Executive Summary: Key Legal and Evidentiary Issues

• FH Development Group Inc. committed an anticipatory breach of contract by attempting to increase the purchase price, delay closing, or terminate the agreement, citing increased material and labour costs.

• Central to the appeal was whether the respondents' duty to mitigate arose at the time of the anticipatory breach or only upon actual breach on October 14, 2021.

• Because the Brooks declined to accept the anticipatory breach and insisted on performance, the Court held that no duty to mitigate arose until the closing date passed without completion.

• At issue was whether the Brooks were obliged to negotiate further with FH — a faithless vendor — as a reasonable means of mitigating their loss.

• Purchasing a replacement home in the open market at $853,000.00 was found to be reasonable mitigation given the highly competitive real estate market conditions in fall 2021 and early winter 2022.

• FH adduced no evidence that a comparable home could have been purchased for less than what the Brooks paid, nor any evidence concerning the housing market that would show the loss could have been avoided or diminished.

Facts of the case

On January 19, 2021, Stephen Brooks and Marianne Su-Ling Brooks agreed to purchase a newly built home from FH Development Group Inc. ("FH") in Brunello Estates Subdivision, Halifax, for $597,490.00. The closing date was set for October 14, 2021. Some months later, alleging problems with the availability and cost of materials and labour, FH sought to increase the purchase price, delay completion, or terminate the agreement and return the Brooks' deposit. FH's demands shifted from a $15,000 surcharge, to a sharing in additional costs, to a surcharge of between 5% and 10% (between $29,879 and $59,759), and back again to a demand for $15,000. The Brooks declined these alternatives and insisted on performance. FH responded by discontinuing construction on their home.

When October 14, 2021 came and went without completion, the Brooks claimed repudiation by FH and terminated the contract. They subsequently entered a competitive real estate market, with real estate agent Mr. Manderville submitting several offers on properties on their behalf in the fall of 2021 and early winter of 2022 — often above asking price and repeatedly outbid. The Brooks eventually purchased a comparable home in Clayton Park for $853,000.00. They sued FH for the difference between the contract price of $597,490.00 and the Clayton Park purchase price of $853,000.00, representing damages of $255,510.00.

Contractual terms and trial decision

At trial, Justice Gail Gatchilian allowed the Brooks' claim (Brooks v FH Development Group Inc., 2025 NSSC 174). She found that FH's attempts to increase the purchase price and delay closing constituted an anticipatory breach of contract that the Brooks did not accept. She held that if FH had not ceased construction on the Brooks' property in April 2021, it would have been ready for closing on October 14, 2021; that the real reason FH stopped construction was an increase in the price of building materials, not their unavailability; that building materials and labour were in fact available; and that although FH's costs increased, those increased costs did not frustrate the contract. She further found that the Brooks acted reasonably in mitigating their damages.

Court's reasoning and analysis

FH appealed on the sole ground of mitigation, arguing that the Brooks failed to act reasonably and thereby inflated their loss by purchasing a more expensive home. The Court of Appeal, per Bryson J.A. (Bourgeois and Beaton JJ.A. concurring), addressed three issues.

On the first issue — when the duty to mitigate arose — the Court confirmed this was a question of law. It held that because the Brooks refused to accept FH's anticipatory breach and insisted on performance, no duty to mitigate arose until the actual breach on October 14, 2021. The Court relied on Leland Walton & Sons Ltd. v. Hillspring Farms Ltd. (2007 NBCA 7), which confirmed that where an innocent party refuses to accept an anticipatory breach, the mitigation principle is not triggered until the promised date of delivery arrives.

On the second issue — whether the Brooks were obliged to negotiate with FH — the Court affirmed this was a question of fact reviewable only for clear and material error. The trial judge found that the Brooks had reasonably lost trust in FH given its inconsistent and shifting demands, and that it was therefore appropriate for them not to re-engage with a faithless vendor. The Court rejected FH's argument that the Brooks should have paid the increased price under protest or accepted FH's offer to negotiate, noting that a mere offer to negotiate is even less than the ambiguous 10% discount offer rejected in Azzarello v. Shawqi (2019 ONCA 820). The Court also observed that accepting FH's position would encourage developers to default in a rising market, insulating the defaulting developer from higher damage claims.

On the third issue — whether purchasing in the open market was reasonable — the Court again affirmed the trial judge's factual finding. Evidence from the Brooks' real estate agent established that the Halifax market between October 2021 and February 2022 was highly competitive, with properties attracting more than 20 bidders, selling well above asking price, and the Brooks being repeatedly outbid despite offering above asking. FH adduced no evidence that a comparable home was available for less than $853,000.00.

Ruling and outcome

The Nova Scotia Court of Appeal dismissed FH's appeal. The respondents, Stephen Brooks and Marianne Su-Ling Brooks, were the successful parties. Costs of $24,000.00, inclusive of disbursements, were awarded to the respondents, representing 40 percent of the costs awarded at trial.