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Damages - Mitigation. Krmpotic v. Thunder Bay Electronics Limited
In Krmpotic v. Thunder Bay Electronics Limited (Ont CA, 2024) the Ontario Court of Appeal considered mitigation, here in an employment law context:REASONABLE EFFORTS TO MITIGATE
[18] The appellants assert here, as they did below, that the period of reasonable notice must be reduced based on the respondent’s failure to mitigate. They submit that the trial judge erred in concluding that the respondent was unable to mitigate during the reasonable notice period because of physical incapacity. They make a number of arguments in support of this submission, the most salient of which are that the trial judge: (1) found, in the “complete absence of any medical evidence”, that the respondent could not work during the notice period because of physical incapacity; and (2) ignored the medical evidence which indicated the respondent was capable of working.
[19] I do not accept this submission or the arguments advanced in support of it. Whether a terminated employee took reasonable steps to mitigate is largely a question of fact – absent an error in principle or a palpable and overriding error, a decision respecting mitigation is entitled to deference: Lake v. La Presse, 2022 ONCA 742, at para. 13. The trial judge made no error in principle nor did he make any factual error, much less a palpable and overriding one.
[20] The principles governing mitigation are well-known. As a dismissed employee, Mr. Krmpotic had a duty to take reasonable steps to mitigate his damages by searching for comparable alternate employment within the reasonable notice period. The appellants had the burden of proving that (1) Mr. Krmpotic failed to take reasonable steps to mitigate; and (2) had he done so, mitigation was possible, in the sense that he would have been expected to secure comparable alternative employment: Lake, at para. 12; Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 23-24. . Eyelet Investment Corp. v. Song
In Eyelet Investment Corp. v. Song (Div Court, 2024) the Divisional Court considered an interesting arbitration mess, where the arbitrator asserted a radical degree of independence that did not accord with the views the appeal judges involved. An arbitrator-sympathetic characterization is that of cultural differences between the judicial and the arbitration 'benches'. It's a useful and even entertaining read, although at the end the CA puts it's foot down firmly on the side of law.
Here the court considers the determination of damages in the context of a failed APC:[2] The appellant Eyelet Investment Corp. builds and sells new residential houses. It sold houses to the respondents pursuant to separate but virtually identical agreements of purchase and sale. When the market soured, the respondents advised the builder that they did not intend to close their purchases. The builder accepted the buyers’ repudiation of their contracts and resold the houses at a loss. It also incurred carrying costs for each house that it would not have incurred had the respondents closed their purchases as they had agreed.
[3] The builder treated the buyers’ deposits as forfeited and commenced legal proceedings against the buyers to recover the remaining losses it sustained by their alleged breaches of their agreements of purchase and sale.
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[72] The Court of Appeal has been clear with its approach to assessing damages in a failed real estate transaction. In Arista Homes (Richmond Hill) Inc. v. Rahnama, 2022 ONCA 759, at para. 9, the Court of Appeal held:[9] Where a purchaser fails to close a real estate transaction and the vendor takes reasonable steps to sell the property in an arm’s length sale to a third party in mitigation of damages, and there is nothing improvident about the sale, the difference between the two sale prices will be used to calculate the damages: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at para. 41; 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401 (C.A.), at para. 55. In such circumstances, there will be no need for expert evidence: Marshall v. Meirik, 2021 ONSC 1687, at para. 30, aff’d 2022 ONCA 275. [73] The Court of Appeal has also been clear about the issue of mitigation in a real estate context. In Tribute (Springwater) Limited v. Atif, 2021 ONCA 463, at para. 14, the Court of Appeal held that where a buyer alleges that the vendor failed to mitigate its damages, the buyer bears the onus to prove on a balance of probabilities, “both that the plaintiff failed to make a reasonable efforts to mitigate, and that mitigation was possible: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 24, 45.”
