Canada: Purchasing Property For Development Or Investment? - What To Do If There Is A Breach Of Contract

Last Updated: November 9 2012
Article by Jonathan D. Born

The recent decision of the Supreme Court of Canada ("SCC") in Southcott Estates Inc. v Toronto Catholic District School Board clarified the remedies available to purchasers upon the breach of an agreement of purchase and sale for land.


Southcott Estates Inc. ("Southcott") was incorporated by a well-known and active land developer as a single purpose corporation without assets for the purchase of a specific property in the Greater Toronto Area. Southcott entered into an agreement with the Toronto Catholic District School Board ("TCDSB") to purchase land for development into single-family homes. TCDSB failed to satisfy a condition in the purchase agreement and refused to extend the closing date. Southcott sued TCDSB demanding specific performance of the purchase agreement, which included a petition to the court to direct TCDSB to complete the transaction.

At trial, TCDSB was found to have breached the purchase agreement and Southcott was awarded damages for loss of chance of profit. Specific performance of the purchase agreement was not granted by the court as the property was not unique, which is a prerequisite to making such a claim. On appeal, the Ontario Court of Appeal agreed that TCDSB breached the agreement but reduced the damages award to a nominal sum because Southcott acted unreasonably in not mitigating its loss by taking reasonable steps to minimize the loss suffered. Southcott admitted that it had no intention of taking steps to mitigate its loss, and failed to prove that it could not have mitigated even if it tried because comparable properties were unavailable.

When is specific performance available for real estate transactions?

The remedy of specific performance developed for circumstances where damages were not adequate compensation for the injured party's losses. A damages award would be inadequate if the injured party could not use the money awarded to purchase a substitute property. Although parcels of land were historically viewed as unique, recent cases have held that damages are adequate for transactions where land is viewed as fungible. A party seeking specific performance must demonstrate that money cannot compensate fully for the loss because the land is unique, meaning it has some "peculiar and special value".

Specific performance and a full award of damages are not available at the same time. However, a plaintiff can initially claim both remedies. There are potential conflicts between the right to specific performance and the requirement to mitigate damages. How can a party purchase a substitute property for a property that it claims is unique and irreplaceable? As well, if a party only has funds to purchase one property, how can it be expected to mitigate by purchasing a substitute property and complete the initial transaction if its claim is successful? Notwithstanding these conflicts, claiming for specific performance does not prevent courts from assessing a plaintiff's mitigation of its losses.

How can a purchaser mitigate its losses?

Generally, a plaintiff cannot recover losses that could reasonably have been avoided. A plaintiff that does take reasonable steps to mitigate losses may recover the costs and expenses of those steps. In the context of real estate transactions, mitigation is done through the purchase of reasonably comparable property.

What issues did the SCC consider?

In a 6 to 1 decision, the SCC dismissed the appeal. The main legal issues considered by the SCC were: 1) whether a single-purpose company should mitigate its losses; and 2) to what extent should a plaintiff mitigate when they are claiming specific performance.

1) Single-purpose companies are required to mitigate

Southcott claimed that, as a single-purpose company, it did not have access to funds to mitigate, and its mandate was limited to the purchase of a specific property. Following the breach of the agreement with TCDSB, sister companies of Southcott wholly owned by Southcott's parent purchased a number of parcels of developable land. The court described these purchases as 'collateral', as they would have occurred irrespective of the breach of the agreement with TCDSB.

A single-purpose company incorporated to take advantage of the benefits of limited liability cannot claim that its parent company mitigated on its behalf through related companies. Southcott itself was required to mitigate by "making diligent efforts to find a substitute property." The SCC commented that single-purpose corporations cannot avoid mitigating damages because they have no assets, as it would be an unfair business advantage.

2) Plaintiffs should mitigate losses despite claims for specific Performance

The SCC acknowledged the inherent conflict between specific performance and mitigation, and confirmed that failure to mitigate is justifiable where circumstances reveal some fair, real and substantial justification or a substantial and legitimate interest for seeking specific performance. With a substantial justification or substantial and legitimate interest in specific performance, the refusal of a plaintiff to mitigate by purchasing other properties may be reasonable under the particular circumstances.

Southcott claimed the TCDSB property was unique as justification for specific performance and its failure to mitigate. The SCC determined that Southcott could not reasonably refuse to mitigate as the property was nothing more than a "singularly good investment" and the unique qualities related only to the profitability of the development. Southcott was engaged in a commercial transaction for the purpose of making a profit. The qualities of the property were only of value because of their profitability, and therefore damages were adequate.

In the context of real estate investment and development, purchasers of land for the purpose of profit are obligated to mitigate their losses as property is only of value for its profitability. Southcott was wholly owned by a well-capitalized parent company with access to financing, and would have been able to mitigate by purchasing other properties. The SCC did not consider whether a company with limited assets or access to funds and lacking the marginal capacity to both mitigate and complete the initial transaction if its claim was successful would be excused from mitigating.

Practical advice after Southcott

  • In the event of termination of a contract for the purchase of land, a purchaser should carefully consider its capacity to both mitigate and complete the initial transaction before proceeding with a claim for specific performance.
  • A single purpose company will not be treated differently than any other company or purchaser with respect to the availability of specific performance as a remedy and the obligation to mitigate.
  • A plaintiff may apply for an order to register a Certificate of Pending Litigation ("CPL") on title to the subject property, which provides notice that a claim has been commenced regarding title to the property. In exercising its discretion to grant a CPL, a court must consider all relevant matters between the parties, including considering whether the property is unique. This early stage examination of the uniqueness of a property will inform the decision to claim specific performance or damages. It is important to note that a plaintiff who registers a CPL may be liable for damages sustained by the vendor while the property was frozen if the court ultimately finds that the plaintiff had no reasonable claim to an interest in land.
  • In the context of the purchase of property by a retailer to serve a specific market area, there are often limited alternative sites available to serve that particular market. Following a default by the vendor, the purchaser should pursue available alternatives through listings and brokers. These actions could provide evidence that the initial property is in fact unique and improve the chances of success of a specific performance claim. If no suitable alternative properties can be located or purchased, the search for such a site could indicate that the purchaser tried to mitigate its damages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
7 Dec 2017, Webinar, Toronto, Canada

FEX Members Jeff Noble, BDO, and Caroline Abela, WeirFoulds LLP, invite you to a complimentary webinar series titled: All About Shareholders.

15 Dec 2017, Seminar, Toronto, Canada

WeirFoulds Partner Caroline Abela will instruct The Advocates' Society program, "Leading Your Case: Opening Statements and Examination-in-Chief".

30 Jan 2018, Seminar, Toronto, Canada

WeirFoulds Partner Marie-Andrée Vermette will instruct The Advocates' Society program, "Cross-Examination: Strategies for Success".

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions