and would have to indemnify 252 if it did not [3].
[48] The trial judge found Rosseau Group could have assumed the BMO Mortgage, in other words, that it could have performed the BMO Mortgage obligations it agreed to assume. That finding was sufficient. It was not germane whether the parties had contacted the mortgagee about the assumption—whatever rights would accrue to the mortgagee on the sale were rights under the BMO Mortgage that Rosseau Group would have had to ensure (and on the trial judge’s finding could have ensured) were honoured.
[49] Nor did the reasons given on the motion to vacate the CPL, that Rosseau Group was not ready, willing, and able to close because it took no steps to assume the BMO Mortgage, preclude the trial judge from reaching a different conclusion on this point.
[50] 252 relies on the principle accepted in Earley-Kendall v. Sirard, 2007 ONCA 468, 225 O.A.C. 246, at para. 43, that a decision on an interlocutory motion is binding on the parties with respect to other proceedings in the same action. In Earley-Kendall, a defence motion seeking to adjourn the trial to allow for a medical examination of the plaintiff was dismissed. This was held to preclude a second defence motion compelling the plaintiff to attend a defence medical examination. The two defence motions were found to have been for substantially the same relief; the decision on the first motion therefore barred the second motion under the doctrine of issue estoppel: at paras. 44, 45, and 47.
[51] 252 argues that this principle has been applied to preclude a party, on a motion for summary judgment, from arguing a point decided against them on a CPL motion, and that the same approach should follow at trial. It points to Lamba v. Mitchell, 2021 ONSC 1612, where one of the issues on a summary judgment motion was whether there had been a material misrepresentation in pre-contractual information about the house that was to be purchased. The summary judgment motion judge noted, as one of the reasons for rejecting the claim of material misrepresentation, that there was a finding about this issue on an earlier motion for leave to issue a CPL: at paras. 31-35. He used this as an alternative ground for rejecting the argument of material misrepresentation, having also found on the record before him that there was no material misrepresentation: at para. 30.
[52] I do not accept the argument of 252 that the trial judge was, in this case, bound by the reasons given when the CPL was vacated. To the extent that the decision in Lamba suggests otherwise, it is inconsistent with the jurisprudence of this court and should not be followed.
[53] The principle in Earley-Kendall applies to prevent a party from relitigating a decision. When the question is whether a trial judge is bound by something that occurred on an interlocutory motion, the distinction between what was decided and the reasons why that decision was made is important.
[54] A CPL confers no rights − it gives notice that there is a claim in the action to an interest in land. The decision as to whether a CPL should be granted or vacated is only a decision about whether notice of the claim should be registered or removed from title. The claim itself is only determined by the final decision in the action: G.P.I. Greenfield Pioneer Inc. v. Moore, [2002] 58 O.R. (3d) 87 (C.A.), at para. 26. A decision about the CPL does not determine the validity of the claim one way or the other. Litigating the claim, and issues in the claim, at trial is not relitigating anything decided in a motion about the CPL.
[55] This court has held that an order granting or lifting a CPL is, for appeal purposes, an interlocutory, not a final, order. This is precisely because it “does not finally determine the litigation” or “any issue in the litigation, which remains ongoing”: 1476335 Ontario Inc. v. Frezza, 2021 ONCA 822, at para. 9.
[56] As the decision about the CPL in this case did not finally determine any issue in the litigation, comments in the reasons given on the CPL motion have no effect on those issues. In Frezza, this court held that the reasons of a motion judge for denying a CPL (for example, reasons about whether the claim was statute barred) are not binding on the trial judge, because they do not constitute the final determination of any issue relating to the validity of the claim for the purpose of granting or denying judgment on the claim: at paras. 10, 14.
[57] Accordingly, the trial judge was correct not to consider herself bound by the reasons given on the motion to vacate the CPL. Adopting the language in Frezza, the “full record for finally determining the issue [of whether Rosseau Group was ready, willing, and able to close] may or may not have been placed before the motion judge, but only enough to allow the motion judge to make or deny the discretionary order that was sought. In any event, the court [on the CPL motion] was not asked to make a final determination of [that] issue”: at para. 14.
