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Damages - Lost Oppourtunity. Block Developments Inc. v. Brewers Retail Inc. [development profits as oppourtunity cost]
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 distinguishes the typical measure of damages for a breached APS (aka 'market value') from the measure where the plaintiffs "lost a development opportunity that had a degree of specificity known to the parties at the time of contracting":[8] As this court held in Rosseau Group, the normal measure of damages for a failed real estate purchase is the difference between the contract price and the market value of the land on the "assessment date", which is usually the date of breach — the date on which the purchase was to close, but did not. The normal measure puts the innocent purchaser in the position it would have been in had the transaction closed by awarding the purchaser the financial or economic equivalent of what it was deprived of on the closing date, less what it had to pay the vendor to obtain it.
[9] As Rosseau Group also held, the fact that the subject of the defaulted purchase is land that could be developed does not, on its own, render the normal measure of damages inapplicable. Market value takes into account the opportunity to profit from the land in the future, including by development; it is “the price at which knowledgeable arms’ length parties are prepared to transact given their assessment of the opportunity the property provides and the chance of realizing on it successfully”: at para. 88.
[10] But Rosseau Group does not hold that market value is always equal to the amount realized by the defaulting vendor on a resale, nor that the resale amount necessarily represents, at the assessment date, the economic equivalent of what the purchaser was deprived of on the closing date. The normal measure of damages may be departed from where it does not address the type of loss the innocent party suffered.
[11] Due to Brewers’ breach, Block lost a development opportunity that had a degree of specificity known to the parties at the time of contracting. The trial judge recognized that lost development profits were a recoverable type of loss. The approach of the experts called by both parties and accepted by the trial judge to measure Block’s loss differed markedly from that rejected in Rosseau Group. The approach in this case used the date of the breach as the assessment date, as contemplated by the normal measure. It valued what Block was deprived of by looking at what a reasonable person would pay or demand, on the assessment date, for projected cash flows from the future development in light of the time to realize them and the risks they may not be realized.
[12] Neither the trial judge nor the parties called the approach taken by the experts a market value approach; they called it a lost development profits approach. However, in determining whether a trial judge has departed from the normal measure of damages in a manner that is unjustified and warrants appellate interference, the extent of any departure is important, and substance must prevail over nomenclature.
[13] In these circumstances, the trial judge did not make a legal error in accepting the approach endorsed by both sets of experts rather than the Rosewater sale price that Brewers pointed to. Given the deference afforded to a trial judge’s damages assessment in the absence of legal error, there is no basis to interfere.
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b. The Principles in Rosseau Group and the Damages Calculation that was Set Aside
[47] Rosseau Group reaffirmed the normal or presumptive measure of damages for a failed real estate purchase. It is the difference between the contract price and the market value of the land on the assessment date which is generally the date of breach—when the purchase was scheduled to close but did not. Use of that measure is supported by the core principle governing the assessment of damages—to put the innocent party in the position it would have been in if the contract were performed—as well as by the commercial certainty that follows from a predictable damages methodology. As explained at paras. 62-64:The normal measure of damages for a failed real estate purchase is the difference between the contract price and the market value of the land on the "assessment date". The assessment date is usually the date on which the purchase was scheduled to close. Although the court may set a later date if the party seeking damages satisfies certain criteria, the presumption is that damages are to be assessed as of the date of the breach. That presumption is not easily displaced; any deviation from it must be based on legal principle: 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401, 88 D.L.R. (3d) 1 (C.A.), at para. 55, leave to appeal refused (1978) 20 O.R. (2d) 401 (S.C.C.); 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417, 209 D.L.R. (4th) (C.A.), at paras. 41-43; Rougemount Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847, 410 D.L.R. (4th) 509, at para. 50; Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, 161 O.R. (3d) 469, leave to appeal refused, [2022] S.C.C.A. No. 183, at para. 27.
There are several reasons why the normal measure is the presumptive measure of the innocent party's damages and is not to be easily displaced.
First, when a purchase contract is performed, the purchaser pays the purchase price on closing and obtains, on the same date, ownership of an asset. Damages are awarded on the principle that the innocent party, as nearly as possible, should be put in the position it would have been in if the contract had been performed. Using, as the measure of damages, the difference between the purchase price and the land's market value on the closing date puts this principle into effect: 100 Main Street, at paras. 55-56. The market value represents the financial equivalent of the asset itself.
