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In February 2026, the Supreme Court of Canada (“SCC”) heard the appeal in Aphria Inc. v. Canada Life Assurance Co., SCC No. 41665 [Aphria SCC], a case previewed in an earlier Appeal Watch. The question presented asks whether commercial landlords who reject a tenant’s lease repudiation are subject to the doctrine of mitigation. On its face the case seems to be of niche interest: significant for commercial property and contract lawyers, of course, but perhaps a dry topic for others.
Far from it. As became apparent during oral arguments before the SCC, the appeal in Aphria puts in issue fundamental principles regarding the nature of common law decision-making.
A Legal Principle in Flux?
The appellants in Aphria are commercial tenants in default of their lease who challenge a short passage of obiter dicta in a 55-year-old Supreme Court precedent. In Highway Properties Ltd. v. Kelly, Douglas and Co. Ltd., [1971] S.C.R. 562 [Highway Properties] at p 570, Laskin J had stated that in the face of a tenant’s default a landlord has several options, one being the option to “do nothing to alter the relationship of landlord and tenant, but simply insist on performance of the terms and sue for rent or damages on the footing that the lease remains in force.” This dictum has been interpreted by successive courts to mean that a landlord who rejects their tenant’s repudiation has no onus to mitigate losses by reletting the property. They can simply do nothing and then sue the defaulting tenant for debt or damages in full when the rent is not paid.
Over the course of the last half-century, this proposition has seemed increasingly out of step with a trend of case law that has expanded the reach of the mitigation principle when a plaintiff seeks remedies in the commercial context. In The Canada Life Assurance Company et al. v. Aphria Inc., 2023 ONSC 6912 [Aphria ONSC], the motions judge accepted “that the law of mitigation and contract has evolved over the years” and that “judicial reform has taken place in the area of mitigation as it relates to leaseholds” (Aphria ONSC, para 78). He commented that, having regard to more recent SCC precedents and provincial case law, “it does appear anomalous that a commercial landlord, at its sole discretion, does not have an obligation to mitigate upon repudiation by the tenant” (Aphria ONSC, para 78).
Nevertheless, the motions judge held that stare decisis required him to apply the mitigation-exemption principle elucidated from Highway Properties. He granted the landlord’s claim for full damages against the defaulting tenant. The Ontario Court of Appeal upheld that decision, concluding that “it is not for this court to change this law but for the Supreme Court or the Legislature to do so” (Canada Life Assurance Company v. Aphria Inc., 2024 ONCA 882, para 31).
Curiously, on further appeal, the tenant in Aphria argued that they are not asking the SCC to make any changes to the common law doctrine of mitigation at all. In his opening statement, counsel for the tenant, Mr. Bell, insisted:
“We are not asking for a new principle of law. We’re not asking for a modification of any settled principle of law. We are not asking to overturn any decision of this Court” (Aphria SCC webcast, 03:00).
Later, when pressed by Karakatsanis J about whether recognising a duty to mitigate in this context would represent the status quo or instead a change in the common law, Mr. Bell reiterated: “We are not seeking to change the law. My friends are the ones that are seeking to change the law” (Aphria SCC webcast, 39:05).
For their part, the landlord’s counsel, Mr. Opolsky, insisted that “the law has been clear, settled and workable for at least 50 years” and that, in proposing to impose on commercial landlords a duty to mitigate a defaulted lease, the tenant "invites this court to change the law" in a way that will significantly disrupt the commercial leasing industry (Aphria SCC webcast, 2:04:00).
That is to say, both parties insisted that they had advanced the proper understanding of established Canadian common law on this point, and that it was their opponent who was proposing a substantial change to the settled law.
The Declaratory Theory of Judicial Law-making1
So, who is seeking to change the common law in this case? The answer to this question should determine which way the Court will rule.
During the hearing, Jamal J enquired of Mr. Bell for the tenant, “I’m puzzled as to why you don’t bite the bullet and say, … ‘I’m here. I’m going to ask you to overturn your precedent’” (Aphria SCC webcast, 17:00), and also “why don’t you just say the time has come to overturn this and draft a new law on a blank sheet of paper?” (Aphria SCC webcast, 9:30). To which Mr. Bell responded:
“Well, largely because that’s not the tradition of this Court. The tradition of this Court is to build upon existing precedents and to utilize precedents where it makes sense. In my submission, you have the precedents…” (Aphria SCC webcast, 9:30).
