COURT OF APPEAL FOR ONTARIO

DATE: 20040406

DOCKET: C40122

RE: STEPHEN R. SIMPSON, KATHY INCH, 587886 ONTARIO LIMITED and 587887 ONTARIO LIMITED (Applicants/ Appellants) –and– FIRST CHOICE HAIRCUTTERS LTD. and REGIS CORPORATION (Respondents/Respondents in Appeal)

BEFORE: CATZMAN, GOUDGE and SHARPE JJ.A.

COUNSEL: Diane L. Evans for the applicants (appellants)

Larry P. Lowenstein and David A. Stamp for the respondents (respondents in appeal)

HEARD AND ENDORSED: April 5, 2004

On appeal from the judgment of Justice James M. Farley of the Superior Court of Justice dated May 10, 2003.

A P P E A L B O O K E N D O R S E M E N T

[1] We agree with Farley J.’s interpretation of the contractual documents that, in relation to the appellants’ territory, FCH agreed only not to grant anyone else a franchise to operate a First Choice Haircutters shop, and that the contractual language cannot be taken further, as the appellants would have it, to provide them with wider protection against competition. Assuming that a “franchisor associate” could be subject to the duty of fair dealing referred to in the Arthur Wishart Act (Franchise Disclosure), 2000, we also agree with Farley J.’s interpretation of the term “franchisor associate” and his conclusion that the Act did not apply to the present case. At paragraphs 12 and 13 of his reasons, Farley J. noted some of the risks to the appellants inherent in the acquisition of FCH by Regis, which operates a number of competing franchise operations. We agree that, on the basis of the record, Farley J. properly refused to grant any relief in response to the appellants’ allegation of bad faith and to its claim that the corporate veil be pierced. If the appellants seek a full and proper determination of those issues, they can do so only on the basis of a full factual record establishing tangible harm.

[2] The appeal is dismissed with costs, fixed in the sum of $10,000 plus disbursements and G.S.T.