Southcott Estates Inc. v. Toronto Catholic District School Board, [2012] SCC Facts: The Toronto Catholic District School Board agreed to sell to Southcott Estates a property, which was surplus to its needs. Southcott intended to develop the property for residential purposes. It was a condition of the agreement that the School Board obtain a severance from the Committee of Adjustment on or before the closing date. The School Board failed to have a development plan prepared and failed to obtain the severance. When the closing date arrived, the School Board refused Southcott’s request to extend the closing date. The School Board declared the transaction to be at an end, and returned Southcott’s deposit. Southcott commenced an action for specific performance or, in the alternative, for damages. Southcott succeeded on the merits of the action,
Issues:(1) Was Southcott legally entitled to specific performance? Or damages? (2) More broadly, what is the scope of the requirement of mitigation for breach of contract and does it apply when a claimant seeks specific performance?
Holding / Reasons: The trial judge found that the Board was in breach of contract, but declined to award specific performance because the land was not “unique” and so damages would be an adequate remedy. Instead he awarded damages of over $1.9 million, representing a loss of a 60% chance to make the full potential profits. On the Board’s appeal (Southcott did not appeal the refusal of specific performance), the Court of Appeal for Ontario held that the trial judge had erred in law, because Southcott should have mitigated its loss in full by purchasing an equivalent investment property, so reduced Southcott’s damages to a nominal sum of $1. Southcott appealed to the Supreme Court, but by a majority (McLachlin C.J. dissenting) the court dismissed the appeal.
All members of the court in Southcott appeared to accept that a purchaser of land, faced with a breach of contract by the vendor, is immediately required to mitigate its loss even if he also seeks specific performance, the only live question therefore being whether he actually has mitigated, in other words whether he has acted reasonably to keep his loss to a minimum (This was supported by Asamera). For the majority, Southcott had not acted reasonably because there were numerous other suitable development properties in the area and it could not rely on its “impecuniosity” as a single-purpose vehicle company because it had access to capital to pay the contract price.
In Southcott the court held that Southcott should have mitigated its loss in full by purchasing an equivalent investment property, because the property was not unique - there were numerous identical properties available to purchase (which would reasonable mitigate losses)
Southcott holds that while a plaintiff bears the burden of proving the fact that he has suffered a loss and the quantum of that damage, the defendant bears the onus of proving, on a balance of probabilities, that: (1) the plaintiff has failed to make reasonable efforts to mitigate and; (2) that mitigation was possible.
