Derek Ronde

In a certified franchise class action concerning alleged failure to share supplier rebates, the representative plaintiff sought to set aside opt-out notices after a franchisee group launched a campaign encouraging class members to opt out.

The campaign included a coordinated telephone blitz and a public website listing franchisees who opted out while disseminating misleading information about the litigation and class counsel.

The court found that the communications exerted pressure on franchisees and undermined the fairness and integrity of the opt-out process.

Concluding that the process had been subverted by misinformation and intimidation, the court exercised its supervisory authority under the Class Proceedings Act to invalidate opt-out notices submitted after the campaign began.

The appellants appealed an order dismissing their claim for statutory rescission of a franchise agreement.

The Court of Appeal agreed with the motion judge that the notice of rescission was provided more than two years after the franchise agreement was entered into, pursuant to s. 6(2).

The appeal was dismissed, as it was plain and obvious the claim could not succeed.

The moving party sought substantial indemnity costs after succeeding on a motion, arguing the opposing party had been warned that their statutory rescission claim lacked merit.

The responding party argued substantial indemnity was inappropriate because the issues concerning the statutory rescission remedy under s. 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000 were novel and of public importance, and because leave to amend pleadings had been granted.

The court held that substantial indemnity costs are reserved for rare and exceptional cases involving reprehensible litigation conduct and found the responding party’s conduct did not meet that threshold.

Given the novelty and public importance of the issues, the court awarded costs on a partial indemnity basis.

Costs of $12,000 were ordered payable by the responding parties.