(iv) Conclusion on the Liability Appeal
[58] I would therefore uphold the trial judge’s determination that 252 breached the amended APS, and therefore her finding that it was liable for damages, and her dismissal of the counterclaim.
(b) The Damages Appeal
[59] A trial judge’s assessment of damages attracts considerable deference on appeal. However, an assessment made on the basis of an error of principle or law may be interfered with on appeal: SFC Litigation Trust v. Chan, 2019 ONCA 525, 147 O.R. (3d) 145, at para. 112, leave to appeal refused [2019] S.C.C.A. No. 314.
[60] 252 submits that the trial judge erred in departing from the normal measure of damages, awarded damages that violated the remoteness principle, did not use the proper date for assessment of damages, and made an award that failed to address contingencies.
[61] I do not agree with 252 that an award that takes into account the loss to Rosseau Group flowing from it being deprived of the opportunity to acquire developable property violates the remoteness principle. However, the question of remoteness − whether the type of loss is recoverable − is separate from the question of how to measure the loss. In my view, the trial judge erred in departing from the normal measure of damages in the absence of anything that suggested that that measure would not address Rosseau Group’s recoverable loss. That conclusion is supported by the issues about the assessment date and contingencies that 252 raises in connection with the trial judge’s approach.
(i) The Normal Measure of Damages
[62] The normal measure of damages for a failed real estate purchase is the difference between the contract price and the market value of the land on the “assessment date”. The assessment date is usually the date on which the purchase was scheduled to close. Although the court may set a later date if the party seeking damages satisfies certain criteria, the presumption is that damages are to be assessed as of the date of the breach. That presumption is not easily displaced; any deviation from it must be based on legal principle: 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401, 88 D.L.R. (3d) 1 (C.A.), at para. 55, leave to appeal refused (1978) 20 O.R. (2d) 401 (S.C.C.); 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417, 209 D.L.R. (4th) (C.A.), at paras. 41-43; Rougemount Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847, 410 D.L.R. (4th) 509, at para. 50; Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, 161 O.R. (3d) 469, at para. 27, leave to appeal refused, [2022] S.C.C.A. No. 183.
[63] There are several reasons why the normal measure is the presumptive, measure of the innocent party’s damages and is not to be easily displaced.
[64] First, when a purchase contract is performed, the purchaser pays the purchase price on closing and obtains, on the same date, ownership of an asset. Damages are awarded on the principle that the innocent party, as nearly as possible, should be put in the position it would have been in if the contract had been performed. Using, as the measure of damages, the difference between the purchase price and the land’s market value on the closing date puts this principle into effect: 100 Main Street, at paras. 55-56. The market value represents the financial equivalent of the asset itself.
[65] Second, commercial certainty is enhanced by a predictable damages methodology. This court has stated that an early, and predictable, date on which the innocent party’s damages are crystallized promotes efficient behaviour and reduces uncertainty and speculation: Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp. (2004), 246 D.L.R. (4th) 595 (Ont. C.A.), at para. 125, per Laskin J.A. (concurring), leave to appeal refused, [2000] S.C.C.A. No. 658. Although made in the context of a sale of goods, the observation applies equally to the sale of land.
(ii) The Remoteness Test Does Not Determine the Measure of Damages
[66] The trial judge noted that Rosseau Group, in calculating its lost expected profit from the opportunity it would have had to develop the property, was not claiming damages according to the normal measure. She said that “there is a general discretion in the court to depart from that [measure] if circumstances warrant”. She held the circumstances here justified the departure because the “parties in this case specifically contemplated that the [p]roperty would be developed into serviced lots…[t]hese were special circumstances known to the parties at the time they made the APS and amended [the] APS”.
[67] In my view, it was an error to rely solely on the parties’ contemplation of future development to justify a departure from the normal measure of damages in this case. The existence of what the trial judge referred to as special circumstances only meant that a type of loss was recoverable − in other words, it was not too remote. That conclusion is not the same as, let alone determinative of, the question of whether the normal measure is somehow inadequate to measure that loss.
[68] To explain, the term special circumstances known to the parties at the time of contracting, in the context of damages for breach of contract, is a reference to the second of the two branches of the remoteness limit on such damages. As this court stated in Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, at para. 36: “…there are two branches to the Hadley v. Baxendale remoteness test. Damages may be recovered if: (i) in the “usual course of things”, they arise fairly, reasonably, and naturally as a result of the breach of contract; or (ii) they were within the reasonable contemplation of the parties at the time of contract”. Damages that fall outside of either branch are not recoverable because they are too remote.