“The tradition” alluded to here (but not expressly stated) is the declaratory theory of the common law—one of the law’s most maligned yet misunderstood doctrines.
In a recent article,2 I defend the declaratory theory and show how it operates in the very kind of legal dispute that is presented in Aphria. I contest the popular misconception that the declaratory theory is anachronous and incompatible with the notion of judicial law-making. Rather, what the declaratory theory represents is the conventional understanding of judicial decision-making, which is that:
“The judicial role is to declare what the law fairly was at the time a dispute arose by determining how it ought to have been understood by the parties all things considered. It is not to rule based on what the judge considers the law should have been or should be from now on.”3
I explore how, properly understood, the declaratory theory embodies foundational features of the common law judicial method; namely, that (i) while judges can be seen to exercise law-making power, (ii) their law-making power is constrained; (iii) it is exercised in response to legal instability; (iv) it operates retrospectively; (v) it is not comparable to legislating, but rather (vi) it entails recognising or elucidating the law.
It would seem that a condition of legal instability concerning a commercial landlord’s (non)obligation to mitigate precipitated the litigation in Aphria. The instability arises from the apparent—or asserted—inconsistency between Laskin J’s obiter dicta in Highway Properties and propositions of legal principle set out in other precedents. In Aphria, the landlord stands upon the apparently clear statement in Highway Properties to justify its refusal to mitigate its situation through trying to relet its now-vacated commercial property. The tenant, on the other hand, contends that over the past half-century “there has been judicial erosion of the underlying principles that gave rise to that obiter in the first place,” such that that specific aspect of the reasoning in Highway Properties cannot be relied upon as good law (Aphria SCC webcast, 17:15).
The arguments suggest that there is genuine uncertainty as to what the common law today expects of landlords faced with a defaulting tenant. Against this backdrop, neither party is asking the Court to legislate a new rule. They are asking the Court to clarify what the common law is and was that applies to their dispute.
Retroactive Adjudication4
In ruling upon what the relevant governing common law is and was, the Court must adjudicate retroactively. As I have explained in another article,5 this is no cause for concern. It comports with the orthodox understanding of the judicial role, which entails judges determining the law through deciding disputes.
By resolving their dispute, the retroactive effect of judicial decisions does justice to both parties before the court. It vindicates the understanding of the law held by the party whose interpretation the court finds the most compelling. Thus, in Aphria the tenant advances their appeal contending that the weight of common law precedent, including developments in the principle of good faith in contract, favours an expansive interpretation of the doctrine of mitigation that applies to their circumstances. Their argument is that existing common law principles need merely be applied here, not new ones invented, and since those principles already “exist” they ought properly to apply retroactively to resolve the immediate dispute between the parties in the tenant’s favour.
Because the Court’s decision will serve as a precedent that governs other similarly situated parties and disputes, retroactive effect also tempers the development of the common law by engendering judicial restraint. The risks of a new judgment disturbing settled transactions and creating uncertainty for those who had relied on an established understanding of the law have a moderating effect on judicial creativity. Judges must be vigilant to avoid making changes in the law that will exacerbate rather than ameliorate instability in the common law. This was recognised in Friedmann Equity Developments Inc. v Final Note Ltd., 2000 SCC 34 [Friedmann Equity], when the SCC declined to overturn the sealed contract rule that had become a settled part of agency and contract law. The Court concluded:
“To avoid uncertainty and any unfairness to those parties who have structured their commercial relationships in accordance with the sealed contract rule, any change to the law should operate prospectively. Only the Legislature has the power to create a prospective change in the law” (Friedmann Equity, para 51).
In Aphria, the landlord characterised the tenant’s appeal as “a solution in search of a problem” (Aphria SCC webcast, 1:37:25)—a request for a change in the law that is beyond the proper remit of the Court because, as they contend, the law of mitigation is settled, a judicial change in this law would exacerbate legal instability, and any proposed change is better addressed by the Legislature. On their view, retroactive adjudication of the parties’ dispute simply requires affirming and applying Laskin J’s obiter dicta from Highway Properties.
Prospective Overruling Unravelled6
Does only the Legislature have the power to create a prospective change in the common law? The judges probed this question during the Aphria hearing (Aphria SCC webcast, 01:12:00).
