by eruditelaw | Mar 3, 2026 | Blog Post, Commercial Lease
On December 9, 2024, the Ontario Court of Appeal released its decision in Canada Life Assurance Company v. Aphria Inc., 2024 ONCA 882, dismissing the tenant’s appeal and confirming that a commercial landlord who rejects a tenant’s repudiation and keeps the lease alive has no duty to mitigate. The decision affirms the longstanding rule from Highway Properties Ltd. v. Kelly, Douglas & Co. and reinforces the stability of commercial leasing law in Ontario.
Background
In 2018, Aphria Inc. entered into a ten-year lease for commercial office space in downtown Toronto. The building was later sold, and the landlords became Canada Life Assurance Company, LG Investment Management, Ltd. as trustee for IG Mackenzie Real Property Fund, and OPTrust Office Inc. In August 2021, Aphria delivered a notice of repudiation and vacated the premises. The landlords refused to accept the repudiation and expressly confirmed that the lease remained in full force and effect. They did not take steps to re-let the space. Rent was paid through November 2021 but ceased thereafter. The landlords commenced an action seeking arrears of rent and judgment for future rent as it came due.
The Tenant’s Position
The tenant advanced two principal arguments:
- it argued that modern contract principles require a commercial landlord to mitigate its damages after repudiation. It invited the courts to revisit the rule in Highway Properties, which allows a landlord to affirm a lease and sue for rent as it becomes due without mitigating;
- the tenant argued that section 19.03 of the lease capped its liability at two years of rent following default.
The Superior Court Decision
On summary judgment, Callaghan J. held that the law in Ontario remains that where a commercial landlord refuses to accept repudiation and elects to keep the lease alive, it has no obligation to mitigate. The court concluded it was bound by Highway Properties and subsequent Ontario appellate authority. The court awarded the landlords $638,171.40 in arrears of rent, plus contractual interest. However, the motion judge declined to grant judgment for all future rent. The court held that while the landlords were entitled to insist on performance, any future claim would need to account for mitigation that might actually occur. In other words, the landlords could sue as rent came due, but a global future award was premature. On the lease interpretation issue, the court held that the two-year cap in section 19.03 applied only where the landlord terminated the lease. Because the landlords elected not to terminate and instead affirmed the lease, the cap did not apply.
The Court of Appeal Decision
The Court of Appeal dismissed the tenant’s appeal in full. On mitigation, the Court confirmed that Highway Properties remains binding authority. Although some of Laskin J.’s discussion in that case was technically obiter, it was authoritative and has been consistently applied in Ontario. The Court emphasized that any change to this principle must come from the Supreme Court of Canada or the Legislature, not from an intermediate appellate court. The Court reaffirmed that a landlord facing repudiation has mutually exclusive options. If the landlord elects to do nothing and insist on performance, the lease continues and there is no duty to mitigate.
On the lease interpretation issue, the Court of Appeal applied the deferential standard of review for contractual interpretation. It agreed that section 19.03, read in context and together with the remainder of the lease, limited damages only where the landlord terminated the lease. Since there was no termination, the two-year limitation did not apply.
Key Takeaways
This decision confirms several important principles for commercial leasing in Ontario:
- A commercial landlord who rejects repudiation and affirms the lease may sue for rent as it becomes due without a duty to mitigate.
- The landlord’s election matters. If the lease is kept alive, traditional mitigation principles applicable to terminated contracts do not apply.
- A rent or damages cap tied to termination will not assist a tenant where the landlord elects not to terminate and instead insists on performance.
The Court of Appeal has made clear that any departure from this framework must come from the Supreme Court of Canada or legislative reform.
For commercial landlords and tenants alike, the decision reinforces predictability in lease enforcement and underscores the significance of election following repudiation.
by eruditelaw | Sep 30, 2025 | Blog Post, Employment Law, Uncategorized
On July 9, 2025, the Ontario Superior Court of Justice released its decision in Li v. Wayfair Canada ULC, 2025 ONSC 2959. The case addresses the enforceability of termination provisions in an employment contract and how they stand up against the Court of Appeal’s guidance in Dufault v. Township of Ignace.
Facts of the Case
Song Li was hired by Wayfair Canada ULC as a Senior Product Manager in January 2023. His compensation package was lucrative, including a salary of $221,564, benefits, RRSP contributions, and potential restricted stock units (RSUs). After just under nine months of service, Li was dismissed without cause in October 2023.
Upon termination, Li received one week of salary and benefits—exactly the minimum entitlements under Ontario’s Employment Standards Act, 2000 (the “ESA”). No letter of reference or outplacement services were provided.
Li brought an action for wrongful dismissal, seeking summary judgment. He argued that the termination clauses in his employment agreement were unenforceable, which would entitle him to common law reasonable notice.
The Plaintiff’s Arguments
Li challenged both the “for cause” and “without cause” provisions in the agreement:
- For Cause: The agreement allowed termination “at any time for Cause without notice… unless expressly required by the ESA.” Li argued this language unlawfully deprived employees of ESA protections, contrary to Dufault v. Township of Ignace.