[69] The fact the property had known development potential, and therefore that if Rosseau Group acquired ownership it could benefit from having land with that potential, meant that damages for loss of the value of that potential (that is, the development value) would not be too remote. Indeed, even without the trial judge’s finding of special circumstances the same result would follow. The APS, originally and as amended, provided for the sale of development lands. The price was a direct function of the net developable acres for residential purposes. The APS was conditional on Rosseau Group satisfying itself as to the economic feasibility of development. The loss, measured in money, of the ability to acquire development lands and the opportunity that provided would, on an objective basis, flow fairly, reasonably, and naturally from the breach of the APS. Loss of development value would not be too remote even on the first branch of the remoteness test.
[70] But, importantly, the remoteness test deals with the “type” of loss that is recoverable, while the measure is about how the loss is quantified. Regardless of the branch of the remoteness test into which the loss of an opportunity to acquire lands that can be developed falls, the normal measure of damages should not be departed from unless the party seeking damages shows that that measure does not address that type of loss. The trial judge made no such finding, nor, in my view, was it available on the record [4].
[71] The key driver of damages under the normal measure is the market value of the land on the assessment date. The normal measure of damages compensates the innocent purchaser for the loss of the market value of the lands on the closing date less the purchase price that had to be paid to acquire them. The concept of market value of the land takes into account the value the land has because it can be developed.
[72] In Musqueam Indian Band v. Glass, 2000 SCC 52, [2000] 2 S.C.R. 633, at para. 37, Gonthier J. drew on precedents from various situations in which the term value is used in connection with real estate to provide an all-compendious general definition. He said: “‘Value’ in real estate law generally means the fair market value of the land, which is based on what a seller and buyer, ‘each knowledgeable and willing,’ would pay for it on the open market”.
[73] One of the cases relied on by Gonthier J. was the decision of this court in Re Farlinger Developments Ltd. and Borough of East York, [1975] 61 D.L.R. (3d) 193, 9 O.R. (2d) 553, an expropriation case. As that case shows, determining market value in the expropriation context relies on expert appraisal evidence that considers the highest and best use of the property, that is, the use to which the property could reasonably and probably be put in the future to maximize its economic return, including by redevelopment: at pp. 199-200.
[74] Assessing market value for the purpose of damages for breach of a purchase agreement for the sale of land employs the same concepts. It generally requires appraisal evidence: DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONSC 2432, at para. 56, rev’d on other grounds 2017 ONCA 961. Appraisal evidence can take into account the value of the property based on what would be its reasonable and probable highest and best use and that includes development: see for example 1427814 Ontario Limited v. 3697584 Canada Inc., 2012 ONSC 156, at paras. 511-17; WED Investments Limited v. Showcase Woodycrest Inc., 2021 ONSC 237, at paras. 149, 151, and 155. In other words, the market value of the land can take into account, as at the valuation date, the market’s perspective of the value of the current and potential future uses and opportunities available to the land’s owner, including development.
[75] There was no suggestion here that a calculation of market value at the closing date would somehow miss or exclude the development value of the lands. The APS, negotiated in January 2017 between arms’ length market participants, attributed value to the property solely by reference to its potential development, as the price was $350,000 per developable acre for residential development. The trial judge found that 252 had knowledge that the value of the property had increased by the closing date based on market evidence − 252 received an offer to purchase the property of $11 million in April 2017, a Letter of Intent at $640,000 per developable acre (almost double that in the APS) in September 2017, and an additional offer to purchase the property that same month for $14 million.
[76] The trial judge referred to the decision in WED Investments Limited as support for her approach. In my view, it does not provide that support. In that case Schabas J., at paras. 93-97, considered it permissible for the plaintiff purchaser to “advance” two approaches to damages: “The first approach seeks the lost profits the plaintiff says it would have earned if it had acquired the properties and developed them, as was its intention when it signed the Agreements in 2016….[T]he second approach considers the increase in value of the properties as undeveloped land calculated on expected closing dates in July 2018.” The first approach is similar to that of the trial judge. The second approach is the normal measure.
