COURT OF APPEAL FOR ONTARIO

CITATION: 2256306 Ontario Inc. v. Dakin News Systems Inc., 2016 ONCA 74

DATE: 20160126

DOCKET: C60050

Weiler, LaForme and Huscroft JJ.A.

BETWEEN

2256306 Ontario Inc. and Ali Reda

Plaintiffs

(Respondents)

and

Dakin News Systems Inc. and Warren Smagaren

Defendants

(Appellants)

Harjaap Mann, for the appellants

Michael Fleischmann, for the respondents

Heard: January 15, 2016

On appeal from the orders of Justice Dale Parayeski of the Superior Court of Justice, dated January 27, 2015, with reasons reported at 2015 ONSC 566, 39 B.L.R. (5th) 136.

ENDORSEMENT

[1] The appellants appeal from an order dismissing their motion for summary judgment and from an order granting the respondents’ cross-motion for summary judgment and declaring that the respondents are entitled to statutory rescission of their franchise agreement with the appellants.

[2] This litigation arises out of the respondents’ purchase of a business operating as International News from a franchisee of the appellants in November 2010. Although the respondents operated the business without interruption following the purchase, they did not enter into a franchise agreement with the appellants until October 29, 2012.

[3] In August 2013, the respondents purported to rescind the franchise agreement because the appellants failed to provide disclosure as required under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3.

[4] The appellants argued that they were exempt from the disclosure requirement under ss. 5(7)(a)(iv) and 5(7)(g)(ii). The motion judge found that neither provision exempted the appellants from their disclosure obligation.

[5] The appellants argue that they were denied a fair hearing by the motion judge because they were not heard on the respondents’ cross-motion. The motion judge’s remarks did create an expectation that there would be further argument on the respondents’ cross-motion if the appellants were unsuccessful in their motion for summary judgment. However, the issues on the motion and cross-motion were intrinsically connected and all of the relevant material was before the court when the appellants’ motion was argued.

[6] It is uncontroverted that the parties entered into a franchise agreement at the instance of the appellants after the respondents had purchased and operated the business for some time.

[7] The franchise agreement covered the period the respondents had been operating the business and extended into the future. It included a requirement that the respondents pay a $10,000 franchise fee, and some of its terms were slightly different than the franchise agreement that had covered the prior franchisee.

[8] Having chosen to require a franchise agreement with the respondents, the appellants cannot now argue that a franchise agreement was already in place with them, such that they are exempted from the disclosure requirement by s. 5(7)(a)(iv). Moreover, the franchise agreement obligated the respondents to pay a transfer fee of $10,000, and as a result the appellants are not exempt from disclosure by s. 5 (7)(g)(ii).

[9] The motion judge’s findings of fact are supported by the record and there is no basis for this court to interfere with them. In the circumstances of this case, those findings rendered summary judgment in favour of the respondents inevitable. As a result, the motion judge’s decision to deal with both the motion and cross-motion resulted in no prejudice to the appellants.

[10] The appeal is dismissed with costs to the respondent of $13,500, inclusive of all applicable taxes and disbursements.

“K. M. Weiler J.A.”

“H.S. LaForme J.A.”

“Grant Huscroft J.A.”