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  • Daniel Ebady

Breaching party’s gain not a requirement for loss of benefit damages in a breach of contract

The Ontario Court of Appeal overturned a motion judge’s decision not to reward a loss of benefit to a purchaser for a breach of contract by the seller. The purchaser argued that by virtue of the breach of contract it had to pay $187,500 more than it had initially bargained for.


Background

The purchaser, Birchcliffe entered into a purchase and sale agreement with the owners of the property, the Pinnocks. Little did Birchcliffe know that the Pinnocks had not made a mortgage payment in past 20 years! The balance owed to the mortgagee was $500,000. Both parties engaged the mortgagee on how to resolve the balance and to complete the transaction.


Ultimately, the Pinnocks were not able to deliver a clear title to the Birchcliffe and 3 days after, Birchcliffe purchased the property from the mortgagee by way of a power of sale for $687 500.


Birchcliffe filed a suit against the Pinnocks for a loss of bargain ($187,500) and their return of the deposit ($25,000).


Motion’s Judge

The motion judge found the benefit Birchcliffe that was lost as a result of the breach of contract by the Pinnocks was illusory and never existed for Birchcliffe. Therefore, motion judge decided the Pinnocks could not have appropriated the benefit. On these reasons, he only gave judgement for the deposit and not the loss of benefit.


Ontario Court of Appeal

The Court of Appeal reversed the motion judge’s decision. They disagreed with the motion judge on two grounds. Firstly, there was in fact a benefit in the bargain and that it was not an illusion. The benefit of the bargain was the exchange of the property for $500,000. Pinnock’s breached this bargain by not delivering a clean title.


Secondly, the court disagreed with motion judge’s requirement that Birchcliffe must prove that the Pinnocks appropriated the benefit from the bargain that was otherwise been unavailable to Birchliffe. The court ruled that loss of benefit is measured by the higher price paid by Birchliffe to the mortaggee and what it bargained for with the Pinnocks. Not benefit the Pinnocks appropriated as a result of the contract.


Takeaway

Most importantly, whether the breaching partying benefits from the breach is not determinative on whether the court will award the non-breaching party damages for loss of benefit. All the non-breaching party has to prove is that the benefit of the performance of the contract has been lost, that is enough for damages for loss of benefit to be laid against the breaching part.

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