[77] Importantly, Schabas J. did not award damages under the first approach, which he found “to be quite speculative and uncertain”: at para. 147. He did award damages based on the second approach, the difference between the purchase price and the market value of the property on the closing date. To determine the latter amount, he relied on appraisal evidence that “treated the property as vacant land available for redevelopment for a highest and best use of medium or higher density residential development….”: at paras. 149, 151, and 155. In other words, he used the normal measure, and that measure took into account the development value of the land.
[78] The trial judge also referred to Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678. In that case, the parties had agreed to jointly own golf course lands, and that an area around the 18th hole could be developed either by a third party or by one of the parties to the joint venture. Bell, the joint venturer who wished to develop was later prevented from proceeding with development by the other joint venturer’s insistence on the terms of their written agreement which did not reflect the terms that had been orally agreed to. The trial judge found the written agreement should be rectified and granted damages in lieu of rectification equal to “the amount of money that Bell would have been entitled to have received had he been permitted to complete the residential development of the 18th hole in accordance with the terms of the rectified [agreement]”: 1999 ABQB 479, 246 A.R. 272, at para. 92. Although the award was considered generous by the Alberta Court of Appeal due to the failure of the trial judge to fully consider contingencies, the award was upheld: 2000 ABCA 116, 185 D.L.R. (4th) 269, at paras. 27-29.
[79] The Supreme Court of Canada also upheld the award. Binnie J. rejected the argument that damages should not include the “reasonably expected profit from a 58-lot housing development” and should instead be limited to the difference between the market value of the land and the option price (which presumably would not include any of that housing development value). He noted that the parties had specifically contemplated “the optioned land would be put to the use of residential housing”, therefore the damages should include the losses flowing from those circumstances: at paras. 72-73.
[80] The normal measure will not be appropriate where it will not address the type of loss suffered by the innocent party. In Performance Industries, one joint venturer was denied a promised opportunity to engage in a specific development. It is implicit in the argument that Binnie J. rejected that for those lands, in those circumstances, the market value would not take into account expected profit from the residential development. I do not take Performance Industries to stand for the proposition that the normal measure of damages is not to be used for a failed arms’ length sale of development lands, such as occurred in this case, simply because the parties had an awareness that the lands could be developed, where there is no suggestion that development value is ignored or excluded by the normal measure.
[81] Rosseau Group’s compensation for breach of the APS should take into account development value of the lands. That loss is not too remote. But absent anything that suggests the normal measure of damages would not address development value, Performance Industries did not require departure from the normal measure in this case.
(iii) Assessment Date Concerns and Contingencies Support the Use of the Normal Measure
[82] Two additional issues that 252 raises about the trial judge’s approach to damages reinforce the conclusion that use of the normal measure of damages is appropriate.
[83] The first issue has to do with calculating damages as of an assessment date. The assessment date is presumptively the date of closing. It can be moved, in the discretion of the court, where to do so is fair, which usually has to do with when the innocent party should re-enter the market so they can engage in mitigating transactions. As this court stated in Akelius: “the date of breach remains a starting point for the assessment of loss, modified only to the extent that the innocent party satisfies the court that a later date is appropriate on the grounds that it is the first date upon which the party could reasonably have been expected to re-enter the market and mitigate its damages”: at para. 27.
[84] The trial judge did not use the date of closing as the assessment date. She was of the view that for a calculation of damages based on an estimate of lost profits, no date of assessment was necessary. Nor does it appear that she used a later date (in the sense of a specific date). Instead, she stated that if a date was required, she considered it to be fair in the circumstances “to start the assessment at the date of closing and estimate the expenses and revenue over the period over which the land would be developed − in this case, six years from the closing date”.
[85] The trial judge did not otherwise explain why no date of assessment was required. Her alternative approach does not identify an assessment date but instead a period of six years. Other than a statement that this is fair, the trial judge does not explain why using a six-year period instead of a date is appropriate. Although when she came to consider mitigation, the trial judge found that 252 had not satisfied its onus of showing Rosseau Group did not take reasonable efforts to mitigate, she did not expressly link that conclusion to the lack of a specific assessment date or the use of a six year period, or specifically equate it to Rosseau Group having satisfied its onus to depart from the presumptive date, or to use a later specific date.
