SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-441713

DATE HEARD: September 12, 2013

ENDORSEMENT RELEASED: November 12, 2013

RE: 7744455 Canada Inc. et al. v. Lick’s Franchising Inc. et al.

BEFORE: Master A. Graham

COUNSEL:
A. Cofman, for the plaintiffs (moving parties)

J. Silver, for the defendants 1248554 Ontario Limited, Denise Meehan, Lick’s Concepts Inc., Lick’s Design Innovations Inc., 914406 Ontario Limited and ABC Lick’s Co. (“the Lick’s defendants”) in action no. CV-11-441713, the defendant Lick’s Concepts Inc. in action no. CV-09-385586 and the defendant Beaches H.O. Administration Corp. in action no. CV-12-465821

S. Bentley-Jacobs, for the defendants Royal LePage and Sid Henry

ENDORSEMENT

[1] The plaintiffs’ motion is for consolidation of the action in which they bring this motion (CV-11-441713) with action no. CV-12-465821 (7744455 Canada Inc. et al. v. Beaches H.O. Administration Corp.) and for trial together of the proposed consolidated action with action no. CV-09-385586 (New Voyage CA Limited et al. v. Lick’s Concepts Inc.). The motion is brought under rule 6.01(1) of the Rules of Civil Procedure:

6.01 (1) Where two or more proceedings are pending in the court and it appears to the court that,

(a) they have a question of law or fact in common;

(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or

(c) for any other reason an order ought to be made under this rule,

the court may order that,

(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or

(e) any of the proceedings be,

(i) stayed until after the determination of any other of them, or

(ii) asserted by way of counterclaim in any other of them. R.R.O. 1990, Reg. 194, r. 6.01 (1).

Motion for consolidation

[2] The two actions in which 7744455 Canada Inc.(“774”) is a plaintiff arise out of the purchase in or about January of 2011 of the Lick’s Ice Cream and Burger Shop located at 8187 Yonge Street, Thornhill, Ontario (“the restaurant”) from the defendant franchisors. The plaintiffs in these two actions (“the 774 plaintiffs”) allege that the disclosure provided by the franchisors did not comply with the Arthur Wishart (Franchise Disclosure), 2000 Act, S.O. 2000, c. 3. All of the Lick’s defendants except ABC Lick’s Co. are alleged to have been “franchisors” or “franchisor’s associates” as defined by the Act. The remaining defendants Royal LePage, Sid Henry and Moshe Teller are alleged to have been “franchisor’s brokers” under the Act and it is further alleged that they made misrepresentations to the plaintiffs about the restaurant prior to the purchase.

[3] The 2012 action, in which Beaches H.O. Administration (“Beaches H.O.”) is the only defendant, essentially names that defendant as another “franchisor’s associate” under the Arthur Wishart Act, in respect of the same restaurant.

[4] In the two actions which the 774 plaintiffs seek to consolidate, the plaintiffs seek much of the same relief, including an accounting to them for all inventory, supplies, equipment and chattels belonging to the corporate plaintiff as of August 25, 2011 and damages to compensate them for losses incurred in acquiring, setting up and operating the franchise business. The plaintiffs in the two actions are the same and much of the relief claimed is the same; the 2012 action is simply against an additional defendant.

[5] Counsel for the Lick’s defendants takes the position that the 2012 action against Beaches H.O. is an abuse of process and intends to bring a motion to strike that action and for that reason stated that he cannot consent to the order for consolidation. The prospect of such a motion is not a bar to an order for consolidation if such an order is otherwise appropriate.

[6] Counsel for the defendants Royal Lepage and Henry take no position on the motion for consolidation. Counsel for the Lick’s defendants advises that counsel for the defendant Teller has no instructions on the issue.

[7] Applying rule 6.01(1) to the motion for consolidation, actions CV-11-441713 and CV-12-465821 have the same plaintiffs, a common question of fact with respect to the sufficiency of disclosure to the 774 plaintiffs and a common question of law with respect to the application of the Arthur Wishart Act. They also arise from the identical transaction, being the purchase by the 774 plaintiffs of the restaurant. I am therefore satisfied that actions CV-11-441713 and CV-12-465821 should be consolidated and I so order.

[8] The plaintiffs in the now consolidated actions shall deliver a consolidated statement of claim in action no. CV-11-441713 within 60 days of the release of this endorsement. The defendants in the consolidated action shall deliver their statements of defence to the consolidated statement of claim within 30 days of receiving it.

Motion for trial together

[9] Action no. CV-09-385586 (“the New Voyage action”) is brought by the previous franchisees of the same Lick’s restaurant that is the subject of the 774 actions. These plaintiffs allege that in May, 2007, they agreed to purchase the restaurant based on disclosure that was so deficient as to constitute non-disclosure for the purpose of the Arthur Wishart Act. They further plead breaches of the franchise agreement and of the duties of fair dealing and good faith. The New Voyage action was commenced by way of a statement of claim issued August 21, 2009, approximately 17 months before the 774 plaintiffs purchased the same restaurant.

