Basic Process for Assessing Damages: 97 Select interest that deserves vindication 97 a. Restitution 97
Specific Performance in Real Estate Ks
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- Domowicz v. Orsa Investments Ltd. [1993, ON Gen. Div.]
- McNabb v. Smith [1982, BCCA]
- Semelhago v. Paramadevan [1996, SCC] (continued)
- John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. [2001, ONSC]
- Earthworks 2000 Design Group Inc. v. Spectacular Investments (Canada) [2005, BCSC]
- Raymond v. Raymond Estate [2011, SKCA]
- Measurement Issues: Reinstatement or Diminution
- O’Grady v. Westminster Scaffolding Ltd. [1962, QB]
- Factors to Consider Re Reinstatement for Damage to Chattels
- Damage to Real Property
- Jens v. Mannix Co. [1978, BCSC]
- Kates v. Hall [1991, BCCA]
- James St. Hardware v. Spizziri [1987, ONCA]
- Fontaine v. Roofmart Western Ltd. [2005, MBQB]
Specific Performance in Real Estate KsBackgroundThis is important because of Asamera and Semelhago, which tell us that courts will take a different approach to damages and mitigation where there is a real and substantial interest in specific performance. So, we need to know how to assess whether someone has a real and substantial interest in SP. Up to a few years ago, SP was the prima facie rule in real estate Ks There was a presumption that land is unique, damages inadequate and thus that SP would always be available Consumer surplus element, esp. w/ residential land. It’s not just about living situation in UK especially, land was key to social status for a long time. Changes (see Domowicz; Semelhago; Asamera): (1) Land is no longer key to voting, status, civic rights (2) It’s often not unique Land is often bought as a commercial investment, even when it’s residential Many people flip houses or otherwise buy land just to make revenue things that can be measured in money. (3) Even residential property is no longer really unique Cookie cutter homes, many substitutes for the same property (4) Courts: preference for damages goal is to put people in as good a position but not better, and damages achieve this better than SP. Problem of uncertainty about SP in real estate: it’s more difficult to advise clients now.
Fact: Bought apartment building in a suburb w/ 7 year delay. Held: No SP. Reasons
The longer the delay, the less likely a court will grant SP. Asamera: “mitigate or litigate” – either mitigate to protect against escalating damages award, or get to litigating quickly so you minimize the possibility of price increases SCC in Domowicz adopts this statement in obiter. No damages in lieu of SP only get those if you have a legitimate distinct interest in SP. McNabb v. Smith [1982, BCCA]Applied Domowicz to residential purchase ∆ showed evidence that planned to flip house – not entitled to SP. At time of breach, buyer had already entered into transaction to sell the property for more than his purchase price. So, damages could fully compensate for his loss.
Held: No SP, sort of. TJ gave SP, but SCC says in obiter that SP shouldn’t have been granted – i.e. it wouldn’t have been available if it had been in issue on the appeal SCC also says that you don’t presumptively give SP with land anymore. Huge windfall to of a damages award calculated in lieu of SP. Issue of hardship to ∆, who ended up paying ~125k more in cash damages than actually lost. (b/c kept own home and avoided mortgage and carrying costs etc.) Court is balancing necessity of protecting w/ order for SP (weak) with a desire to protect ∆ against undue/oppressive amt of damages (strong) inclines against SP. John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. [2001, ONSC]Facts: = hotel builder/manager. Agreement to purchase land (vacant lot) from ∆ co. Agreement req’d severance approval from city before proceeding. City granted approval, subj to possibility that ∆ might be req’d to construct an extension to a nearby road & dedicate it to city. Cost was set b/w $350-500k. Building the road would not have benefited or ∆, only other property owners. ∆ tried to get out of the agreement; sued for specific performance. Legal Issues: Specific performance – is performance of the K unique? Since Sopinka’s dissent in Semelhago, courts don’t assume that about land Ks anymore. Held: SP awarded Reasons: This particular transaction merited SP, damages would be inadequate. Land was right next to a mall and Wonderland, so that was a specific attribute. Evidence that they had tried to find a substitute but couldn’t find one that replicated all the features of the desired land. Note: It would be highly speculative to calculate the damages in a monetary sense SP is granted where damages are inadequate (i.e. it’s not just about money), but also where it is all about money but damages are too difficult to calculate.
Held: you can build a gas station w/ convenience store pretty much anywhere. Damages ≠ inadequate. Not a unique or complicated business model like in Dodge. Raymond v. Raymond Estate [2011, SKCA]Facts: Farmland dispute. owned part interest in land and K’d w/ ∆ for another portion. Held: SP granted. Reasons Personal reasons why ownership of this particular family farm was unique. Note, though, that farming is generally a commercial operation, so must look at rel’ship b/w ∆ and the property in question. Is it really tied to the family thing or is it just that he needs to expand? TJ refused SP on grounds that he suspected real interest in property wasn’t unique, but that it was actually part of a long-standing family feud in which he was seeking retribution against his siblings. CA: that’s irrelevant, so long as we also believe he wanted this particular piece of property. See list of factors at pg. 1029. Proximity – yardsite for his cattle Emotional attachment to the land (accepted) Right across the road from his house
Damage to ChattelsDewees v. Morrow [1932, BCCA]Cost of repair: $1458 Cost of replacement: $900 Court says only entitled to cost of reasonable substitute, not cost of repair
Darbishire v. Warran [1963, Eng. CA]Repair: £192 Replacement: £85 Same as Dewees - not entitled to cost of repair where that cost exceeds that of a reasonable substitute.
