Franchise Law

The franchisors sought leave to appeal two arbitral awards: one finding Marcel Hachem and Eastern Canadian Coffee Company Ltd. to be "franchisor's associates" liable for rescission costs, and another regarding costs.

The franchisees sought court enforcement of these awards.

The court dismissed the franchisors' application for leave to appeal the "franchisor's associate" finding, determining it was a question of fact, not law.

The court also dismissed leave to appeal the costs award, finding that while it raised a question of law, it lacked sufficient importance to the parties.

Consequently, the franchisees' application to enforce the arbitral awards was granted.

The plaintiff sought to certify a class action on behalf of independent distributors who contracted with the defendants to deliver fresh bread products.

The plaintiff alleged the defendants breached their contracts and the Arthur Wishart Act by participating in and concealing an illegal price-fixing conspiracy.

The court found that the pleadings disclosed viable causes of action, there was an identifiable class, the claims raised common issues, a class action was the preferable procedure, and the representative plaintiff was suitable.

The motion for certification was granted.

The Franchisor, Meltwich Hospitality Group Inc., sought summary judgment on its crossclaim for contribution and indemnity against the Franchisee, 2562583 Ontario Inc., o/a Meltwich Food Co., and its principal, Janarthanan Jeyaparan.

The crossclaim arose after the Franchisor settled with the Landlord, Ritson Division Retail GP Limited, following the Franchisee's default on a lease and subsequent abandonment of the premises.

The Franchisor claimed the settlement amount and legal fees incurred in defending the Landlord's action, relying on indemnification clauses in the Franchise Agreement and Mr. Jeyaparan's personal guarantee.

The Franchisee and Mr. Jeyaparan raised unsubstantiated defenses of "subterfuge" and misrepresentation by the Franchisor, and claimed they did not receive a full copy of the lease.

The court found no merit to these defenses, concluding there was no genuine issue requiring a trial.

The motion for summary judgment was granted, holding the Franchisee and Mr. Jeyaparan jointly and severally liable for the claimed damages and costs.

The appellants, representing a class of Ontario Shoppers Drug Mart franchisees, appealed a summary judgment decision regarding their entitlement to Professional Allowances paid by generic drug manufacturers.

The Court of Appeal upheld the motion judge's findings that Shoppers breached the 2002 franchise agreement by retaining the allowances, which constituted 'revenue', but did not breach the 2010 agreement, which explicitly allowed Shoppers to retain such concessions.

The Court also upheld the application of a rolling limitation period and the refusal to award aggregate damages due to the idiosyncratic nature of the profit-sharing model.

However, the Court allowed the appeal regarding the quantification of damages, finding that Shoppers breached its duty of good faith by arbitrarily allocating $129 million as out-of-province rebates to avoid sharing the funds with Ontario franchisees, bringing the total Professional Allowances received to $1.084 billion.

This is a costs endorsement following a grouped set of appeals and cross-appeals where all parties were entirely unsuccessful.

The court declined to award costs, rejecting the franchisor parties' argument to parse success across various elements of the appeals and cross-appeals.

The court found it inappropriate to do so, concluding that since no party achieved any degree of success, no costs should be awarded.

The Court of Appeal for Ontario heard appeals and a cross-appeal concerning a franchise dispute under the Arthur Wishart Act.

Franchisees Versatile Holdings Inc. and Everest Group Inc. appealed the dismissal of their rescission actions, arguing errors in the burden of proof for disclosure deficiencies and the determination of franchisor's associates.

The franchisor, Paramount Franchise Group Inc., cross-appealed the trial judge's finding that Premium Host Inc. was entitled to statutory compensation, challenging disclosure exemptions, the effect of contract termination on rescission rights, material omission of financial statements, and the finding that Holly Graham and Paramount Leasing were franchisor's associates.

The Court dismissed all appeals and the cross-appeal, affirming the trial judge's findings on the burden of proof for rescission, the non-applicability of disclosure exemptions, the right to rescind despite prior termination for breach, the materiality of the financial omission, and the determination of franchisor's associates.

The defendants brought a motion for security for costs against the plaintiff, a former franchisee, citing the plaintiff's insufficient assets.

The plaintiff conceded its lack of assets but argued against the order, claiming impecuniosity and a meritorious case.

The court found the plaintiff failed to prove impecuniosity due to insufficient disclosure of shareholder assets and lack of inquiry into borrowing.

While acknowledging the defendants' delay in bringing the motion, the court ordered the plaintiff to post security for costs on a partial indemnity scale, significantly reducing the amount sought to reflect the delay and future litigation steps.

The appellant franchisee appealed a motion judge's decision denying an interlocutory injunction to prevent the termination of its franchise agreement.

The Divisional Court allowed the appeal, finding the motion judge's two-paragraph reasons were insufficient to permit meaningful appellate review as they failed to address the renewal clause, the factual disputes, or the RJR-MacDonald test.

The Court declined to decide the injunction on the merits, remitting it to a different judge.

The Court also held that the franchisor's undertaking not to terminate the agreement pending the determination of the injunction motion remained binding through the appeal process.

The plaintiffs brought a motion seeking leave to amend their Statement of Claim and to dismiss a crossclaim brought by the Non-Settling Defendants against the Settling Defendants, following a Pierringer Agreement.

The court granted leave to amend the Statement of Claim, as it was unopposed.

However, the motion to dismiss the crossclaim was dismissed.

The court found that the Pierringer Agreement was not contingent on the dismissal of the crossclaim, and crucially, that the crossclaim was not solely for contribution and indemnity in negligence but also included claims for breach of contract, which are not negated by a Pierringer agreement.

