An important point from the Supremes in Southcott Estates Inc v Toronto Catholic District School Board, 2012 SCC 51. Southcott Estates, a single-purpose entity created (and funded by its parent company) for the purpose of a specific land purchase, agreed to buy a piece of property from the school board that was suitable for development. The board failed to satisfy a condition and refused to extend the closing date of the transaction. Southcott sued for specific performance. The trial judge found that the board was in breach and had failed to prove that Southcott could have mitigated its damages, awarding the latter just under $2 million for loss of a chance. The Ontario Court of Appeal agreed about breach, but thought that Southcott could have found another suitable piece of land; its damages were reduced to a nominal dollar.
Karakatsanis J, writing for the majority of the SCC, reviewed the general principles underlying the doctrine of mitigation. She rejected the contention that, as a single-purpose corporation with finite resources, Southcott was unable to mitigate loss – and, more significantly, that it was not required to do so given its claim for specific performance of the contract with the school board. While there may be situations where a plaintiff will be justified in not mitigating, a claim for specific performance should not insulate it from having to make a reasonable attempt to do so. If the plaintiff’s refusal to buy a substitute property has a ‘substantial justification’, then fine: not mitigating will have been the reasonable course of action. Here, however, Southcott’s inaction could not be justified. It was engaged in a commercial transaction for investment purposes, so it could not be said that the particular parcel had any peculiar and special value, and the trial judge erred (both in law and on the facts) in concluding that there were no comparable, profitable properties available. McLachlin CJC, dissenting, disagreed that the trial judge got it wrong about comparable properties and found it difficult to conclude that Southcott had acted unreasonably in promptly seeking specific performance. In her view, a plaintiff, ‘acting reasonably, cannot pursue specific performance and mitigate its loss at the same time’; to do so might result in the (clearly unintended) acquisition of two properties. Specific performance is often motivated by the unavailability of substitutes in the marketplace, which seemed to be the case here. Even though the old common-law presumption of the uniqueness of real property no longer obtains, specific performance may be the way to go when a property has unique characteristics and there are no substitutes readily available. The Chief Justice would have restored the judgment of the trial judge.
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