[10] The plaintiffs in the New Voyage action are represented by the same counsel as the 774 plaintiffs. The defendant in that action, Lick’s Concepts Inc., is also a defendant in the 774 action and is represented by the same counsel as the other Lick’s defendants.

[11] The Lick’s defendants oppose the motion for trial together of the newly consolidated 774 action with the New Voyage action. The defendants Royal LePage and Henry take no position on this motion but do oppose an order for common documentary and oral discovery. Counsel for the Lick’s defendants advises that counsel for the defendant Teller has no instructions on the motion for trial together.

[12] The plaintiffs again rely on rule 6.01(1), as set out above, as well as s. 138 of the Courts of Justice Act:

138. As far as possible, a multiplicity of proceedings shall be avoided.

[13] The plaintiffs submit that trial together is warranted because both actions involve issues of the sufficiency of disclosure provided by the franchisors of the same restaurant. The plaintiffs in both actions were buying the same thing. After selling the restaurant to the New Voyage plaintiffs, the Lick’s defendants repossessed it and then sold it to the 774 plaintiffs. Accordingly, the value of the restaurant is an issue in both actions. Further, the defendants’ disclosure obligations to the 774 plaintiffs include disclosing the existence of the New Voyage litigation in respect of the restaurant and the plaintiffs allege that they failed to do so.

[14] The plaintiffs submit that given the overlapping issue of damages, the plaintiffs in the New Voyage action would also be witnesses at the trial of the 774 action.

[15] The plaintiffs further submit that the various corporate defendants are all corporations with a single shareholder, being Denise Meehan who is named personally as a defendant in the 774 action. Ms. Meehan is also a director of all of the corporations, and she essentially carries on her businesses through those corporations. She will likely be the corporate representative examined for discovery in both actions as well as a witness at trial in both actions.

[16] In addition, although Mr. Sid Henry is named as a defendant only in the 774 action, he is referred to in the statement of claim in the New Voyage action as having been hired by the New Voyage plaintiffs to sell the restaurant and then having been coaxed by Lick’s Concepts Inc. to work for Lick’s directly. Mr. Henry will therefore be a witness at the trial of both actions.

[17] Essentially, the plaintiffs and moving parties acknowledge that there are some differences between the claims advanced in the two actions but the underlying facts and players are the same.

[18] Counsel for the Lick’s defendants, which oppose the motion for trial together, refers to the factors considered by Master Dash in 1014864 Ontario Ltd. v. 1721789 Ontario Inc., 2010 ONSC 3306, 2010 CarswellOnt 4183 which are as follows (at paragraph 18):

18 A non-exhaustive list of some of the considerations on ordering trial together may, depending on the circumstances, include:

(a) the extent to which the issues in each action are interwoven;

(b) whether the same damages are sought in both actions, in whole or in part;

(c) whether damages overlap and whether a global assessment of damages is required;

(d) whether there is expected to be a significant overlap of evidence or of witnesses among the various actions;

(e) whether the parties the same;

(f) whether the lawyers are the same;

(g) whether there is a risk of inconsistent findings or judgment if the actions are not joined;

(h) whether the issues in one action are relatively straightforward compared to the complexity of the other actions;

(i) whether a decision in one action, if kept separate and tried first would likely put an end to the other actions or significantly narrow the issues for the other actions or significantly increase the likelihood of settlement;

(j) the litigation status of each action;

(k) whether there is a jury notice in one or more but not all of the actions;

(l) whether, if the actions are combined, certain interlocutory steps not yet taken in some of the actions, such as examinations for discovery, may be avoided by relying on transcripts from the more advanced action;

(m) the timing of the motion and the possibility of delay;

(n) whether any of the parties will save costs or alternatively have their costs increased if the actions are tried together;

(o) any advantage or prejudice the parties are likely to experience if the actions are kept separate or if they are to be tried together;

(p) whether trial together of all of the actions would result in undue procedural complexities that cannot easily be dealt with by the trial judge;

(q) whether the motion is brought on consent or over the objection of one or more parties.

[19] Counsel for the Lick’s defendants submits that the claims advanced by the New Voyage defendants have very little to do with those advanced by the 774 defendants. The New Voyage action and the 774 action have only one defendant in common, being Lick’s Concepts Inc.. Counsel states that the only issue in common is that of the sufficiency of disclosure made to the two sets of franchisees. He further submits that the damages in each of the two actions are discrete, and depend on the review of financial records of both sets of plaintiffs.

[20] The Lick’s defendants also submit that the New Voyage action could go to trial by the end of 2014 but the 774 action, which will take longer to try, cannot be tried for 4-5 years. This argument is based on the assumption that the New Voyage action will take less than two weeks to try and the 774 action will take more than two weeks. As examinations for discovery in the two actions have not been held and there is no evidence as to how many witnesses will be called to testify at trial, it is not realistically possible to determine how long the trials of these two actions will take.