Replacement: £180-250 Held: entitled to repair even though repair costs exceed reasonable cost of substitute. Reasons: Personal attachment to the car. had named it, replaced the engine three times already So, he had shown that he was willing to spend the $, and that he HAD done the work. Remember the policy from DeFroberville: if wouldn’t do the work otherwise or isn’t actually going to do the work now, shouldn’t be entitled to make ∆ pay for it. Price was close to repair cost. Note: monetary value of the wasn’t fully ascertainable, as it kept appreciating due to status as classic car. Plus, court noted that it was difficult to find a reasonable substitute given the condition he had kept it in. Note that was NOT allowed to claim for 5 months of rental cars while waiting to have car repaired. Duty to mitigate; goes to time of assessment. Court did make a deduction from the repair costs for betterment – the car was in slightly better condition than before, and avoided 5 months worth of wear-and-tear/depreciation, thus increasing its value. Factors to Consider Re Reinstatement for Damage to Chattels:
Damage to Real PropertyTaylor v. Hepworths Ltd.Facts: owned shops & billiards hall. ∆ caused fire and property is basically destroyed. claimed cost of rebuilding the hall. Held: Not awarded. Reasons did not actually intend to rebuild the hall it was only an investment property, and rebuilding would not have been a good investment Basically, there was no diminution in value because was going to have to tear down the building to redevelop the site. So, really, he saved money by not having to pay for the tear-down. Jens v. Mannix & Co. [1978, BCSC]Facts: Oil spill makes house uninhabitable; will have to dig up overburden and replace all contaminated soil, then build entirely new house. Property could likely be sold for more w/o house, since zoned commercially and has greater value as such. Held: full value of repairs awarded by TJ; CA reduced for betterment. Reasons actually lives there and wants to stay. It’s like the factors discussed in Dodge: has proximity to car museum in which he keeps his cars Local community likes it and gave exemption to have the museum on his property Basically, has a credible, proven subjective attachment to this particular property, which can’t easily be replicated. Note: this would have been a tough case to argue: He hadn’t actually rebuilt the house if he had done so, it would show real intention to do the work Failure to rebuild leaves judges a bit nervous because he put up with the problem for 4 years, may not use the award to rebuild and may sell the land instead, garnering a windfall. This is probably why they scaled back the award. Betterment Old house; tearing it down and building new one gives an advantage, so court makes a 10% deduction for betterment and also deducts an amount for the increase in building costs over the 4 year delay. Kates v. Hall [1991, BCCA]Facts: ∆ cut down several mature trees on property to get better view. Cost of replacement with fully grown trees (which may not even take) is $210k, but no diminution in value of property. Issue: Neither amount is really appealing. The question is: what interest of the is the court seeking to protect? Held: Court crafted a 3-part award, tied to this policy question. 1. Repair interest: $21,000 to plant a bunch of smaller trees w/ greater likelihood of flourishing. Because the trees do serve an important esthetic/privacy purpose, part of the award should be to spend a reasonable amount on repairs. This takes care of some repairs, but doesn’t address the functional interest 2. Functional interest: $1000/tree for lost amenity Subjective value of having nice, full-grown trees 3. Punitive damages: $26,000 to deter ∆ behaviour $210k would be too much, but some punitive amount is necessary to address the egregious and flagrant breach – intentional trespass and cutting down trees to make own property go up in value. Court could have awarded higher punitive damages, but: Judge thought was just after retribution. Plus, didn’t even really live there – just a few weeks a year; and they owned 8 homes each worth multi-millions. If you look at the overall award as punitive damages, 60k is pretty high. BettermentGeneral Principle: we deduct windfall amounts of increased value to property resulting from repairs James St. Hardware v. Spizziri [1987, ONCA]Facts: Cites similar old UK HL case (Harbotts Plasticine): factory burned down by ∆; replaced and updated to code etc. Got more valuable factory as a result; court refused to deduct for betterment in that case. Not fair that ∆ torched factory and forced into that situation, and not fair to make spend own money on the repairs. Lord Denning: destruction of bldg isn’t the same as of car – can go into market and get a new car, but when mill was destroyed company had to replace it. Factory burned down and had to build to better std b/c of building codes. Plus getting extra years out of factory Held: Court accepts (but does not apply) Waddams’ argument: Courts should deduct for betterment, then add back in the opportunity costs of the money (this was done in Safe Steps) Safe StepsCalculate deduction for betterment by taking betterment value [how much it will increase] and subtracting from that the interest on the amount it will cost to do the repairs. Assumption: you can borrow the money to do the repairs, so only the interest is counted against the betterment value. If you don’t get a loan, it’s assumed that you would have invested the money on a rate of return approximately equivalent to the bank’s interest rate. Fontaine v. Roofmart Western Ltd. [2005, MBQB]Facts: Shingles deteriorated before expected; had to replace. But they did last for 10 years. Issue: if awarded full value of new shingles, getting a windfall for those 10 years’ coverage. But had to spend own money 5 years earlier than expected. Held: court awarded 5 years of the value of the shingles (but actually only 2 years because it took a while to replace the shingles) Looked at opportunity costs over time the advance was made by , and amount of money spent. Betterment: 10 years.
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