SUPERIOR COURT OF JUSTICE – ONTARIO
COURT FILE NO.: 07-32228 (Hamilton)
DATE: 2012/03/12
RE: Thomas C. Dodd and Christine Dodd (Plaintiffs) v.
Prime Restaurants of Canada Inc. (Defendant)
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL:
James A. Scarfone and Lauren Grimaldi, for the Plaintiffs
Daniel S. Murdoch and Sarah Clarke, for the Defendant
HEARD: February 29 and March 1, 2012 (in Hamilton)
E N D O R S E M E N T
I. Introduction
[ 1 ] Prime Restaurants of Canada Inc. franchises, owns and operates restaurant chains, including East Side Mario’s restaurants. Thomas Dodd and Christine Dodd were franchisees who, together with their son Kevin Dodd, operated an East Side Mario’s restaurant in Toronto from August 2004 to October 2005 through their company, 1591299 Ontario Inc. The Dodds' total equity investment in this venture from their own resources was at least $550,000.
[ 2 ] In September 2003, the Dodds received a disclosure document from Prime with respect to the franchise opportunity as contemplated by subsection 5(1) of the Arthur Wishart Act (Franchise Disclosure), 2000 , [1] together with additional information contained in a “Sales Package”. The Dodds had the opportunity to review those documents with the assistance of counsel. The Dodds entered into a franchise agreement with Prime on December 8, 2003.
[ 3 ] The Dodds' restaurant opened in August 2004. The restaurant was not successful. By October 2005, the Dodds owed Prime over $84,000, principally for royalty payments due under the franchise agreement as well as rent payments made by Prime on their behalf. The Dodds were also unable to make loan payments to GE Capital, which had provided financing for the venture in the principal amount of $675,000.
[ 4 ] After discussions between Thomas Dodd and Prime officers, 1591299 made a voluntary assignment in bankruptcy on October 15, 2005, and Prime took over operation of the restaurant. Concurrently, the Dodds and Prime entered into a mutual release under which the Dodds and Prime released each other from any debts, claims or actions. Under the mutual release, Prime also agreed to pay the interest on the Dodds' debt to GE, to use its reasonable best efforts to find a buyer for the restaurant that would assume the GE debt, and to use its reasonable best efforts to have GE release the Dodds from their obligations to GE.
[ 5 ] On October28, 2005, counsel for the Dodds served Prime with a “Notice of Rescission” of the franchise agreement. Prime’s counsel responded by letter dated November 15, 2005, advising that the Dodds' position was contrary to the agreement between the parties as set out in the mutual release, copies of which were provided with the letter. The letter also stated that Prime was prepared to continue to assist in reducing the Dodds' exposure, but would reconsider its position if the Dodds did not revoke their rescission notice. There was no response by the Dodds or their counsel to the letter from Prime’s counsel.
[ 6 ] Prime operated the restaurant from October 2005 to January 2007, and paid interest on the GE debt during that period as required by the mutual release. In January 2007, the restaurant was sold. The GE debt was satisfied from the proceeds the sale together with an additional $100,000 provided by Prime.
[ 7 ] On June 27, 2007, Mr. and Mrs. Dodd commenced an action against Prime claiming among other things damages for breach of contract, negligence, misrepresentation and rescission of the franchise agreement. Their son Kevin Dodd is not a party to this action.
[ 8 ] In the motion now before the court, Prime sought the following relief:
(a) Summary judgment to dismiss the action in its entirety, on the basis that the action is barred by the mutual release entered into by the Dodds and Prime;
(b) Alternatively, partial summary judgment to dismiss the claim for rescission of the franchise agreement as being statute barred under section 6(1) of the Arthur Wishart Act , since notice of rescission was given more than 60 days after Prime delivered the disclosure document required by that statute; and
(c) To strike the jury notice, on the basis that the Dodds waived trial by jury under the franchise agreement, and in any case, a jury trial is not appropriate given the relief sought.
[ 9 ] In response to the summary judgment motion, the Dodds' position was that Prime has not satisfied its onus of establishing that there is no genuine issue requiring a trial, [2] either in relation to the mutual release or the rescission claim. According to the Dodds, a trial is necessary to determine the validity of the mutual release, which the Dodds' claimed was not enforceable since it was unconscionable as well as being void pursuant to section 11 of the Arthur Wishart Act .
[ 10 ] As well, the Dodds took the position that a trial is necessary to determine whether the disclosure document provided by Prime complied with the requirements of the Arthur Wishart Act . If the disclosure was deficient, the Dodds' position was that the applicable limitation period for rescission was two years from the date of the franchise agreement as provided for in subsection 6(2) of the Arthur Wishart Act , rather than 60 days after delivery of the disclosure document.
[ 11 ] The Dodds also took the position that their waiver of trial by jury was not enforceable since they had rescinded the franchise agreement, and that in any case Prime had not satisfied the substantial onus required to strike a jury notice.
[ 12 ] Accordingly, the issues to be determined on this motion are as follows:
Test for summary judgment: Has Prime met the required onus to justify granting summary judgment or partial summary judgment?
Mutual release: Is a trial required to determine the validity of the mutual release?
Rescission: Is a trial required in order to determine whether the Dodds were entitled to rescind the Franchise Agreement?
Jury notice: Should the jury notice be struck?
[ 13 ] I will deal with each of these issues in turn.
III. Test for summary judgment
[ 14 ] Summary judgment will be granted if the court is satisfied that there is no genuine issue requiring a trial. [3] In determining whether the test for summary judgment has been met, the court is entitled to weigh the evidence, evaluate a deponent’s credibility and draw any reasonable inference from the evidence, unless it is in the interest of justice for such powers to be exercised only at a trial. [4]
[ 15 ] According to the recent Ontario Court of Appeal decision in Combined Air Mechanical Services Inc. v. Flesch , to determine whether the test for summary judgment has been met:
the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial? [5]
[ 16 ] The onus of establishing that there is no genuine issue requiring a trial is on the moving party (in this case, Prime). If this onus is not satisfied, summary judgment will not be granted. However, both parties are required to “put their best foot forward” with respect to the existence or non-existence of material issues to be tried. [6] This requirement is consistent with subrule 20.02(2) of the Rules of Civil Procedure , which requires the responding party to place before the motions judge evidence of specific facts showing that there is a genuine issue requiring a trial.
[ 17 ] For the reasons set out below, I have concluded that in this case Prime has not met its burden of establishing that there is no genuine issue requiring a trial, either in relation to the validity of the mutual release or the Dodds' entitlement to rescind the franchise agreement. Accordingly, I am dismissing Prime’s motion for summary judgment or partial summary judgment against the Dodds.
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