[74] A buyer’s deposit is held as an earnest to bind the buyer to her bargain. It is applied in reduction of the vendor’s damages in most cases to avoid double-recovery. But it is not relevant to mitigation of damages in this context. . Preiano v. Cirillo
In Preiano v. Cirillo (Ont CA, 2024) the Ontario Court of Appeal considered a breached APS specific performance or, alternatively damages, action brought by the purchasers.
Here the court cited an added feature of the defendant's evidentiary duty regarding 'mitigation':[20] To meet their onus on a balance of probabilities that the respondents failed to mitigate their damages, the appellants had to establish not only that the respondents failed to take reasonable efforts to find a substitute, but also that a reasonable substitute could be found: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at para. 45, per Karakatsanis J., for the majority. The appellants did not put forward any evidence that the respondents could have purchased or rented a comparable property. As a result, the appellants did not meet their onus to demonstrate that the respondents failed to mitigate their damages. . Monterosso v. Metro Freightliner Hamilton Inc.
In Monterosso v. Metro Freightliner Hamilton Inc. (Ont CA, 2023) the Court of Appeal considers contractual mitigation, both in an employment and other contexts. Case law is cited for the proposition that an employment contract of fixed term does not attract a duty to mitigate:[7] Next, the appellants submit that the trial judge erred in holding that the respondent was not required to mitigate his damages. We accept this submission.
[8] The trial judge erred by conflating the situation of independent contractors with that of employees working under fixed-term contracts. Although this court held in Howard v. Benson Group Inc., 2016 ONCA 256, 129 O.R. (3d) 677, leave to appeal refused, [2016] S.C.C.A. No. 240, that employees under fixed-term contracts are entitled to damages equal to the loss of remuneration for the balance of the fixed term, without a duty to mitigate, this court has never held that independent contractors do not have a duty to mitigate following breach of a fixed-term contract. Mohamed v. Information Systems Architects Inc., 2018 ONCA 428, 423 D.L.R. (4th) 174, at para. 26, expressly left open the question whether the Benson principle applies to fixed-term contracts of independent contractors. The Mohamed panel held only that there was no duty to mitigate in the specific circumstances of that case because the parties intended compensation for the fixed term to be the consequence for failing to terminate the contract in good faith – effectively, a liquidated damages agreement: Mohamed, at para. 29.
[9] A duty to mitigate arises when a contract is breached, including contracts with independent contractors. Of course, the terms of a contract may provide otherwise. However, nothing in this case takes it outside the normal circumstances in which mitigation is required. For example, the respondent was not in an exclusive, employee-like relationship with the appellants, nor was he dependent on the appellants; the terms of the contract permitted the respondent to perform services for other parties. The matter was not argued fully before us, but for purposes of this appeal it suffices to say there was no basis for the trial judge to conclude that the respondent was not required to mitigate.
[10] Although the trial judge made no findings on the mitigation issue, this court can determine the matter. The burden was on the appellants to establish that the respondent failed in his duty to mitigate and they did not meet that burden. The respondent filed extensive evidence detailing his unsuccessful job search efforts. The appellants acknowledge this evidence but assert that the respondent was looking for work that was beyond the scope of his experience and qualifications. There is no basis in the evidence on which to accept this assertion. The appellants led no evidence to establish that there were jobs the respondent could have taken. Thus, despite the trial judge’s error in failing to require mitigation, the result is the same, for the appellants have not met their burden of proving that the respondent failed to mitigate his damages. . Rassouli-Rashti v. Tayefi