The plaintiff, Qualicare Canada Inc., sought default judgment against the defendants for breaches of a franchise agreement and personal guarantees.

The defendants were noted in default.

The court applied the test for default judgment, finding that the plaintiff established liability based on deemed admissions and affidavit evidence.

The plaintiff was awarded $372,487.24 in damages, including lost royalties, branding fees, and legal fees, plus pre-judgment interest at a contractual rate of 36%, and fixed costs of $11,483.29.

The plaintiff, a franchisee, brought an urgent motion seeking a stay of a prior decision denying injunctive relief and a mandatory injunction to restore possession of the franchise premises, pending leave to appeal to the Divisional Court.

The franchisor had locked out the plaintiff after the initial injunction motion was dismissed.

The court found it lacked jurisdiction to grant the requested relief, determining that the Divisional Court, as the court to which leave to appeal was being sought, was the proper forum for such interim orders under section 134(2) of the Courts of Justice Act.

The motion was transferred to the Divisional Court.

The plaintiff sought an injunction to prevent the defendants from terminating their franchise agreement.

The court noted that the agreement was set to expire in April 2024 with no automatic renewal clause.

Finding that an injunction would unfairly extend the agreement indefinitely pending litigation, and that the plaintiff could seek monetary damages, the court dismissed the motion.

The applicant, Competition Motors Limited (CML), sought to set aside an arbitral award from an Appeal Panel under the National Automobile Dealer Arbitration Program (NADAP) Rules, pursuant to sections 46(1)3 and 6 of the Arbitration Act, 1991.

CML argued the Appeal Panel exceeded its jurisdiction by applying an incorrect standard of review (correctness on facts without deference, akin to a de novo hearing) when reversing an initial arbitral decision that found Toyota Canada Inc. (TCI) unreasonably withheld consent to CML's dealership sale.

The court dismissed CML's application, finding that the issue raised was not one of true jurisdiction under s. 46(1)3, and even if it were, the Appeal Panel acted within its mandate by interpreting and applying the NADAP Rules' unique correctness standard for both law and fact, which allows for a re-evaluation of evidence to reach a "better" conclusion without conducting a full de novo trial.

The court also dismissed the procedural fairness argument as it was contingent on the jurisdictional claim.

The plaintiff, Tripsetter Inc., brought a motion seeking leave to add Tweed Inc. and Jurgen Schreiber as defendants, alleging they are "franchisor's associates" under the Arthur Wishart Act (Franchise Disclosure), 2000.

The proposed defendants objected, arguing the claim was out of time due to a lack of notice of rescission and that the proposed pleading failed to establish the necessary control for a franchisor's associate.

The court found that the Act does not require notice of rescission to be given to an alleged franchisor's associate for a claim for damages to proceed.

It also determined that the limitation period argument was not clear-cut and could be argued at trial, as the plaintiff's knowledge of Tweed's full involvement only came to light during discovery.

The court found the proposed pleading, including the "de facto franchisor" concept, to be sufficient for the purpose of a pleadings amendment motion, noting that amendments are to be read generously.

The plaintiffs in a certified class action brought a motion seeking an order to provide official notice to class members regarding the outcome of common issues summary judgment motions, despite pending appeals and cross-appeals.

The defendants objected, arguing that such notice would confuse class members and disputed the sharing of information and costs.

The court granted the plaintiffs' motion, finding that providing notice was necessary to protect the interests of the class members and that the defendants' concerns about confusion were unfounded.

The court emphasized the fiduciary responsibility of class counsel to report to class members throughout the litigation.

This is a costs decision following a judgment in a complex multi-party litigation involving franchise disputes.

The court determined the quantum and scale of costs for various successful and unsuccessful claims and counterclaims.

Premium Host Inc. was awarded partial indemnity costs against Paramount Franchise Group Inc. and related entities.

Versatile Holdings Inc. and Everest Group Inc., whose claims were dismissed, were ordered to pay partial indemnity costs to the Paramount group.

The court declined to award elevated costs, reduced the defendants' claimed costs due to duplication and litigation conduct, and clarified the liability of individual guarantors for corporate litigation costs, holding them jointly and severally liable only for costs related to counterclaims where they were proper parties.

The plaintiff, Coffee Time (2015) Corporation, sought costs on a partial indemnity scale after being granted partial summary judgment against the defendants for franchise fees, interest, and rent arrears.

The court, however, exercised its discretion under Rule 57.01 and 57.05 of the Rules of Civil Procedure to deny the plaintiff any costs.

This decision was based on the plaintiff's conduct, specifically their failure to properly calculate rent arrears and account for a rent deposit, which unnecessarily lengthened the proceeding.

Furthermore, the total amount recovered by the plaintiff fell within the monetary jurisdiction of the Small Claims Court, leading the judge to conclude the action should have been brought there.

The plaintiff, Coffee Time (2015) Corporation, sought summary judgment against the defendants, 1685247 Ontario Limited and Khursheed A. Choudhry, for unpaid franchise fees and rent arrears under a franchise agreement and sublease.

The defendants raised several defenses, including limitation periods, the effectiveness of the assignment of the agreements to the plaintiff, disputes over the calculation of fees and rent, a claim for accelerated rent, and credit for abandoned property.

The court granted partial summary judgment, finding the assignment effective as an equitable assignment, adjusting the calculation of rent arrears based on a reduced minimum rent, denying the claim for accelerated rent as the tenancy was month-to-month, and denying credit for abandoned property due to insufficient evidence.

The plaintiff was awarded specific amounts for franchise fees and rent arrears, with interest on franchise fees.