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SALE OF LAND - Agreement of purchase and sale - Breach of - Express term

Tuesday, March 10, 2020 @ 8:24 AM  


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Appeal by the defendant purchaser from trial judgment finding that it breached the agreement of purchase and sale and its duty of good faith contractual performance, the dismissal of its counterclaim for return of the deposit and from the damages awarded. The agreement to purchase land contained a condition requiring the appellant to obtain a development permit from the City by a certain date. The City did not approve the development permit. The appellant appealed to the Subdivision and Development Appeal Board. On the evening prior to the appeal hearing, the appellant withdrew its appeal and terminated the agreement. The vendor sued. The trial judge found that the appellant’s condition contemplated an appeal, not simply the original application to the City. In assessing damages, the trial judge was required to determine the likelihood of the success of an appeal to the Appeal Board. The trial judge rejected the appellant’s expert’s opinion on this issue in its entirety, preferred the evidence of the respondent’s expert who estimated a 90 to 100 per cent chance of success and refused to make any reduction in the damages. The trial judge awarded damages as at the date of the breach and rejected appellant’s argument that the respondent had an opportunity to mitigate its damages when an offer was made to purchase the site in August 2012.

HELD: Appeal allowed in part. The damage award was reduced. The trial judge did not err by finding that the Condition imposed a duty to appeal the City’s refusal of its development permit to the Appeal Board. The trial judge was entitled to find that the parties contemplated pursuing an appeal and the agreement imposed either a standard of best efforts or a reasonable effort to persuade the Appeal Board that the development permit ought to be issued. The trial judge made no palpable and overriding errors of fact and law in concluding that the appellant breached its duty of honest performance when it abandoned its appeal on a pretext. The trial judge erred, however by failing to undertake an assessment of the likelihood of the transaction not proceeding because the Condition was not met, in the absence of a breach by the appellant when assessing damages. His failure to make a finding on the loss of chance and adjust the damages accordingly was an error of law. A 90 per cent chance of the Condition having been met was supported by the findings made by the trial judge. Damages calculated by the trial judge of $2 million should thus be reduced by 10 per cent to $1.8 million to reflect this. The trial judge correctly concluded that the respondent was not obligated to mitigate based on an offer to purchase more than three years after the breach but erred by ordering that the deposit of $100,000 was to be forfeited and not credited toward the damage award. The deposit should also be credited towards damages.

Telsec Developments Ltd. v. Abstak Holdings Inc., [2020] A.J. No. 118, Alberta Court of Appeal, P.A. Rowbotham, B.K. O'Ferrall and J. Strekaf JJ.A., January 30, 2020. Digest No. TLD-March92020005