I'm coming a bit late to this one, but I disagree with what I understand
most of you to be saying on the first point (mitigation and termination).

What interests me is whether or not mitigation can apply to the decision
whether to affirm or terminate after a repudiatory breach. In my view it
applies to that, as to every other decision the claimant makes. It applies
because if damages are ultimately claimed (and I don't see how it can apply
to the action for a debt) the claimant will not recover for any loss he
could have avoided after the breach. The choice whether to affirm or
terminate occurs after (upon) the breach and the duty to mitigate has
arisen.

Of course in most cases it will be reasonable to press the defendant for
performance and/or seek specific performance, but there may be cases where
the argument for specific performance is hopeless and it is unreasonable and
unrealistic to do so rather than terminating and getting on with mitigating.

That does not mean that the courts force the claimant to terminate. Yes the
repudiatory breach is writ in water, and the courts do not force the
claimant to terminate. And the claimant has no 'duty' to mitigate. Instead
the courts restrict damages to what they would have been if the claimant had
terminated earlier and acted reasonably.

I think this view is logical and supported by Asamera v Sea Oil in the SCC,
Kopec v Pyret in Saskatchewan. It is why in Johnson v Agnew Lord Wilberforce
takes care when deferring the date for damages assessment to say that the
claimant "reasonably" continued to press for performance and seek specific
performance (although counsel Mr Millet QC had argued that the duty to
mitigate does not apply to the decision as to whether to terminate or not).
Also Habton v Nimmo per Auld LJ at para 128. And now Southcott (although
I'll have to go and read it now!)


Adam Kramer
3 Verulam Buildings
Gray’s Inn, London, WC1R 5NT

 

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-----Original Message-----
From: Jason Neyers [mailto:jneyers@uwo.ca]
Sent: 18 October 2012 16:18
To: Stephen Smith, Prof.
Cc: Robert Stevens; David Campbell; obligations@uwo.ca
Subject: Re: Supreme Court of Canada on Specific Performance and Mitigation

I had the same question as Stephen.

Jason Neyers
Cassels Brock LLP Faculty Fellow in Contract Law Associate Professor of Law
Faculty of Law Western University N6A 3K7
(519) 661-2111 x. 88435