Second, commercial certainty is enhanced by a predictable damages methodology. This court has stated that an early, and predictable, date on which the innocent party's damages are crystallized promotes efficient behaviour and reduces uncertainty and speculation: Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp. (2004), 2004 CanLII 36051 (ON CA), 246 D.L.R. (4th) 595 (Ont. C.A.), at para. 125, per Laskin J.A. (concurring), leave to appeal refused, [2000] S.C.C.A. No. 658. Although made in the context of a sale of goods, the observation applies equally to the sale of land. [48] The fact that the subject of the failed purchase is land that was, to the knowledge of the parties, being purchased for redevelopment does not, on its own, render the normal measure inapplicable. The purchaser’s loss of the opportunity to acquire the land and earn profits through its future development is a recoverable type of loss, in the sense of it not being too remote. But that type of loss is, presumptively, properly measured by comparing the contract price with market value on the date of breach, since market value takes into account the land’s highest and best use, including the value of the land’s development potential. In other words, market value takes into account, as at the valuation date, the market’s perspective of the value of the current and potential future uses and opportunities available to the land’s owner, including development: at paras. 70-71.
[49] Market value at the assessment date also accounts for the time it would take to realize on the opportunity the land presents, and the risk that the opportunity might not be realized in full or at all. Market value is “the price at which knowledgeable arms’ length parties are prepared to transact given their assessment of the opportunity the land provides and the chance of realizing on it successfully”: at paras. 69-75, 88.
[50] The normal measure may be departed from, but it will not be lightly disregarded and there must be a reason, grounded in legal principle, to do so. In this regard, it is important to underscore two aspects of the normal measure. One is the use of the breach date as the assessment date. Departing from this aspect of the normal measure is usually tied to consideration of the date the innocent party might reasonably have been expected to enter the market to mitigate (see Rosseau Group, para. 62 and the cases cited therein). The second aspect is the use of market value. Departing from its use may be justified when market value will not address the type of loss suffered by the innocent party. This may occur in situations where the purchaser could extract a special value from developing the land that other market participants could not, because, for example, the purchaser already owned adjacent land that could be combined with the subject land, or had special development techniques not known to the market generally: at paras 70, 78-80, and fn 4.
[51] In Rosseau Group, the trial judge’s calculation of damages departed fundamentally from both aspects of the normal measure. It did not use the breach date as the assessment date, and it did not use market value or any equivalent of it at any date. The calculation rested solely on an estimate of the total profits that would have been earned six years after the aborted purchase, at the end of a potential redevelopment. In other words, standing at a point in time long after the presumptive assessment date for damages, the calculation totaled what the purchaser would then have in its pocket if a potential development had gone through. No present value of that amount was calculated as of the date of the breach. No discount rate was used. Risks and contingencies of there being a successful development were not considered. The calculation did not purport to reflect or address what, on the date the land was to have been acquired, a person would have paid for the economic opportunity to earn the projected profits that the land presented, considering the time it would take to realize on the opportunity and the risk that the opportunity might not be realized: at paras. 24-26, 82-88.
[52] The trial judge’s damages assessment was set aside as an unjustified departure from the normal measure of damages. “There was no suggestion ... that a calculation of market value at the closing date would somehow miss or exclude the development value of the lands”, given the trial judge’s finding that the property had increased in value by the closing date based on offers and expressions of interest received by the owner from other developers. The matter was remitted for a new hearing on the issue of damages according to the normal measure at paras. 75, 81, 90.
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i. Was the Trial Judge Required to Accept the Rosewater Sale Price as Market Value?
[56] Market value, as used in the normal measure of damages, posits a hypothetical transaction. To determine it one must ask “what a seller and buyer ‘each knowledgeable and willing’ would pay for [the land] on the open market”: Musqueam Indian Band v. Glass, 2000 SCC 52, [2000] 2 S.C.R. 633, at para. 37 (emphasis added). This includes consideration of what the hypothetical parties would consider the future prospects of the land to be. “[M]arket value may reflect a higher and better use of the land than its current state – in other words, recognizing the land’s development potential”: St. John’s (City) v. Lynch, 2024 SCC 17, 491 D.L.R. (4th) 581, at paras. 29-30, 32. To determine market value, one must determine “the price at which knowledgeable arms’ length parties are prepared to transact given their assessment of the opportunity the land provides and the chance of realizing on it successfully”: Rosseau Group, at para. 88.
