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Damages - Effect of Pecuniosity of Mitigation. Block Developments Inc. v. Brewers Retail Inc.
In Block Developments Inc. v. Brewers Retail Inc. (Ont CA, 2026) the Ontario Court of Appeal dismissed a defendant's appeal, here where the "trial judge awarded damages to Block in the amount of $15.5 million, plus prejudgment interest" for APS breaches.
Here the court considers whether the plaintiff mitigated their lost oppourtunity damages where they "could and would have purchased each property it purchased subsequent to the breach in addition to the properties Block was to acquire from Brewers":[14] Nor did the trial judge err in her conclusion about mitigation. At trial, both parties’ arguments regarding mitigation treated Block and its affiliates as one. The trial judge found that the Block corporate group could and would have purchased each property it purchased subsequent to the breach in addition to the properties Block was to acquire from Brewers. Accordingly, none of the actual acquisitions arose as a consequence of Brewers’ breach—none were mitigating. I see no error in that conclusion.
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2. The Trial Judge Did Not Err in Her Conclusions on Mitigation
[83] Brewers argues that the trial judge erred in principle in her analysis of mitigation. Brewers argues that even if Block’s expectation damages were calculated correctly, those damages should be reduced because Block failed to mitigate its damages. This differs from Brewers’ position at trial, where it argued that Block had fully mitigated its damages. I see no error in the trial judge’s conclusions.
[84] After each APS was terminated, Block’s affiliates purchased several other development properties. At trial, Brewers said that these were “replacement properties” purchased to mitigate Block’s losses, and that any damages award to Block should be correspondingly reduced.
[85] The trial judge disagreed, holding that all the purchases were transactions Block or its affiliates would have entered into in addition to the APS purchases. As such, they could not constitute mitigation of Block’s losses arising from the breach of each APS.
[86] On appeal, Brewers argues for the first time that Block failed to mitigate its damages because Block itself did not acquire some or all of the development lands that, in fact, were acquired by its affiliates. Brewers now argues that the trial judge erred by conflating Block with its corporate affiliates and ignoring Block’s independent obligation to mitigate. According to Brewers, the Supreme Court’s decision in Southcott mandated, in these circumstances, a finding that Block could have fully mitigated its damages but failed to do so.
[87] I reject this argument for two reasons.
[88] First, the common approach of the parties at trial on the subject of mitigation was to consider Block and its affiliates as one. Purchases that were made by Block’s affiliates were treated as purchases by Block; Brewers argued that by making them Block had in fact mitigated its damages, while Block argued that due to its substantial financial resources it would have made those purchases in addition to the Properties.to be acquired from Brewers: see, for example, Trial Decision, at paras. 303-4. The trial judge found that Block could and would have purchased each property actually purchased in addition to the Properties Block was to acquire from Brewers, and thus no mitigation occurred. I reject the argument that the trial judge committed a reversible error by addressing the issue on the premise the parties put forward.
[89] Second, this case is unlike Southcott, because Brewers failed to demonstrate a causal link between Brewers’ breach of each APS and Block’s ability to mitigate. A plaintiff only has a duty to mitigate losses “consequent on the breach”: Asamera Oil Corp. v. Sea Oil and General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633 at p. 661, quoting British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Co. of London Ltd., [1912] A.C. 673 (H.L.) at p. 689. The defendant bears the onus of proving that the plaintiff could have mitigated its losses but failed to do so: Southcott, at para.45.
[90] In Southcott, the plaintiff had some capacity to mitigate its losses but made the strategic decision not to. Southcott was a special purpose vehicle with the ability to deploy just enough capital to fulfill the agreement with the defendant. When the defendant’s breach freed up that limited capital, instead of redeploying those funds elsewhere, Southcott made the calculated decision not to acquire any assets in Southcott’s name for litigation reasons: Southcott, at paras. 11, 27-28. In other words, instead of seeking a “replacement purchase” to mitigate Southcott’s damages, the corporate group used affiliates to acquire desirable properties while preserving Southcott’s litigation strategy.
[91] In this case, on the trial judge’s findings Block had no such capital constraints, and there was no causal connection between Brewers’ breach and its ability to make purchases. The trial judge accepted Block’s evidence that it had “substantial backing and no operational or financial constraints”. Unlike Southcott, Brewers’ breach did not change Block’s financial position or impact decision-making across its corporate group. There is no evidence that Block strategically avoided profitable transactions by steering other transactions to its affiliates to maximize Block’s damages.
[92] The trial judge concluded that the six properties purchased post breach were “independent transactions” because even if Brewers had fulfilled its obligations, “Block” would have bought those properties anyway. Unlike in Southcott, on the trial judge’s findings, whether the properties were purchased by Block itself or its affiliates, they would be independent transactions which cannot mitigate a plaintiff’s damages because they are unrelated to the defendant’s breach, and so irrelevant to the plaintiff’s losses arising from it: British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74, at para. 106.
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