On 18/10/2012 11:05 AM, Stephen Smith, Prof. wrote:
> Whether we say that a party has 'abused a right' by insisting on keeping a
contract alive (or, if you prefer, by bringing an action on that basis) or,
instead, had a duty in good faith to accept a repudiatory breach, i.e., to
treat the contract as terminated, does not seem to me to matter very much:
both ways of framing the argument are basically saying the same thing, which
is that as a matter of strict law you have a right to keep the contract
alive, but in the circumstances that right should be curtailed. Good faith
and abuse of right are two sides of the same coin.
>
> As I mentioned previously, I am generally wary of abuse of right (and good
faith) arguments. But I don't think they (or something similar) can be
ignored completely in thinking about White or Southcott-type cases. I can't
imagine anyone but a lawyer thinking that it is okay for a cabinet-maker to
go ahead and build contracted-for custom cabinets for my kitchen if I have
told him the day after we signed the contract that I no longer want or need
the cabinets because my house just burned down or because I was fired from
my job and can't pay for them, or whatever.
>
> Further--and others will no doubt correct me on the law here if I am wrong
here--it is my understanding that the result in Southcott (that damages will
be assessed on the assumption the buyer mitigated even where the buyer did
not terminate) is the normal rule in sale of goods cases. If you fail to
deliver goods to me and, without having in any way indicated that I am no
longer expecting you to perform, I later sue you, I will not be given
specific performance (unless the goods are unique) and my damages will be
calculated assessed on the basis of the market price as of the contractual
date of delivery. Yet if I did not terminate, then according to the orthodox
understanding of the relationship between termination and mitigation (as set
out by Rob and Andrew), should not damages be calculated as of the date of
judgment? If this is just another exception to the normal rule (like the
residential lease example Rob gives, it seems a pretty big one. I am not
arguing that Southcott is correct, but is Rob arguing that the sale of goods
cases are wrong? (I am sure he is not, but I await illumination...). Have I
missed something here?
>
> steve
>
> -----Original Message-----
> From: Robert Stevens [mailto:robert.stevens@law.ox.ac.uk]
> Sent: October-18-12 9:57 AM
> To: David Campbell; obligations@uwo.ca
> Subject: RE: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> (i) The Lord Reid 'legitimate interest' gloss has always seemed to me to
be itself wholly illegitimate. If we ask ourselves why the defendants had
not sought to argue that the pursuers had no legitimate interest in seeking
the agreed sum the answer is obvious. Nobody had ever thought there was such
a requirement until Lord Reid suggested it in an obiter dictum in the case
itself. The result itself is unobjectionable.
>
> (ii) In the Alaskan Trader the arbitrator thought that the co-operation of
the charterers in supplying fuel was necessary in order for the owners to
perform their side of the bargain. If that is right, the decision is right
(although I rather doubt it myself). Other decisions following Reid's dictum
(eg The Puerto Buitrago) are also readily explicable in other ways, usually
expressly relied upon by the judges.
>
> (iii) I can't myself see abuse of rights flying as an idea here. By not
terminating the deal the innocent party is not 'doing' anything. Can I abuse
my rights through inaction?
>
> (iv) Being a soft-hearted fellow, I can quite see the good sense of
implying (as a matter of law) rights of unilateral termination into, say,
residential lease agreements in order to protect consumers. As a matter of
English landlord and tenant law my understanding is that that is the law,
enabling tenants to get out of deals and not be on the hook for rent for an
agreement's entire term.
>
> As between commercial parties (such as those in this case and in W&C) I
see no case for re-writing the parties' deal. Even from David's preferred
perspective of the economist (which I do not share) commercial parties
should be free to enter into such bargains on such terms as they think fit,
and be bound by them. The commercial bargain in W&C also made perfect sense,
especially considering the 'acceleration clause' which meant that pointless
wasteful performance was unnecessary, and the parties were rightly held to
it.
>
> Similarly, in Southcott Estates I see no case for the court re-writing the
parties bargain and inserting into it a unilateral right of termination. In
effect, however, that is what they have done.
>
> Rob
> ________________________________________
> From: David Campbell [I.D.Campbell@leeds.ac.uk]
> Sent: 18 October 2012 14:12
> To: obligations@uwo.ca
> Subject: FW: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> Dear Obligations colleagues
>
> Stephen Smith (and since this was drafted Martin Hogg) is right that, if a
contract which has been repudiatorily breached is affirmed, then mitigation
cannot apply. But does this mean that mitigation follows only after
termination? As a formal matter, this is so. But what I believe to be the
mitigation policy, in the form of Lord Reid's two conditions, especially the
legitimate interest point, now also applies to the election to affirm or to
terminate, and the claimant no longer has an unfettered power to affirm, as
White and Carter (if it makes any sense) says it does.
>
> I am afraid I am not at all up to date on this, but when writing a
textbook account of White and Carter in 2002, I did not find a single case
in (as I recall) Australia, Canada or the UK in which the choice to affirm
was unfettered. The typical case was The Alaskan Trader, to which the
legitimate interest point was central. I therefore cannot agree with Stephen
'that contracting parties are free to 'reject' a repudiatory breach and so
to keep the contract alive'. So long as White and Carter is not overruled,