In the context of the Canadian Charter of Rights and Freedoms [Charter], the courts have—controversially—abrogated for themselves a power to invalidate rules and change the law for future cases only. The temporal effect of this power was diagrammatically illustrated in R v Albashir, 2021 SCC 48 [Albashir] at para 85. Although ostensibly reserved for “exceptionally rare” cases (Albashir, para 1), this judicial power is invoked with regrettable frequency.7
Adjudication of the common law, however, has been and should remain insulated from this heterodox juridical technique. When invited by the bench to address the doctrine, neither party in the Aphria hearing sought to rely on it. Indeed, counsel for the tenants cautioned the Court against purporting to overrule the contested obiter dicta in Highway Properties with prospective-only effect, warning that to adopt the prospective overruling doctrine “would be the death of the common law” (Aphria SCC webcast, 2:28:10).
That is not hyperbole. The High Court of Australia has expressed similar sentiment, affirming its own precedent in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 [Bell Lawyers], that a common law court has no power to overrule cases non-retroactively:
“A hallmark of the judicial process has long been the making of binding declarations of rights and obligations arising from the operation of the law upon past events or conduct. The adjudication of existing rights and obligations as distinct from the creation of rights and obligations distinguishes the judicial power from non-judicial power. Prospective overruling is thus inconsistent with judicial power on the simple ground that the new regime that would be ushered in when the overruling took effect would alter existing rights and obligations. If an earlier case is erroneous and it is necessary to overrule it, it would be a perversion of judicial power to maintain in force that which is acknowledged not to be the law” (Bell Lawyers, para 55).
The doctrine of prospective overruling is perverse because it purports to separate the courts’ law-making and adjudicatory functions. It is incompatible with the declaratory theory of judicial law-making. It invites the court to establish a new precedent but not to apply its reasoning to resolve the parties’ dispute, thereby snatching success from the party (and those similarly situated) whose substantive argument was otherwise vindicated on its merits.
The doctrine is also bad policy. It is sometimes invoked on instrumental grounds, as a way to facilitate judicial law-making while buttressing a range of social interests—such as (a) a stable legal order, (b) protection of reliance and expectation interests, (c) the efficiency of judicial institutions, (d) the dignity and good repute of judicial institutions, (e) the efficiency of administrative or legislative action, and (f) the equality of treatment for like cases. C’est une cause perdue. As I have argued,8 these six values, when properly understood, actually support (rather than undermine) the retrospectivity of judge-made law. The doctrine of prospective overruling unravels under scrutiny.
It is reassuring that counsel on both sides of the argument in Aphria recognized this trap. It is to be hoped that the Court does not leave it open.
Conclusion
Hard cases make bad law. Fortunately, Aphria is not a hard case from the perspective of judicial methodology. (It is unlike the dispute in another civil appeal on which I have also commented,9 Ahluwalia v Ahluwalia, SCC No. 41061, which was revealed at oral hearing to be unusually procedurally fraught. That might explain why more than one year on from the hearing the Court still has not rendered its hotly anticipated judgment.) In Aphria, there is no disconnect between the parties’ arguments and the respective remedies they seek. Both sides accuse the other of seeking a judicial change to settled law. We can expect the Court’s judgment to elucidate what that settled law is and to apply that law straightforwardly to resolve the parties’ dispute.
Footnotes
- Samuel Beswick, “The Declaratory Theory of Judicial Law-Making”, 39 Can J L & Jur [forthcoming in 2026], online: <https://ssrn.com/abstract=5295175> [Beswick, Judicial Law-Making]. ↩︎
- Ibid. ↩︎
- Ibid, p 8. ↩︎
- Samuel Beswick, “Retroactive Adjudication” (2020), 130:2 Yale LJ 276, online: <https://ssrn.com/abstract=3393077> [Beswick, Retroactive Adjudication]. ↩︎
- Ibid. ↩︎
- Samuel Beswick, “Prospective Overruling Unravelled” (2022) 41:1 Civil Justice Quarterly 29, online: <https://ssrn.com/abstract=3820990> [Beswick, Prospective Overruling]. ↩︎
- Hugues Cyr, Stéphanie Chouinard & Audrey Macklin, “Judicially Licensed Unconstitutionality” (2022) 55:2 UBC L Rev 323. ↩︎
- Beswick, Prospective Overruling supra note 6. ↩︎
- Samuel Beswick, “The Cause of Action in Ahluwalia v Ahluwalia” (2025) 55:4 Advocates’ Quarterly 429, online: <https://ssrn.com/abstract=5128861>. ↩︎