[57] It follows that market value will not always equate to what was paid in an actual transaction involving similar land or the same land. An actual transaction in the same land may be strong evidence of market value: Scott v. Forjani, 2021 ONSC 1996, at para. 44; 345176 Canada Inc. et al. v. James Selkirk Custom Homes Ltd, 2026 ONSC 600, at para. 52. Nevertheless, one transaction, even in the same land, is only a data point. There can be circumstances in which an actual sale price may not accurately reflect market value. For example, the parties to the actual transaction may not have been operating at arm’s length, one or both of them may not have been knowledgeable, the property may not have been sufficiently marketed, or one party may have been under compulsion to transact: see, for example, Medway v. Manitoba (Department of Urban Affairs) (1983), 29 L.C.R. 89 (Manitoba Land Value Appraisal Commission), at pp. 95-96; 1427814 Ontario Limited v. 3697584 Canada Inc., 2012 ONSC 156, at paras. 859-868; Northern Meat Packers Ltd. v. Roynat Ltd. (1986), 1986 CanLII 135 (NB CA), 71 N.B.R. (2d) 212 (C.A.), at paras. 14-15; and discussion in BCE Place Ltd. v. Municipal Property Assessment Corp., Region No. 9, 2010 ONCA 672, 103 O.R. (3d) 520, at paras. 19-20.
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ii. Was the Approach the Trial Judge Accepted the Same as That Rejected in Rosseau Group?
[60] Contrary to Brewers’ submission, the approach to damages accepted by the trial judge in this case, although referred to as a lost development profits approach, was different, in four important ways, from that rejected in Rosseau Group.
[61] First, damages were calculated in this case using the assessment date that the normal measure contemplates. In contrast, the damages calculation in Rosseau Group departed starkly from that assessment date. In other words, although they both started with a projection of profits or cash flows from a redevelopment that was to take place years after the acquisition of the land, the calculation in this case did not end there. Here, the calculation was the present value of those cash flows, at the date of breach, achieved through the application of a discount rate.
[62] Second, in contrast to what was rejected in Rosseau Group, in this case the damages calculation took into account the time that it would take to realize the cash flows from redevelopment and the risks in achieving them, through the use of the discount rate. As the trial judge found, “the risk of any development not being achieved in the timeline is addressed in the discount rate”.
[63] Third, unlike in Rosseau Group where no consideration was given to what someone would pay at a particular point in time for the projected profits from the envisaged development, the formulation of the discount rate and its use in this case was derived by answering the question of “what a reasonable party would pay or accept at a certain point in time [in this case, the date of the breach--November 5, 2015] in exchange for the future stream of cash flows, based on the risk of achieving such cash flows and the time value of money”.
[64] Fourth, the damages approach accepted by the trial judge was the same approach taken by Brewers’ experts.
[65] In light of these differences, I reject Brewers’ argument that the damages approach accepted by the trial judge was flawed for the same reasons as that in Rosseau Group.
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[67] Rosseau Group held that the normal measure of damages applies “unless the party seeking damages shows that that measure does not address the type of loss claimed”: at para. 70. An example cited was the award of lost development profits in Performance Industries. In that case, one joint venturer denied the other a promised opportunity to engage in a specific residential housing development, and market value would not take into account the expected profit from that development: Rosseau Group, at paras. 78-80.
[68] In Remington Development Corporation v. Canadian Pacific Railway Company, 2025 ABCA 244, 87 Alta. L.R. (7th) 1, the Alberta Court of Appeal set aside a finding that Canadian Pacific had breached a contract to sell lands to Remington for $7.7 million. The court went on to say that, had it upheld the liability finding, it would have set aside the trial judge’s $165 million damages award in favour of Remington for lost development profits. The normal measure of damages was the “presumptive approach” which should have been applied by the trial judge but was not. The normal measure “may be rebutted by special circumstances showing the market’s knowledge is deficient—for example, by failing to capture an enhanced value (including for a specified development) known to the parties at the time of contracting”, but those circumstances were not present: at para. 103. Remington had no specific plan, or even a clear idea, at the time of contracting, for development of the land it was to acquire; the lands had, at the time, only “nascent development potential”: at para. 110. It was therefore wrong for the trial judge to proceed on the basis that Remington would develop the lands in the most profitable way possible based on market conditions at the time of development. This was in contrast to Performance Industries which the majority referred to as a case of a “crystallized development plan that invited exceptional damages for lost profits”, since the plan was known to the parties at the time of contracting, and the Supreme Court implicitly held that development profits would not be captured by a market value approach: at para. 102.
[69] In this case, Brewers marketed the Properties as excellent development opportunities. As Mr. Lucas admitted at trial, at the time each APS was entered into, both parties contemplated that a mixed-use condominium would be constructed on the sites. Importantly, each APS required a portion of the redeveloped sites be leased back to Brewers for the operation of a Beer Store in the mixed-use project, further indicating a shared understanding about the proposed redevelopment that would involve both parties. The trial judge noted that Brewers did not challenge Block’s expert’s opinion describing the probable redevelopment that would occur on the Properties. Accordingly, the development opportunity had a significant degree of specificity that was known to the parties at the time of contracting. In context, the trial judge’s reference to Performance Industries as a basis to reject the proposition that development profits were not recoverable should be taken as her recognition of this.