[86] The lack of a specific date of assessment of damages is problematic. First, the expected profit is inherent in the value of the land at the date of closing. Second, because the normal measure of damages compares the purchase price to the market value at the date of closing, it compares outflows and inflows of value at the same date. When a later date of assessment is used, expected inflows and outflows of value may have to be adjusted so they are measured consistently, given considerations of interest, the time value of money, inflation, etc. But if no date, or multiple dates over a period are used, there can be concerns about what is being measured, and whether amounts are being measured and treated consistently.
[87] The second concern raised by 252 with the trial judge’s approach has to do with contingencies. When damages are assessed on the basis that an opportunity to make a profit in a certain way was lost, the question arises as to whether a discount is appropriate to reflect the contingency that the opportunity may not be realized, perfectly or at all: Eastwalsh Homes Ltd. v. Anatal Developments Ltd., [1993] 12 O.R. (3d) 675, at para. 38. 252 argues that the trial judge failed to apply any discount notwithstanding what it argues was Mr. Quarcoopome’s concession that there were risks that the project might not proceed as he envisaged it.
[88] I need not decide whether or what contingency discount should have been applied to Mr. Quarcoopome’s calculations, as the trial judge erred in using them as she did. But I note that the normal measure of damages accounts for contingencies through its use of market value, which represents the price at which knowledgeable arms’ length parties are prepared to transact given their assessment of the opportunity the property provides and the chance of realizing on it successfully.
(iv) Conclusion on Damages
[89] The trial judge erred in not using the normal measure of damages. Her award must be set aside.
[90] I do not consider that it would be appropriate to substitute an award of nominal damages. The trial judge found that the property had increased in value by the closing date (meaning there were damages according to the normal measure), but she did not make a specific finding as to what that value was, and this court is not in a position to determine that value. A new hearing on the issue of damages according to the normal measure is therefore required.
Disposition
[91] I would dismiss the appeal as to liability.
[92] I would allow the appeal on damages, set aside the damages award, and direct a new hearing on damages to be assessed according to the normal measure, namely, the difference between the purchase price and the market value of the lands on the date set for closing.
[93] Because of this disposition, it is unnecessary to address 252’s argument that the trial judge erred in rejecting its mitigation arguments. On the measure of damages to be used, mitigation is not an issue, as Rosseau Group had suffered the loss of the difference between the purchase price and the market value on the closing date, regardless of any activities it undertook, or could have undertaken, following that date.
[94] It is also unnecessary to consider the argument that the trial judge erred in qualifying Mr. Quarcoopome as an expert. The issue of what expert(s) are qualified to testify on the issue to be determined at the new damages hearing will be for the judge presiding over that hearing.
[95] Success on the appeal is divided. If the parties are unable to agree on the costs of the appeal given this disposition (which was not contemplated by their agreement on costs at the time of the hearing), they may make written submissions not exceeding three double spaced pages each, within ten days of the release of these reasons.
Released: December 8, 2023 “M.L.B.” “B. Zarnett J.A.” “I agree. M.L. Benotto J.A.” “I agree. Gary Trotter J.A.”
[1] 18.9 developable acres x $350,000. The price remained subject to change upon the final determination of “natural net Developable Acres…when final studies are completed and confirmed by … the Toronto and Region Conservation Authority …and [the] Town of Caledon…the final price shall be adjusted accordingly based on more or less at $350,000 … per Natural net developable acre”. [2] Any further change in the purchase price resulting from a change in the net developable acres was to be reflected in the amount of the VTB mortgage. [3] The mortgagee would have had a direct right of action against Rosseau Group for payment under these circumstances: Mortgages Act, R.S.O. 1990. c. M. 40, s. 20. [4] The trial judge did not find that Rosseau Group could extract a special value from developing the land that other market participants could not because, for example, it owned adjacent land and could combine it in a unique way with the land to be acquired, or because it had special development techniques not known generally to the market. In those types of situations, the normal measure of damages may not be adequate because the key driver of damages according to the normal measure − the market value of the land − may not reflect the development value the disappointed purchaser has lost.
