Court of Appeal for Ontario

Date: October 25, 2017 Docket: C62827 Judges: MacFarland, Hourigan and Pardu JJ.A.

Parties

Between

2122994 Ontario Inc. and Raisa Baila Plaintiffs (Respondents)

and

John Lettieri, Jim Papadopoulos and Lettieri Bars Ltd. Defendants (Appellants)

And Between

Lettieri Bars Ltd. Plaintiffs by counterclaim

and

Raisa Baila Defendant to the counterclaim

Counsel

Morris Cooper, for the appellants

Adrienne Boudreau and Krishana Persaud, for the respondents

Heard and Released

Orally: October 25, 2017

On appeal from the judgment of Justice Michael A. Penny of the Superior Court of Justice, dated October 7, 2016, with reasons reported at 2016 ONSC 6209.

Reasons for Decision

[1] The appellant argues that the trial judge erred in failing to permit him to cross-examine the respondent about the arrangement she had with Toronto Dominion Bank ("TD"), the entity said to have loaned her the money to fund the cost of leasehold improvements made to the property.

[2] In the same vein, it is argued that the trial judge erred in permitting respondent's counsel to inform the court that TD had a judgment in excess of $300,000 against the respondent, and that an arrangement had been made between the bank and the respondents.

[3] We do not accept this submission. In our view, whatever the arrangements were between TD and its customer, they are irrelevant to the issue between the franchisor and the franchisee. The only relevant fact for the purpose of compensation under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the "Act") is the amount the franchisee paid to the franchisor under this category and here the number $287,289 is not in dispute.

[4] The language of the statute is clear. On rescission the franchisor is, under ss. 6(6)(a), to "refund to the franchisee any money received from or on behalf of the franchisee, other than money for inventory, supplies or equipment". Whether the franchisee paid these monies from her funds, borrowed funds or inherited funds is irrelevant to her claim against the franchisor. Her entitlement is statutory and the language of the legislation is clear. Whatever she paid to him, he must pay back.

[5] Unlike legislation in other jurisdictions, as the respondent points out in her factum, Ontario has a specific legislated payback scheme. It is not a "net loss" regime. And whether the leasehold improvements are properly categorized under s. 6(6)(a) or s. 6(6)(c) is immaterial from the appellant's perspective. No matter the category, the result is the same: pay back what the franchisee paid.

[6] We agree with the trial judge. Any argument on the categorization of this claim is really about form over substance and is quite immaterial. In our view, the trial judge was correct in categorizing this claim as he did.

[7] Secondly, there is no breach of the s. 3 duty of fair dealing. This court's decision in Personal Service Coffee Corp. v. Beer (2005), 256 D.L.R. (4th) 466 (C.A.) is dispositive of this argument.

[8] And lastly, the respondent Baila was required to provide the franchisor with her personal guarantee of both the franchise agreement and the sublease. In light of the way the arguments were presented at trial, it was appropriate for judgment to be granted in her favour as well.

[9] The appeal is dismissed. Costs are awarded to the respondent fixed in the amount of $25,000, inclusive of disbursements and HST.

J. MacFarland J.A.

C.W. Hourigan J.A.

G. Pardu J.A.