Thanks Lionel.
I know the English courts have also linked
the 'legitimate interest' point to SP (e.g. The Peurto Buitrago)
although not in the context of leases.
But it strikes me there is an obvious difference if the claimant has already
performed to the extent necessary to begin incurring the right to the agreed
sum (i.e. conveying and giving vacant possession), or can otherwise
unilaterally perform. It is one thing for the court to say 'we are not going to
use state power to compel the defendant, under threat of contempt, to allow you
to perform'. It is another for the court to say 'this state will actively put
pressure on you to stop performing your side of the bargain as you are
currently doing, by depriving you of your rights to payment of money as a
consequence'.
Also, to go to the very start of this
analysis, it isn't obvious to me there is a breach in these cases. You might be
in breach of your obligation to pay rent you owe on a certain date, but
you cannot be in breach of your obligation to pay rent simpliciter. That is a
primary obligation that cannot be breached. And while you can purport to
repudiate the lease, if the defendant does not accept your repudiation, you
certainly aren't in breach of unaccrued obligations at that stage.
Best,
Matthew
Matthew Hoyle
Barrister
One Essex Court
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Coming late to the party, I won t say much about the stare decisis
point, except that I agree with Catherine that the idea that dicta can
be binding in any sense seems like a misunderstanding. The Supreme Court of
Canada has tried on various occasions, not always consistently, to articulate
when it will depart from its own previous decisions, and some attempt to
describe this is here.
I wanted to go back to the point about mitigation. I would not be
surprised to see a Canadian court holding that a victim of a breach must accept
repudiation and mitigate, as there is precedent for denying specific
performance due to its inconsistency with the requirement to mitigate. That
might seem the wrong way around; indeed, it does to me; but there are other
perspectives, and there is both literature and case law. In a 1978 decision
of the Supreme Court of Canada, Estey J (who was known for his commercial
orientation) said, for the Court (667-9):
On principle it is clear that a plaintiff may not merely by instituting
proceedings in which a request is made for specific performance and/or damages,
thereby shield himself and block the court from taking into account the
accumulation of losses which the plaintiff by acting with reasonable promptness
in processing his claim could have avoided. Before a plaintiff can rely on a
claim to specific performance so as to insulate himself from the consequences
of failing to procure alternate property in mitigation of his losses, some
fair, real, and substantial justification for his claim to performance must be
found. the action for performance must be instituted and carried on
with due diligence. This is but another application of the ordinary rule of
mitigation which insists that the injured party act reasonably in all of the
circumstances. Where those circumstances reveal a substantial and legitimate
interest in seeking performance as opposed to damages, then a plaintiff will be
able to justify his inaction and on failing in his plea for specific
performance might then recover losses which in other circumstances might be
classified as avoidable and thus unrecoverable
The first part of this was relied upon in 1993 by a judge
in Ontario to reject a claim for specific performance of a contract for the
sale of an estate in land.
Unfortunately, the plaintiffs' insistence on specific performance has
locked the parties into a pathological embrace for the last seven years. The
consequent losses to them both illustrates the wisdom of monetary relief in
such cases and the value of requiring innocent promisees to mitigate their
business losses where reasonably possible. This left the plaintiffs with a
claim for damages,
subject to the requirement of mitigation. His decision was upheld on appeal.
See also Semelhago
(SCC, 1996) at [22].
Of course a contract by which a leasehold estate has been granted is a
different kind of contract. (Sam s original posting shows the appellant noting
that Quebec courts take a different view; members might be interested to know
that in Quebec civil law, simplifying a bit, a lease of land does not create an
interest in land in the tenant, but only contractual rights.) But personally I
am not surprised that the Court has granted leave and I think the appellant
will have a decent chance of success.
Cheers,
Lionel
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.
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