Assessment of damages begins as of date of breach: Ontario Court of Appeal

In a recent case, the Ontario Court of Appeal has ruled that a real estate investor failed to show any exceptional circumstances that would justify displacing the presumption that damages should be assessed as of the date of the breach.

In Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, the parties entered a purchase and sale agreement in 2015. Under the agreement, the appellant, Akelius Canada Ltd., agreed to buy residential apartment buildings from the respondents, 2436196 Ontario Inc. and B’Nai Fishel Corporation, for $228,958,320. However, the deal did not push through due to the respondents’ failure to remove certain encumbrances from the title.

In 2018, the respondents sold the properties to a new purchaser for more than 25 percent of the original purchase price.

In its suit, the appellant claimed that it was entitled to the respondents’ profits in 2018 when they sold the properties for more than their market value on the date of the breach of the agreement.

The motion judge awarded the appellant only $775,855.46. In assessing the damages, he relied on the case of 472047 Ontario Ltd. v. Fleischer, which ruled that damages should be assessed at the date the contract was to be performed, namely, the death of breach.

In its appeal, the appellant alleged that the motion judge erred in finding that he was bound by the case of Fleischer to assess damages as of the date of the breach and misapplied Fleischer since the vendor was innocent in that case.

Citing the case of Domowicz v. Orsa Investments Ltd., the appellant further alleged that assessing damages as of the date of breach would not satisfy the general principle that the non-breaching party should be put in a position in which they would have been in had the contract been performed.

The Court of Appeal held that it would be unfair in the circumstances to shift the date of the assessment of damages beyond the date of the breach.

In Fleischer, the court refused to deviate from the usual measure of damages as of the date of the breach, although the vendor had been proven innocent and therefore found that the appropriate date was the date of the breach.

“I see no principled reason for the suggestion that the date should be different when the purchaser is the innocent party,” Justice Alison Harvison Young wrote. “Put another way, the fact that a party is innocent does not displace the date of breach as the presumptive date for the measure of damages in a real estate case.”

The court also determined that Domowicz would not assist the appellant. Unlike the plaintiff, in that case, the appellant failed to provide evidence of its loss of revenue.

“However, in order to prove what it had actually lost, the appellant would have had to show not only what it lost in capital appreciation but also, as in Domowicz, what it would have made in capital appreciation had it sold in 2018 when the respondents did,” Justice Harvison Young wrote.

With this, the court held that the appellant failed to prove its loss, and the date it had chosen as the “crystallization” of its loss is not sufficiently connected to the date of breach or the objectively understood purpose of the contract.