[70] It was thus open to the trial judge to approach the matter on the basis that Block’s damages should take into account the specific development opportunity that it lost as a recoverable type of loss. ....
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[72] In some cases, development profits and the approach taken under the normal measure of damages for land with development potential are distinct conceptual categories — the former viewing the matter at the end of a hypothetical development to total what was earned, and the latter viewing the matter at the date of breach to assess, on that date, the price at which reasonably informed market participants would transact for the land, in light of their estimate of the amount, timing and risks of achieving future profits from its development. But the concepts are not straightjackets. In cases such as this one, they can overlap to a significant degree.
[73] The damages approach accepted by the trial judge comported with the first aspect of the normal measure—it used the date of breach as the assessment date. As for the second aspect, Brewers has not shown how the approach accepted by the trial judge (which was the approach taken by the parties’ experts, including their own) departs in a significant way from the purpose of the market value aspect of the normal measure, so as to warrant appellate interference in this case.
[74] As explained in Rosseau Group, the market value aspect of the normal measure is used to determine, as at the assessment date, the financial or economic equivalent of the asset of which the purchaser has been deprived by asking at what price knowledgeable arms’ length parties would be prepared to transact, given their assessment of the economic opportunity the land provides and the risks and time it will take to realize on it successfully. It thus accords with the basic premise of expectation damages: to put the innocent party in the economic position it would have been if the contract were performed. It does this in a way that enhances commercial certainty. By “focusing on reasonably informed participants in the marketplace, [the normal measure] reinforces that foreseeable loss is generally constrained by commercially predictable and proportional outcomes, which advance fairness”: Remington Development, at para. 99.
[75] As I have noted above, the discount rate formulated by the parties’ experts and their use of it addresses a profoundly similar question with a profoundly similar focus as the normal measure. Both parties’ experts formulated and applied their discount rate “to assess what a reasonable party would pay or accept at a certain point in time [the date of breach] in exchange for a future stream of cash flows, based on the risk of achieving such cash flows and the time value of money.”[4]
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[77] I return to the trial judge’s conclusions:In the present case, I find that the market value approach would not appropriately or fairly assess the plaintiff’s damages in the circumstances of this case.
I remain of the opinion that the lost development profit approach, adopted by both parties [sic] economic loss experts is the fair and appropriate means to assess damages in all of the circumstances of this case. [78] Read in light of the positions put to her, the trial judge’s rejection of the “market value approach” was a rejection of Brewers’ proposition that Block had no damages because market value had to be equated to the Rosewater sale price and thus was the economic equivalent, at the assessment date, of what Block had been deprived of. It was open to her to reject that position in light of the nature and circumstances of the Rosewater sale and the expert evidence.
[79] The trial judge’s finding that “the lost development profit approach” adopted by both parties’ economic loss experts was “the fair and appropriate means to assess damages” has not been shown to be a legal error in the circumstances of this case. The economic opportunity that the Properties provided was the potential for profits from a redevelopment about which the parties shared an understanding at the time of contracting. The approach taken by both parties’ experts aimed to determine the economic equivalent, on the assessment date, of what Block was deprived of when it lost that opportunity due to Brewers’ breach of contract, viewed through the lens of what a reasonable person would pay or demand for the future profits in light of the time to realize them and the risks. To the extent that approach differed from the normal measure, the trial judge explained why she accepted it as the approach endorsed by both parties’ experts and the fair and appropriate way to measure damages in this case.
[80] Where a trial judge accepts a departure from the normal measure of damages, they should explain the nature and extent of the departure, and why it is justified. Brewers argues that the trial judge’s reasons are insufficient.
[81] I reject this argument. The trial judge’s reasons on the approach to the measure of damages are brief, but must be read in light of her reasons as a whole (which contain detailed findings about the circumstances leading up to the Rosewater sale and the content of the expert evidence) and the trial record (which includes detailed reports from the experts whose approach she accepted). Taking a contextual and functional approach, the reasons permit meaningful and effective appellate review: Gholami v. The Hospital for Sick Children, 2018 ONCA 783, 2019 C.L.L.C. 210-007, at paras. 63-64.
d. Conclusion on the Measure of Damages
[82] The trial judge did not make a reversible error in the measure of damages she used.
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