We regularly review and share insights from leading appellate reported decisions from across Canada in the law of remedies with our comments.
In this instalment, we review a case from the Ontario Court of Appeal upholding a long-standing measure of assessing damages in real estate contracts, a BC Court of Appeal finding further defining special circumstances in actions against third parties, and a Saskatchewan decision involving the less usual dispute involving a stay of execution.
Ontario Court of Appeal reverses $11M real estate award, upholding presumptive approach to damages in real estate
The Rosseau Group Inc. v. 2528061 Ontario Inc. 2023 ONCA 814 https://www.canlii.org/en/on/onca/doc/2023/2023onca814/2023onca814.html
The Ontario Court of Appeal recently reversed a lower court decision, noting that the trial judge had erred in considering lost profits when calculating damages.
The parties had entered into a contract of purchase and sale for land related to a development project. At trial, the Vendor was found to have improperly repudiated the contract. The judge awarded the Purchaser damages based on lost profits from the intended development, rather than the difference in land value.
The panel found that the trial judge had incorrectly applied the principles of remoteness to the measure of damages and clarified that the remoteness test does not apply to the measurement of loss. Rather, the remoteness test deals with the “type” of loss recoverable, while the measure of damages relates to how a recoverable loss should be quantified.
In failed real estate purchases, the typical measure of damages is the difference between the contract price and the market value of the land on the assessment date (usually the scheduled closing date). This approach follows the presumption that damages are to be assessed as of the breach (para 62). Here, the panel found that the market price inherently considered land development value, though it gave some narrow examples of types of loss that may overcome the presumptive measure.
We included this case because it has been the subject of many blog posts and online articles across Canada. However, in our respectful view, this case usefully summarizes existing law and does not change it. Remoteness in contract shares its conceptual basis with remoteness in the tort context. When assessing the sources of damage arising from a civil wrong, whether it is a tort or a breach of contract, one looks at the reasonably foreseeable kinds of events that may be consequences of that wrong. One does not necessarily look at the scale or amount of that damage, usually measured as a measure of money, when considering the remoteness of damage. Issues of remoteness are distinct from assessing the quantum of damages. The likelihood that an event will take place consequent from an underlying event is a different calculation than the expected value of the consequences should the likelihood of that event be realized. This distinction can have enormous implications in a trial and the evidence one must adduce. Yet, the case does not create new law or some new principle. The case merely affirms a long-standing, yet often confused, Canadian common law position.
BCCA grants trust beneficiary standing to sue third party, noting special circumstances
Price Security Holdings Inc. v. Klompas & Rothwell 2023 BCCA 453 https://www.canlii.org/en/bc/bcca/doc/2023/2023bcca453/2023bcca453.html
The appellant (Price) held a beneficial interest in certain rents paid by the respondent (K & R) to their landlord (Fort Quadra). Fort Quadra was a trustee for those rents, and Price was a beneficiary of that trust.
Over time, K & R stopped making rent payments to Fort Quadra. Fort Quadra refused to pursue K & R for the money in arrears. Price, as a beneficiary, was not a named party in the lease between K & R and Fort Quadra.
On summary trial, the trial judge determined that Price did not have standing to sue K & R for unpaid rent under the lease because Price was not a named party to the contract.
However, the BC Court of Appeal concluded this was an error. While a beneficiary generally has no cause of action against a third party, special circumstances applied.
The BCCA held that Fort Quadra, as a trustee, did not protect their beneficiary’s interest when they refused to recover K & R’s unpaid rent. This, along with K & R’s unjust enrichment at Price’s expense, gave Price standing to sue K & R directly for the unpaid rent.
“Special circumstances” is an open list and can encompass concerns in equity and interests of justice. The BCCA determined the trial judge was in error when finding that the sophistication of the plaintiff-beneficiary prevented Price from relying on equity as a special circumstance. Corporate structuring to reduce tax consequences or to have existing contractual relationships on the sale of property does not amount to misconduct that offends the “clean hands” maxim of equity.
This case emphasizes the need for parties to consider equitable remedies and principles when litigating a commercial dispute. The traditional common law position is that third parties to a contract do not have the standing to sue a person who breached a contract, the execution of which might have conferred benefits on that third party. However, this decision illustrates that in important circumstances, the courts will use equitable to circumvent usual restrictions of imposed by privity of contract.
Stay of execution dismissed, potential harms mitigated by court holding funds
Nilson v. ABO Transport Ltd. 2024 SKCA 3 https://www.canlii.org/en/sk/skca/doc/2024/2024skca3/2024skca3.html
The Saskatchewan Court of Appeal considered stays of execution regarding recovery remedies ordered after judgment. ABO Transport (the respondent) has successfully obtained judgment against landowners Martin and Diane Nilson. The Nilsons filed an appeal of that judgment, which would have required them to pay damages to the respondent.
The appellants also sought a stay of execution while their appeal was being prosecuted. In particular, the appellants raised concerns that the respondent had many creditors and any money paid by may be taken by those creditors, rendering the money irrecoverable if the appeal succeeded.
The Saskatchewan Court of Appeal confirmed the well-settled principle that granting a stay of execution is a balance of competing interests to ensure a just result (para 10 and 11). Here, the only harm facing the appellants was that their monies may become impossible to recover after appeal if taken by the respondent’s creditors. The appeal court held that the application for a stay could be dismissed, and the potential harm ameliorated by ordering that the appellants pay the judgment money into court instead.
Chilwin Cheng, Principal
With contributions from Cory Russell, Associate