In Rassouli-Rashti v. Tayefi (Ont CA, 2023) the Court of Appeal considered the law of mitigation:[15] The onus was on the appellant to prove on a balance of probabilities that the respondents’ inaction was unreasonable in the circumstances of this case and that they had failed to mitigate their damages: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at para. 45. While the respondents had an obligation to mitigate their losses caused by the appellant’s breaches of his fiduciary duties, the issue of mitigation, including the timing of the listing of the property, must be examined contextually, particularly in the circumstances found by the trial judge to have been created by the appellant’s own breaches: Hunt v. T.D. Securities Inc., 2003 CanLII 3649 (ON CA), 66 O.R. (3d) 481, at paras. 107-115; Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC), [1991] 3 S.C.R. 534, at pp. 553-554, per McLachlin J. (concurring), and pp. 580-581, per La Forest J (for the majority). Based on the trial judge’s findings and the evidence in the record, the appellant has not discharged his burden of showing that the respondents’ conduct was unreasonable in the circumstances of this case and that they failed to mitigate their damages. . Arista Homes (Richmond Hill) Inc. v. Rahnama
In Arista Homes (Richmond Hill) Inc. v. Rahnama (Ont CA, 2022) the Court of Appeal considered mitigation, here where a purchaser failed to close on an APS:[9] Where a purchaser fails to close a real estate transaction and the vendor takes reasonable steps to sell the property in an arm’s length sale to a third party in mitigation of damages, and there is nothing improvident about the sale, the difference between the two sale prices will be used to calculate the damages: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at para. 41; 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401 (C.A.), at para. 55. In such circumstances, there will be no need for expert evidence: Marshall v. Meirik, 2021 ONSC 1687, at para. 30, aff’d 2022 ONCA 275. . Aylmer Meat Packers Inc. v. Ontario
In Aylmer Meat Packers Inc. v. Ontario (Ont CA, 2022) the Court of Appeal considered a lawsuit by an abattoir against the province:[112] The plaintiff has a duty to mitigate its loss and cannot recover losses that it could have avoided. While the duty to mitigate is on the plaintiff, the onus is on the defendant to demonstrate the failure to mitigate: Bowman v. Martineau, 2020 ONCA 330, 447 D.L.R. (4th) 518, at para. 31, citing Janiak v. Ippolito, 1985 CanLII 62 (SCC), [1985] 1 S.C.R. 146, at p. 163. I note that the trial judge did not address mitigation, nor did Ontario raise it as an issue so that it need not detain this court. . Tribute (Springwater) Limited v. Atif
In Tribute (Springwater) Limited v. Atif (Ont CA, 2021) the Court of Appeal considered mitigation as a damage issue:[14] As a general rule, a plaintiff is not entitled to recover for losses which could have been avoided by taking reasonable steps. Where it is alleged that the plaintiff failed to mitigate damages, the onus is on the defendant to prove both that the plaintiff failed to make a reasonable efforts to mitigate, and that mitigation was possible: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 24, 45. . Bowman v. Martineau
In Bowman v. Martineau (Ont CA, 2020) the Court of Appeal commented on mitigation:[31] The respondents [plaintiffs] were required to make reasonable efforts to mitigate their damages. It is the appellants’ [defendants] onus to demonstrate they failed to do so: Janiak v. Ippolito, 1985 CanLII 62 (SCC), [1985] 1 S.C.R. 146, at p. 163. I see no error in the trial judge’s conclusion that the appellants did not meet that onus. The trial judge’s determination of the mitigation issue was reasonable in the circumstances of this case. His conclusion is therefore entitled to deference on appeal. . Azzarello v. Shawqi
In Azzarello v. Shawqi (Ont CA, 2019) the Court of Appeal commented as follows on mitigation:[39] The duty to mitigate is derived from the proposition that the wronged party cannot recover from the defaulting party for losses that could reasonably have been avoided: S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017), at p. 529. It cannot be reasonable for a vendor to be obliged to reduce the loss it claims from the defaulting party by reselling the property to that party, then suing him or her for the difference. This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way. Yet the defaulting party would secure a significant tactical and procedural advantage over the innocent vendor. . Curley v. Taafe
In Curley v. Taafe (Ont CA, 2019) the Court of Appeal stated as follows on mitigation:[38] It is a basic tenet of contract law that a victim of a breach cannot recover losses that could have been avoided by taking reasonable steps post-breach; this principle against avoidable loss applies in all contractual settings: John D. McCamus, The Law of Contracts, 2nd ed. (Toronto: Ont.: Irwin Law, 2012), at p. 926. The burden of establishing that the plaintiff failed to take reasonable steps to mitigate damages is on the defendant: McCamus, at p. 928; Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324, at p. 331.
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