“Stare decisis has been at the centre of the common law for much of its history. In recognition of our judicial hierarchy, stare decisis requires lower courts to follow the principles set down by higher courts. However, in extremely limited circumstances, a lower court may depart from precedent. The defendant says this is such a case. The defendant invites me to disregard a principle arising from a Supreme Court of Canada case which has been applied by the Ontario Court of Appeal and trial courts in Ontario for 50 years.”
So begins the decision of Justice Callaghan in The Canada Assurance Company v. Aphria Inc. In this case, Justice Callaghan noted that the Defendant was making a “big ask”: the precedent being challenged was a pronouncement on the law of commercial leasing as set out in Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd., 1971 CanLII 123 (SCC), [1971] S.C.R. 562 (“Highway Properties“), a 1971 decision of the Supreme Court of Canada.
The Defendant Aphria Inc. was a commercial tenant defending against a motion for summary judgment by its landlord on the basis that the landlord’s failure to mitigate its damages arising from a repudiated lease meant that the damages were capped. However, under Highway Properties, commercial landlords have the option of ignoring a tenant’s repudiation of a lease and can proceed as if the lease continued to operate. A landlord therefore has no obligation to take reasonable steps so as to avoid accruing losses.
Justice Callaghan gave a very learned discussion of the history of Stare Decisis and an in-depth analysis of the law of commercial tenancy which had evolved since the decision in Highway Properties. In ultimately rejecting the “ask” made of him, His Honour concluded as follows:
“For over fifty years, commercial landlords and tenants have entered into relationships on the basis of the principles set out in Highway Properties. Tenants have undoubtedly entered these contracts knowing that if the tenant repudiates the lease, the landlord may insist on performance and need not mitigate any avoidable losses. These bargains between landlords and tenants implicitly recognise that commercial landlords have this unique remedy. The proposed “incremental change” could have a dramatic impact on bargains already made. This is not to say a higher court might not decide to revisit Highway Properties as the Supreme Court has done in other circumstances. However, a single judgment by a judge of first instance rejecting the principle in Highway Properties would cause uncertainty in the law and instability in the marketplace. It would undermine the certainty and predictability at the heart of the doctrine of stare decisis.”
Thanks for reading,