Executive Summary: Key Legal and Evidentiary Issues

• A residential real estate transaction collapsed when the buyer repudiated the agreement of purchase and sale before the scheduled closing date, giving rise to a claim for breach of contract.
• Central to the dispute was whether the vendor took reasonable steps to mitigate its damages after the buyer's anticipatory breach.
• Failure to list the property on the Multiple Listing Service (MLS) was identified as a troubling factor, requiring the vendor to demonstrate a reasonable alternative marketing strategy.
• Insufficient evidence of property-specific marketing efforts led the motion judge to draw an adverse inference against the vendor.
• Damages were assessed as of the date of the breach — September 11, 2017 — rather than the date of the eventual resale six months later, using the vendor's own lower appraisal.
• On appeal, both the finding of failure to mitigate and the use of summary judgment procedure were upheld.

Facts of the case

Eyelet Investment Corp., carrying on business as Treasure Hill Homes, entered into an agreement of purchase and sale (APS) with Lin Zhou for a newly built home in one of its residential developments. The purchase price was $1,680,151.38, and Zhou paid deposits totalling $127,500. The scheduled closing date was September 28, 2017. On September 11, 2017 — more than two weeks before closing — Zhou's counsel notified Treasure Hill that Zhou was terminating the APS. Treasure Hill treated this as an anticipatory breach and stated it would take steps to mitigate its damages. Six months later, the property sold to a different buyer for $1,300,000 — approximately $380,000 less than the contract price with Zhou. Treasure Hill subsequently brought a claim for breach of contract, seeking damages of $253,981.97, representing the difference between the APS price and the resale price, plus carrying costs, less the deposit paid by Zhou.

Contractual and legal framework at issue

The core legal framework governing the claim was the standard measure of damages for breach of a real estate contract: the difference between the contract price and the resale price, where the vendor has taken reasonable steps to sell the property at arm's length and there is nothing improvident about the resale. Equally central was the vendor's duty to mitigate — the obligation to take reasonable steps to minimize its losses following the buyer's breach. Under the established principle from Southcott Estates Inc. v. Toronto Catholic District School Board (2012 SCC 51), the burden of proving a failure to mitigate rests on the party who breached the contract, in this case Zhou.

Reasoning and analysis

The motion judge, Justice Nathalie Des Rosiers of the Superior Court of Justice, examined whether Treasure Hill had discharged its mitigation obligation. She noted that the property was never listed on the MLS. While she did not treat that omission as automatically constituting a failure to mitigate, she described it as a troubling factor that required Treasure Hill to establish a reasonable alternative marketing strategy. Treasure Hill's evidence fell short: its affiant could not recall what specific steps were taken to market the particular property after the APS was terminated and could speak only to the company's general marketing practices — email blasts to past buyers and real estate agents, signs and billboards, and social media outreach. No records or details were provided about implementation of those practices during the six-month period in question, either for this specific property or for others in the development. The motion judge found it appropriate to draw an adverse inference from that evidentiary gap, concluding that there had been a delay in marketing the property and a failure to sufficiently market it. She also found that Treasure Hill had deliberately chosen to delay marketing to avoid flooding the market and depressing prices across its development, and that while such a rationale might be reasonable in some circumstances, the absence of any supporting records meant the evidence did not justify a finding of reasonable mitigation. On the question of damages, because the resale occurred below the appraised value of the property and there was no record of marketing efforts, the motion judge held it was not appropriate to use the eventual sale price as the true measure of value. Instead, she assessed damages as of September 11, 2017 — the date of the breach — using Treasure Hill's own appraisal of the property's value on that date, which was the lower of the two appraisals provided. After deducting Zhou's deposit from the difference between the APS price and that appraised value, Treasure Hill suffered no damages. The Court of Appeal upheld this reasoning, finding no error in the motion judge's conclusions on mitigation or on the appropriate date and method for assessing damages. It also dismissed Treasure Hill's argument that the matter should not have proceeded by summary judgment, noting that both parties had agreed to that procedure and that a party's failure to put its best evidentiary foot forward does not retroactively render summary judgment inappropriate.

Ruling and overall outcome

The appeal was dismissed in its entirety. Lin Zhou, the respondent, was the successful party. As agreed by the parties, Treasure Hill was ordered to pay Zhou's costs of the appeal in the amount of $15,000, inclusive of disbursements and HST.