DHMK Properties Inc. v. 2296608 Ontario Inc. 2017 Ont SCJ
Purchaser of a commercial building refused to close and sued for specific performance and an abatement because the income represented in the agreement of purchase and sale was lower than the actual income that the property produced. The trial judge held that the representation was a warranty, which entitled the purchaser to sue for damages but did not entitle the purchaser to refuse to close. Accordingly, the purchaser was in breach. Another hearing was held to determine the vendor’s damages arising out of the purchaser’s repudiation of the agreement. The court held that the damages were the difference between the sale price and the market value of the property at the date of closing. This difference was significant because the income was lower than that represented and therefore the fair market value was lower. Because the purchaser repudiated the agreement before closing, the vendor had a duty to mitigate its damages. The purchaser offered to purchase the property on the same terms as previously after it lost the first trial, but that offer was attached to a condition that the purchaser could sue for the misrepresentation as to income. The vendor, not surprisingly, refused that offer. The court held that the failure to accept this offer was not a failure to mitigate its damages; mitigation only requires a vendor to act reasonably rather than destroying or sacrificing previous rights as part of the mitigation.
Note: This decision has been overturned. Our summary of the decision rendered by the Court of Appeal can be found HERE.
Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.