- Without Cause: The clause restricted entitlements to “only the minimum statutory amounts” under the ESA. Li argued that this unlawfully narrowed his rights and therefore invalidated the entire termination provision.
Relying on Dufault, Li argued that because one aspect of a termination clause was non-compliant, the whole termination regime fell. He sought five months’ common law notice, which would also have captured a $73,017 USD RSU grant scheduled to vest in February 2024.
The Defendant’s Arguments
Wayfair countered that the contract was enforceable:
- The “for cause” language expressly incorporated the ESA definition of cause.
- The “without cause” language repeatedly tied entitlements to the ESA’s minimum requirements, making it ESA-compliant.
- Li had already received all that the ESA required.
The company also argued that Li failed to mitigate, noting he applied for only 28 jobs in five months, some at levels (such as Vice President) for which he was not qualified.
The Court’s Decision
Justice Dow upheld the enforceability of the termination provisions. Unlike in Dufault, the Wayfair contract expressly tied the definition of “cause” to the ESA and clearly provided ESA minimums for without-cause terminations. The Court distinguished Dufault on this basis, finding that the clause in that case omitted required entitlements and used broader language (“any time”) without tethering to the ESA.
Because the contract was valid, Li was limited to the ESA minimum of one week’s salary and benefits, which he had already received. His claim for common law notice was dismissed.
What If the Clause Had Been Invalid?
In obiter, the Court noted that if the termination clause were unenforceable, it would have awarded Li four months’ common law notice (not the five he claimed). This would have included entitlement to the February 2024 RSUs, as courts generally treat stock options and bonuses as part of compensation during the notice period (Paquette v. TeraGo Networks).
Key Takeaway
This decision reaffirms that Ontario courts will carefully parse termination provisions to ensure they comply with the ESA. Employers can take comfort that clauses explicitly referencing and incorporating ESA definitions—especially around “cause”—are more likely to be upheld.
At the same time, Li highlights that employees continue to test these clauses, often relying on Dufault. The difference lies in the drafting: if an agreement fails to track the ESA minimums precisely, it risks being struck down, with significant common law liability as the result.
Need More Information?
For more information or assistance related to employment contracts or ending the employment relationship, contact us at info@eruditelaw.com
The contents of this blog is not legal advice.
by eruditelaw | Mar 6, 2024 | Blog Post, Employment Law
Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029: Employers may not have “sole discretion” in terminating an employee without cause.
In recent years, employers have been dealt blow after blow as Ontario Courts continue to find ways to void termination provisions in employment contracts. Last month, the Ontario Superior Court of Justice continued this trend by finding that an employment contract was unenforceable because, among other reasons, it allowed the employer to terminate the employee’s employment in its “sole discretion” and “at any time”.
The employee, Karen Dufault, entered into a fixed-term employment contract of two years with the defendant employer, The Corporation of the Township of Ignance. The employer subsequently terminated her employment, without cause, two months into the employment relationship.
Ms. Dufault then brought an action against the Township for salary and benefits for the remaining term of the employment contract. She argued that the termination clauses in the employment contract violated the Employment Standards Act (“ESA”). Specifically, Ms. Dufault argued that:
- the “for cause” termination clause allowed for termination without notice in broader circumstances than permitted by the ESA;
- the “without cause” termination clause suggested that the employer could pay less payment in lieu of notice than would be required by the ESA; and
- the “without cause” termination clause opened the door to allow the employer to terminate employment in its “sole discretion” and “at any time”.
The Court accepted Ms. Dufault’s arguments and held that the employment contract was not enforceable because:
- the employment agreement would have allowed the employer to terminate the employment relationship “for cause” for reasons that did not meet the standards under the ESA for termination without notice;
- the employment agreement attempted to limit the payment in lieu of notice to “base salary”, which is less than the requirement amount pursuant to the
Finally, and perhaps most problematic of all for lawyers and employers is that the Court held that the termination “without cause” provision was invalid because it allowed the employer to terminate an employee in its “sole discretion” and “at any time”:
[46] Thirdly, the plaintiff submits that Article 4.02 misstates the ESA when it gives the employer “sole discretion” to terminate the employee’s employment at any time. I agree with this submission. The Act prohibits the employer from terminating an employee on the conclusion of an employee’s leave (s. 53) or in reprisal for attempting to exercise a right under the Act (s. 74). Thus, the right of the employer to dismiss is not absolute.
The Court reasoned that this would allow an employer to terminate an employee even if they were returning from protected leave or due to reprisal for the employee exercising their legal rights.
As a result, Ms. Dufault was entitled to her salary and benefits for the remainder of the fixed term employment contract.
Takeaways
While it remains to be seen whether this decision will be appealed, the growing body of case law voiding termination provisions are becoming increasing strict. Employers and their lawyers should be mindful of these new developments and review their employment agreements regularly to determine whether their contracts require revisions for both new and existing employees.
A copy of the decision is linked here: Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029
The contents of this blog is not legal advice. If you would like your employment contract reviewed, contact our team of lawyers at Erudite Law LLP for a consultation.
