In Block Developments Inc. v Brewers Retail Inc., 2026 ONCA 431, the Court of Appeal dealt with an interesting claim arising out of two failed real estate transactions between Block as purchaser as Brewers Retail Inc. as vendor. The properties had been marketed by Brewers as excellent development opportunities, and Block was a developer intending to develop the properties as a mixed-use condominium project. A portion of the project would then be leased back to Brewers.
The agreements of purchase and sale were signed in June 2015. Brewers terminated them in November of that year and sold them to another developer one month later.
Block sued Brewers and obtained an award at trial of over $15,000,000 plus interest. The trial judge rejected Brewers’ argument that Block had mitigated its damages.
The case is interesting for a number of reasons, including the assessment of damages when a property involved is being purchased for future development. The issue to be focused on in this note is that of mitigation of damages.
The Court considered that Block is a real estate development company that is a part of a corporate group that is affiliated and related companies. Before and after the subject transactions, Block and its group were pursuing a business model of aggressive growth, with strong financial backing.
Following the date of breach, a number of Block’s affiliates purchased other development properties elsewhere as part of an active program to expand the group’s portfolio. In all, following the breach, members of the group made offers on 73 properties and acquired 6 of them. Brewers’ argument was that these purchases should be considered as mitigating, so that the profits ultimately earned on them would offset the loss of potential profits from the properties Block was to have purchased from Brewers.
Block’s argument was that none of these other sites replaced the subject property. The group would have acquired all of them anyway.
The trial judge agreed with Block and declined to reduce its damages due to mitigation.
On appeal, Brewers shifted its position and submitted that even if Block’s damages had been properly calculated, they should be reduced because Block had failed to mitigate those damages. Again, Brewers’ argument was based on the fact that Block’s affiliates had purchased other development properties. To Brewers, these were replacement properties which could have been purchased by Block just as easily. Had Block made the purchases, its losses would have been mitigated.
The Court of Appeal disagreed, based on the connection between these subsequent purchases and the failed transactions, or lack thereof. The Court found that with the resources available to Block and to its group of companies, these subsequent purchases would have been made (whether by affiliate companies or by Block itself) even if Brewers had closed its deals with Brewers. There simply was no connection between the failed transactions and the subsequent purchases.
As the Court of Appeal pointed out, a Plaintiff only has a duty to mitigate losses “consequent on the breach”. Block had no financial constraints and there was no causal connection between Brewers’ breach and Block’s financial ability to make purchases. The breaches did not change Block’s financial position or impact the group’s decision-making process. There was no evidence that Block strategically avoided profitable transactions by steering other transactions to its affiliates so as to maximize its own damages claim. The other purchases were independent transactions and as such, being unrelated to the Defendant’s breach, they were irrelevant to Block’s losses.