Court of Appeal for Ontario

Date: 2017-06-26

Docket: M47944 (C62520)

Brown J.A. (In Chambers)

Between

The Cora Franchise Group Inc. Plaintiff (Defendant by Counterclaim) (Respondent) (Responding Party)

and

William Watters Defendant (Plaintiff by Counterclaim) (Appellant) (Moving Party)

AND BETWEEN

2176693 Ontario Ltd. and William Watters Plaintiffs by Counterclaim (Appellants) (Moving Parties)

and

The Cora Franchise Group Inc. Defendant by Counterclaim (Respondent) (Responding Party)

Counsel: Michelle Kropp, for the moving parties Derek Ronde and Alexandra Murphy, for the responding party

Heard: June 23, 2017

Reasons for Decision

A. Nature of the Motion

[1] The moving party, William Watters, is a director and shareholder of 2176693 Ontario Ltd., which operated the Niagara Falls Cora restaurant franchise under a franchise agreement with the responding party, The Cora Franchise Group Inc. Watters gave a personal guarantee of the franchisee's indebtedness to Cora.

[2] In December 2015, Cora sued Watters on the guarantee, seeking payment of royalty fees, advertising contributions, and products and supplies owed by the franchisee. In his statement of defence, Watters acknowledged the indebtedness of the franchisee to Cora, but stated the franchisee had decided to pay other creditors instead of Cora.

[3] By way of defence, Watters pleaded set-off. With the franchisee, he counter-claimed for damages. That defence and counter-claim were based on the allegation that Cora had caused the franchisee to lose a potential sale of the Niagara Falls franchise in September 2013. Separate litigation took place in late 2013 and early 2014 concerning the franchisee's efforts to sell that business.

[4] Cora moved for summary judgment on the guarantee. The motion judge granted summary judgment against Watters on his guarantee in the amount of $117,000 and dismissed the counter-claim as statute-barred.

[5] By order dated April 6, 2017, this court dismissed Watters' appeal (reasons reported at 2017 ONCA 286). The court observed that Watters "does not dispute the franchisee's indebtedness or his obligation as guarantor." The court found no error in the motion judge's conclusion that the franchise agreement, by its terms, precluded set-off. As well, the court saw no error in his conclusion the counter-claim was statute-barred. This court, however, allowed Cora's cross-appeal, holding the motion judge had understated the amount of the franchisee's indebtedness to Cora and directed a reference to determine the amount owing.

[6] Watters has filed a motion seeking leave to appeal the order of this court to the Supreme Court of Canada.

[7] He now moves under s. 65.1 of the Supreme Court Act, R.S.C. 1985, c. S-26, for an order staying the judgment of the motion judge and the order of this court pending the determination of his application for leave to appeal.

B. Governing Principles

[8] The test for granting a stay pending an application for leave to appeal to the Supreme Court of Canada is well-established. The moving party must demonstrate that: (i) there is a serious issue to be adjudicated on its proposed appeal, including that the appeal raises an issue of public or national importance; (ii) it will suffer irreparable harm if the stay is not granted; and (iii) the balance of convenience favours granting the stay. These three components are interrelated in that the overriding question is whether the moving party has shown that it is in the interests of justice that the court grant a stay: Iroquois Falls Power Corp. v. Ontario Electricity Financial Corp., 2016 ONCA 616, at paras. 14 and 15; Livent Inc. (Receiver of) v. Deloitte & Touche, 2016 ONCA 395, 131 O.R. (3d) 784, at para. 7.

C. Analysis

Serious Issue

[9] Dealing with the first element of the stay test, I conclude it is unlikely the Supreme Court of Canada would grant Watters leave to appeal. He raises three issues on his motion for leave to appeal.

[10] The first two relate to the finding that his counter-claim was statute-barred. Those issues are primarily fact-driven – i.e. when did Watters discover his claim for purposes of ss. 4 and 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B?

[11] The third issue concerns his defence of set-off. That involves matters specific to these particular parties – the interpretation and interplay of the guarantee and franchise agreement, and the effect of Cora's conduct in respect of the September, 2013 effort to sell the franchise. The motions judge characterized Watters' set-off defence as "spurious and without merit." This court saw no error in that conclusion.

[12] In sum, the judgments have little or no wider precedential value given the very fact-specific nature of the issues raised by Watters.

Irreparable Harm

[13] Second, irreparable harm generally refers to harm not quantifiable in monetary terms. Clearly only money is at stake in this proceeding. However, I will refrain from taking a narrow view of irreparable harm: Livent, at para. 10.

[14] In his affidavit, Watters describes the irreparable harm he would suffer in the event a stay were not granted as follows:

In order to immediately come up with enough money to satisfy the Order I would have to extract monies from one or all of these retirement strategies and lose the compounding interest opportunity and/or pay unnecessary costs to collapse the mutual fund, stocks, or bonds and possibly incur huge personal income tax costs for excessive income in a single year.

[15] I am not persuaded that constitutes irreparable harm. Watters obviously possesses sufficient assets to satisfy the judgments. What Watters describes as irreparable harm, I regard simply as the ordinary, foreseeable business risk assumed by a guarantor that he might have to draw on personal assets in the event demand is made on the guarantee.

Balance of Convenience

[16] Turning to the balance of convenience, Watters submits it favours him for several reasons: (i) Cora might not satisfy any amounts it might be required to pay at the end of the litigation; and, somewhat inconsistently, that (ii) Cora would not be prejudiced by the delay caused by a stay because it is a going concern with a continuous revenue stream. As well, he points out he has proceeded in a timely fashion with his leave to appeal application and the Supreme Court of Canada likely will decide it within several months. Watters submits there would be no material prejudice to Cora having to wait a few more months until the mid-Fall, or so.

[17] I do not accept those submissions. I regard the balance of convenience as favouring Cora. The debt owed to Cora was admitted at the start of the litigation. Watters acknowledged the franchisee made a deliberate decision not to pay the debt but, instead, to prefer other creditors over Cora. As well, this is not a case like Livent where the party seeking leave to appeal has offered security or some other mechanism to ensure the judgment would be paid promptly in full if the application for leave failed: Livent, at paras. 14 and 15.

[18] Considering all of the circumstances, I am not persuaded Watters has shown that it is in the interests of justice that a stay be granted pending the determination of his leave to appeal application to the Supreme Court of Canada.

D. Disposition

[19] I dismiss Watters' motion for a stay. I order him to pay Cora its costs of this motion fixed at $5,000, inclusive of disbursements and HST.

"David Brown J.A."