the law cannot be entirely clear, but this is a cost of the common law, for
I do not believe that any counsel would advise its client to rely on White
and Carter in the sense of insisting on affirmation without a legitimate
interest, and I cannot see how this case will ever be overruled (unless it
be on appeal from the House of Lords to the pages of the LQR, as arguably
has happened with Bell v Lever Bros).
>
> I have heard Scots colleagues, a little ashamed of White and Carter, argue
that it can be dealt with by application of the abuse of right doctrine. The
English position, for good (as I think) or ill, does not require this,
because Lord Reid's response to White and Carter has been to shape the right
to affirm in a congenial (if not ideal) fashion.
>
> Best wishes
>
> David Campbell
>
> David Campbell, BSC(Econ), LLM, PhD, FCI(Arb) Professor of
> International Business Law
>
> School of Law
> Liberty Building
> University of Leeds
> LEEDS
> LS2 9JT
> UK
>
> tel: [+44] (0) 113 343 7041
> fax: [+44] (0) 113 343 5056
> email: i.d.campbell@leeds.ac.uk
>
> http://www.law.leeds.ac.uk/about/staff/d-campbell.php
> ________________________________________
> From: Stephen Smith, Prof. [stephen.smith@mcgill.ca]
> Sent: 18 October 2012 13:27
> To: Robert Stevens; David Campbell; obligations@uwo.ca
> Subject: RE: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> Robert & Andrew's analysis of the law seems to me spot on, except, I
think, Robert's suggestion that the mitigation issues raised in Southcott
Estates have nothing to do with White & Carter. Those who think that White &
Carter is wrong (or at least those who think Lord Reid's dicta should be
applied in some cases) are at bottom arguing that in White & Carter
circumstances contracting parties should not be permitted refuse to 'accept'
a repudiatory breach. In law, the only basis on which to refuse the claim
for debt in White & Carter is to say that the contract was terminated by the
breach, and so performing the condition on which payment turned was no
longer possible. Similarly, the only legal basis on which the SCC's decision
in Southcott could be justified is to say that the buyer was obliged to
accept the vendor's repudiatory breach, i.e., the buyer was obliged to treat
the contract as terminated. Once the contract is terminated, then the law
rightly expects or at least assumes that the buyer will mitigate, and
calculates damages accordingly. This analysis also explains why Robert
thinks, rightly, that White & Carter is correct, and Southcott wrong, as a
matter of orthodox legal principle--it is a long-established principle, and
part of the very notion of freedom of contract, that contracting parties are
free to 'reject' a repudiatory breach and so to keep the contract alive. If
the contract is alive, there can be no duty to mitigate (contra southcott)
and performance is still possible (per White).
>
> All that said (and I say this as someone who has long felt slightly uneasy
with the actual result in White & Carter) the above analysis also suggests
one way that critics of White and fans of Southcott might try to frame their
argument: abuse of right. The only basis that I can see for arguing that the
contracts in these cases should be treated as terminated is to say that the
plaintiffs were abusing their rights by refusing to 'accept' the repudiatory
breaches. I say this notwithstanding that I am not a great fan of the idea
of abuse of right. Nor am I confident that even fans of abuse of right
should want the concept applied to the acceptance of repudiatory breaches,
particularly in Southcott type cases (in civil law systems with which I am
familiar, where abuse of right plays a major role, it has never been
suggested that the concept could be applied to questions of termination and
it is pretty clear that such a suggestion would be rejected). A particular
problem with applying abuse of right in sale of land (or goods) cases is
that the consequence, in cases where it is concluded that plaintiffs abused
their rights, is not merely to deny a right but, in effect, to penalize the
plaintiff by reducing damages. Given the uncertainty of application of abuse
of right, this is a major practical issues. (As an aside, my understanding
is that even in cases where the land appears 'unique', Canadian lawyers now
normally recommend that disappointed purchasers accept repudiations and
mitigate, because if they don't, and a court subsequently concludes that the
land is not unique, they will effectively be penalised for not mitigating.)
Nonetheless, I think it helps to clarify the issues to see that what critics
of White and supporters of Southcott are effectively arguing for, in legal
terms, is applying a notion of abuse of right to the matter of contracting
parties' rights to refuse to accept repudiatory breaches.
>
> cheers
>
> Stephen A. Smith
> James McGill Professor
> Faculty of Law, McGill University
> 3674 Peel St.
> Montreal, Quebec H3A 1W9
> 1-514-398-6633
> fax: 1-514-398-3233
>
>
> -----Original Message-----
> From: Robert Stevens [mailto:robert.stevens@law.ox.ac.uk]
> Sent: October-18-12 6:34 AM
> To: David Campbell; obligations@uwo.ca
> Subject: RE: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> We come here of course to a basic difference between David and myself. I
think that if you enter into a contract that you are legally obliged to
perform it (which is the same as saying that the counter-party has a right
to performance). One party cannot unilaterally determine this duty. David
does not agree, and very sadly it looks like the SCC may agree with him.
>
> So, for me, the ultimate justification for awarding specific performance
in contracts for the sale of land is that that is what has been agreed to.
It seems very doubtful to me whether one piece of land is always just as
good as any other, even for commercial parties. In a standard contract for
the sale of generic goods 1,000 widgets from A is not just as good as but in
fact indistinguishable from 1,000 widgets from B. Where the contract is for
