ODGers
may be interested in a case on which the Supreme Court of Canada recently
granted leave, which will revisit whether the doctrine of mitigation applies to
the repudiation of commercial leases.
The
appellant tenant challenges a common law doctrine that purports to shield
landlords in the commercial leasing context from the general principle of
reasonable mitigation. From the appellant's leave application:
1. In Canada, plaintiffs owe a duty to mitigate
damages. This is a foundational principle that has been a part of
Anglo-Canadian law for at least a century, requiring a plaintiff to act like a
“reasonable and prudent” person to avoid losses caused by a wrongdoing. In
Ontario and British Columbia, the Courts of Appeal have said that there is one
class of plaintiff exempt from this doctrine: commercial landlords. The Quebec
courts disagree: there, commercial landlords do have a duty to mitigate, in the
face of a repudiation by a tenant. American courts, faced with the exact same
issue, have consistently changed the common law to impose a duty to mitigate on
landlords.
2. In this case, the Applicant, Aphria Inc. (the
“Tenant”), signed a ten-year lease. Early into its term, as a result of a
business combination, it did not have a need for two duplicate offices. It
therefore repudiated the applicable lease. It made repeated, good faith efforts
to send interested tenants to the Respondents (the “Landlords”). The Landlords
refused to meet with them, refused to take any steps to mitigate, refused to
accept the repudiation, and made clear they preferred to sue the Tenant every two
years for past rent. The Landlords are not incapable of mitigating, nor do they
say it is too onerous to mitigate. They simply refuse to mitigate, because they
say the law does not require them to do so.
3. This anomalous situation is not a product of sound
law, logic, or equity. It is a product of history, where antiquated property
law concepts of a lease being a “conveyance”, led to that result. And two lines
of obiter dicta from Justice Laskin, as he then was, on a five-member bench of
this Court in the 1971 decision, Highway Properties v Kelly, Douglas &
Co., have been used by lower courts as a jurisprudential straightjacket,
fossilizing the common law to a doctrine that predated the law of contract in the
Commonwealth.
More
generally, the appeal invites the SCC to clarify the scope of judicial
law-making power of lower courts in private law matters. From the final section
of the leave application:
50. Finally, an issue that transcends the interests of
these parties, and beyond the commercial leasehold context, is the issue of the
development of the common law. As can be seen from the decisions below,
appellate courts continue to struggle with the extent to which they are
permitted to develop the common law, even to be consistent with other Supreme
Court decisions. While the Motions Judge below followed the Canada v Craig
approach of offering “comments” on the “problematic nature” of the precedent,
the Court of Appeal simply refused to engage at all (not commenting on whether
he was right or wrong on these points), saying nothing more than if the law is
to be changed, it is for the Supreme Court to do it. This approach is
unsatisfactory, in that it provides no appellate commentary for the Supreme
Court to engage on the issue, leaving it not as the court of last resort, but
the court of only resort and essentially, of first instance.
Samuel Beswick
Assistant Professor | Peter A. Allard
School of Law
The University of British Columbia | Allard
Hall, Room 444
1822 East Mall |
Vancouver, BC, Canada V6T 1Z1
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