Compensation for Harm to Property Interests
| Author | Jamie Cassels |
| Profession | Professor of Law University of Victoria |
| Pages | 63-107 |
CHAPTER
3
COMPENSATION
FOR
HARM
TO
PROPERTY
INTERESTS
A.
INTRODUCTION
An
interest
in
property
may be
harmed
in a
variety
of
ways.
The
prop-
erty
may be
stolen, damaged,
or
destroyed
by the
wrongful
act of the
defendant.
In
these cases
the
cause
of
action will
be in
tort
(e.g.,
negli-
gence,
nuisance, trespass, conversion,
and
detinue).
Alternatively,
the
plaintiff
may be
kept
out of
possession
of
property
by a
bailee,
or by a
vendor
who
fails
to
live
up to a
contract
to
sell
the
property;
or a
con-
tractor
may
breach their contract
to
improve
or
preserve property.
In
these cases
the
cause
of
action will
be in
contract. This chapter outlines
the
basic principles
of
damages assessment
in
relation
to
property
interests,
in
both contract
and
tort.
The
first
principle
in
respect
of
compensation
of
property interests
is
restitutio
in
integrant.
The
owner
of
property
is
entitled
to be put in
the
position
as
though
the
wrong
had not
been
done.
The
damages
will
be
measured
by the
loss
in
value
of
the
property
to the
owner.
Where
the
wrong
is a
breach
of
contract
(e.g.,
a
failure
to
deliver
property that
the
plaintiff
has
purchased
from
the
defendant,
or a
breach
of
contract
to
improve property),
the
plaintiff
is
entitled
to
expectation damages. These will
be
measured
by the
value that
the
property would have
had to the
plaintiff
had the
contract been per-
formed.
The
same basic principle applies
in
tort cases. When property
is
damaged
or
destroyed,
the
plaintiff
is
entitled
to
full
restoration; that
is, to be put in the
position
as
though
the
wrong
had not
been
done.
63
64
REMEDIES:
THE LAW OF
DAMAGES
This means that, where property
is
destroyed,
the
owner
is
entitled
to
the
actual value that
the
property
had to him at the
time
of the
wrong.
Where
the
property
is
"fungible"
and
available
for
purchase
on the
market,
the
damages
will
be
assessed
by the
cost
of
acquiring
a
substi-
tute.
Where
the
property
is not
easily replaced, courts must engage
in
more complex calculations
to
determine
its
value
to the
owner.
The
method
is
explained
in the
first
part
of
this
chapter.
Where
the
property
is
damaged,
the
owner
is
also entitled
to be
made whole. Typically, damages
will
be
assessed
by the
reasonable
cost
of
repairing
or
replacing
the
property.
The
most significant problems
arise when
the
cost
of
repairing
the
property
is out of
proportion
to the
market value
of the
property. This problem
is
discussed
in
depth
in a
later
section
of
this chapter.
In
addition
to the
value
of the
property itself,
the
plaintiff
is
enti-
tled
to
compensation
for
consequential losses,
subject
to the
rules
of
remoteness
and the
duty
to
mitigate.
For
example,
the
purchaser
of
goods,
or the
owner,
may
have been intending
to
resell
the
goods
or to
use
them
in
some enterprise.
The
breach
of
duty
by the
defendant
(whether
a
breach
of
contract
to
deliver
the
goods,
or a
tort
that dam-
ages
them)
may
result
in an
additional loss
of
profit.
Where substitute
property
can be
immediately procured,
or the
property
can be
immedi-
ately
repaired, damages will
be
limited
to the
cost
of
doing
so
since there
will
be no
lost
profits.
However,
in the
case
of
many profit-earning
chattels such
as
heavy machinery
or
ships,
there will inevitably
be a
period
of
delay,
as
there will
be in
cases involving non-delivery
of
cer-
tain
goods
and
real property.
In
these cases,
the
plaintiff
is
entitled
to
consequential losses, including lost
profits,
subject
to the
limitations
imposed
by the
rules
of
remoteness
and
mitigation. Even where
the
property
is not
intended
to be
used
for
profit,
the
owner will have been
deprived
of its use and may
have
a
claim
for the
loss
of
use.
B.
NON-DELIVERY
OF
PROPERTY
Chapter
2
addressed
the
basic principles regarding
the
recovery
of
damages
for a
breach
of
contract. Those general principles apply
to
contracts
to
sell both real
and
personal property,
and
that chapter con-
sidered
the law
with respect
to the
sale
of
goods.
The
following section
deals with
contracts
in
respect
of
land.
Compensation
for
Harm
to
Property Interests
65
1)
Breach
of
Contract
to Buy and
Sell
Real
Estate
a)
General
Principles
Historically,
the
primary remedy
for
breach
of a
contract
to
sell land
was
specific performance
— an
order
to the
vendor
actually
to
deliver
the
land. Land, especially residential real estate,
has
been considered
unique
and
damages
are
presumptively inadequate. However, expecta-
tion damages
are
also
an
available remedy
at the
plaintiffs
option;
and
with
the
diminishing
availability
of
specific performance
for the
sale
of
land, damages
are
becoming
a
more important
remedy.J
Expectation
damages
in
real estate cases will
be the
difference
between
the
contract price
and the
market price
of the
land.2
For
example,
if
the
vendor
refuses
to
deliver
the
property
at a
contract price
of
$100,000,
and its
value
has
increased
to
$110,000
at the
time
of the
breach,
the
vendor will
be
liable
for
$10,000
(and
the
buyer will
be
enti-
tled
to the
return
of any
deposit
paid).
Likewise,
if the
buyer
is in
breach,
and
the
land
has
decreased
in
value,
the
vendor will
be
entitled
to the
loss.
If
the
buyer
has
incurred legal
fees
or
other expenses
in
anticipa-
tion
of
closing,
these
are not
recoverable,
since
they
would
have
been
incurred
in any
event
had the
contract gone through.
And if the
plain-
tiff
has
saved such expenses, they must
be
deducted
from
the
damages
for
the
lost value
of the
land since,
had the
contract been performed,
these expenses would have been incurred
in
order
to
earn that
value.3
b)
Time
of
Assessment
Ordinarily,
in
determining compensation
for
breach
of
contract, dam-
ages
are
assessed
at the
date
of the
breach. This
is a
corollary
of the
rule
of
mitigation since
it
assumes that
at the
time
of the
breach
the
plaintiff
will
be
able
to
enter into
an
alternate transaction.
It
also promotes
effi-
ciency
in the
assessment
of
damages
by
dictating
an
arbitrary
but
conve-
nient point
at
which
the
valuation exercise should
be
done,
and
avoiding
costly
and
complex litigation over
the
exact time
at
which
the
loss
should
be
evaluated. These
principles
are
discussed
fully
in
chapter
12.
In
cases involving real estate,
the
rules about time
of
assessment
are
more complex, particularly
in the
case
of the
buyer's action. Since
the
buyer
of
real estate
is
often
entitled
to
specific
performance,
the
usual rules regarding mitigation
do not
apply. Obviously
the law
can-
not be at one and the
same time that
the
buyer
is
entitled
to
actual
1
Semelhago
v.
Paramadevan,
[1996]
2
S.C.R.
415.
2
Pitcher
v.
Shoebottom
(1970), [1971]
1
O.R.
106
(H.C.)
[Pitcher].
3
Ibid.
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