the sale of specific goods the same position is usually reached as in
relation to land because property passes when intended to pass: ie title
passes without any further act of conveyance by the seller so that no claim
for specific performance is required.
>
> White and Carter does not seem to me to be in point. White and Carter
concerned an action for the agreed sum (as did Finelli v Dee). So where my
right to be paid a sum of money under the deal is conditional upon my
performing my duty under the bargain, if I cannot perform my duty without
your co-operation, which you withhold, I cannot claim it. As the pursuer in
W&C could perform without the other side's co-operation he was awarded the
agreed sum. The rules on mitigation were neither here nor there as the claim
was not one for loss suffered.
>
> Lord Reid did, in an obiter dictum, say that the action for the agreed sum
might in some circumstances be withheld where the claimant had no legitimate
interest in seeking it, but what he meant by that is obscure to me (there
are a number of different possible interpretations). It is a very radical
argument to suggest that it now means that one party has the unilateral
power to determine a contract.
>
> But perhaps that is the law in Canada.
>
> ________________________________________
> From: David Campbell [I.D.Campbell@leeds.ac.uk]
> Sent: 18 October 2012 10:42
> To: obligations@uwo.ca
> Subject: RE: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> Dear Obligations colleagues
>
> If this case represents the further acceptance of the idea that mitigation
should play a wider role in the claimant's choice between specific
performance and damages, then it is, I suggest, ultimately welcome. (I do
not deny the existence of a lot of current difficulties). In England, of
course, if there is a breach of a conveyance of land, the default remedy is
specific performance. But there is no ultimate justification for this. If
the claimant's interest is commercial and a substitute property is
available, the argument for confining the claimant to market damages applies
just as much as it would to a standard sale of goods. It is different, of
course, if there is a non-commercial interest or a substitute is not
available, just as it would be in a sale of goods, and there may be, as it
were, procedural reasons for making specific performance the default remedy
for breach of a conveyance of land, though I do not see them myself.
>
> I cannot agree with Rob about an unaccepted repudiatory breach being a
thing writ in water. White and Carter Councils has not been overruled (and
one cannot see how it ever will be), but it does not actually state the law,
and a number of Canadian cases, such as Finelli v Dee, have led the way in
making this clear. The point is that, in effect, mitigation considerations
do rightly influence the claimant's election between affirmation and
termination after repudiatory breach, albeit under the guise of the
legitimate interest and defendant's co-operation arguments, and it is good
that they do, though the law would be better if the influence of mitigation
was made explicit.
>
> And, in principle, it would be better if mitigation considerations
explicitly played a role in the decision to award specific performance, for
this would bring a superior coherence to the equitable defences that, in
effect, if obliquely, do this now.
>
> Best wishes
>
> David Campbell
>
> David Campbell, BSC(Econ), LLM, PhD, FCI(Arb) Professor of
> International Business Law
>
> School of Law
> Liberty Building
> University of Leeds
> LEEDS
> LS2 9JT
> UK
>
> tel: [+44] (0) 113 343 7041
> fax: [+44] (0) 113 343 5056
> email: i.d.campbell@leeds.ac.uk
>
> http://www.law.leeds.ac.uk/about/staff/d-campbell.php
> ________________________________________
> From: Robert Stevens [robert.stevens@law.ox.ac.uk]
> Sent: 18 October 2012 10:02
> To: James Lee; obligations@uwo.ca
> Subject: RE: Supreme Court of Canada on Specific Performance and
> Mitigation
>
> "Specific performance is an equitable remedy that is difficult to
reconcile with the principle of mitigation."
>
> Oh dear, that is a sentence that makes one's heart sink.
>
> The SCC has long been away with the fairies when it comes to whether to
award specific performance of contracts for the sale of land. Now however it
seems to have got itself confused about the relationship between mitigation
and specific performance.
>
> Simplified, this is a standard contract for the sale of land on a specific
date. The seller fails to complete by that date, and then says it won't be
completing and returns the deposit. The buyer refuses to accept this and
presses for specific performance (or failing that damages).
>
> Was the buyer under any duty to mitigate its loss at this point?
>
> No, because a repudiatory breach that is not accepted is a thing writ in
water. Although the obligation to sell by a particular date had been
rendered impossible, the seller remained under a duty to convey the land to
the buyer.
>
> If the buyer had accepted the repudiation then the obligation to sell
would have been brought to an end, replaced by an obligation to pay damages
for breach, with a consequent "duty" on the buyer to mitigate his loss from
that point. That did not happen.
>
> Now in a country other than Canada, specific performance would have been
awarded, but when it is refused the time for assessing damages should be the
date of trial. There can be no 'duty' to mitigate for loss caused by the
failure to sell before that time (see, in England unfortunately, Johnson v
Agnew).
>
> The rules relating to mitigation concern the quantification of loss. If a
breach occurs, losses which are not suffered cannot be recovered, and
consequential losses caused by the innocent party's own fecklessness in
failing to avoid them are his own look out. There is not, and could not be,
any tension between these rules and the availability of specific
performance.
>
> I have only read the SCC decision, and so may not have the full facts, but
on its face this is not very good.
>
> Rob