[21] Applying rule 6.01(1)(a) to the motion for trial together, I accept that the New Voyage action and the 774 action have in common the question of fact with respect to the value of the restaurant that was re-possessed from the New Voyage plaintiffs and then acquired by the 774 plaintiffs. In addition, there are common questions of fact with respect to the involvement of Sid Henry in the events that led to the acquisition of the restaurant by the 774 plaintiffs. Similarly, applying rule 6.01(1)(b), the two actions arise out of the same “series of transactions”, being the sale of the franchised restaurant to the New Voyage plaintiffs, the repossession of the restaurant by Lick’s and the subsequent sale to the 774 plaintiffs.

[22] In applying the court’s discretion under rule 6.01(1), it is helpful to consider the factors set out by Master Dash in 1014864 Ontario Ltd. v. 1721789 Ontario Inc., supra. On reviewing those factors, I find as follows (using the letters from Master Dash’s decision):

(a), (b) and (c): Both actions require the application of the Arthur Wishart Act to the sale of the franchise for the same restaurant, consideration of the involvement of Mr. Sid Henry in that sale and an assessment of the value of the restaurant at the time that it was repossessed and then re-sold by the defendants. These factors favour trial together.

(d) and (e): The New Voyage action and the 774 action have one common defendant, Lick’s Concepts Inc.. However, quite apart from the named defendant, the fact is that Denise Meehan is the sole shareholder and a director of all of the corporate defendants and will be giving evidence in both actions. The actions are all essentially against the same defendant.

Mr. Henry will also be a witness at the trial of both actions and the damages witnesses will also likely be the same. The evidence of the New Voyages plaintiffs will also be relevant to the issue of damages in both actions. These factors favour trial together.

(f): The plaintiffs in both actions have the same lawyer and all Lick’s defendants have the same lawyer. The lawyers for the other parties, Royal LePage, Henry and Teller do not oppose the motion. This factor favours trial together.

(g): There could be inconsistent findings on the evidence of Mr. Henry and the value of the restaurant at the time of re-possession and sale if the actions are not tried together. This factor favours trial together.

(h): The two actions are similarly complex. The 774 action looks more complex on the surface because it has 11 defendants (12 including Beaches H.O. Administration Corp.) but, as indicated above, the corporate defendants are all business vehicles used by Denise Meehan, and the issues of liability are essentially whether there were any deficiencies in disclosure and if so, who was responsible for those deficiencies. This factor favours trial together.

(i): A decision in the New Voyage action on the issue of the valuation of the restaurant would mean that that issue would not have to be resolved again in the 774 action. However, there are other issues in common, and there is no reason that the valuation issue cannot be resolved at a trial together of the two actions. This factor is neutral.

(j), (k) and (l): The two actions are both still at the pre-discovery stage. There is apparently a motion to be brought in the 774 action to challenge the naming of Beaches H.O. as a defendant which would not have anything to do with the New Voyage action. There is no jury notice in any action. As the actions are at similar stages there is no possibility of interlocutory steps being avoided by relying on transcripts from a more advanced action. These factors either favour trial together or are neutral.

(m): Although the actions have been delayed by lengthy pleadings motions and by the limited availability of court dates, the timing of the motion is not a factor in determining whether the actions should be tried together. With respect to the suggestion by the Lick’s defendants that trial together will delay the trial of the New Voyage action, first, this is a very speculative submission and second, the only parties who might legitimately complain about any additional delay arising out of trial together are the New Voyage plaintiffs, and they themselves are seeking the order. This factor is neutral.

(n) and (o): The plaintiffs and the Lick’s defendants would likely save costs by having to prepare for and conduct one trial instead of two. There is no evidence of any prejudice to any party arising from the actions being tried separately, or being tried together. There may be some increased costs to the defendants Henry and Royal LePage, who are named only in the 774 action, and who are not exposed to the New Voyage claim, but Henry is referred to in the New Voyage action and would be a witness at the trial of that action in any event. In the absence of opposition from Henry, Royal LePage and Teller to trial together, this factor favours trial together.

(p): There would not appear to be any insurmountable procedural complexities that would result from the actions being tried together. This factor favours trial together.

(q): As indicated, the Lick’s defendants oppose the motion but the others do not. This factor would militate against trial together only if the arguments of the Lick’s defendants on the other factors were meritorious.

[23] The circumstances of these cases fall within the requirements for trial together in rule 6.01(1) and a consideration of the factors in 1014864 Ontario Ltd. favour trial together of the actions. For these reasons, action no. CV-09-385586 and consolidated action CV-11-441713 shall be tried together or one immediately after the other, subject to the discretion of the trial judge.

[24] As indicated above, the defendants Royal LePage and Henry, although taking no position on the motion for consolidation and trial together, do oppose the motion for common documentary and oral discovery and common mediation. Counsel’s submission is that there is no economy in requiring all parties to participate in each step of both actions.

[25] Given that the actions will be tried together, there must be common documentary and oral discoveries to ensure that the same disclosure is provided in respect of all issues to be tried. With respect to mediation, the participation of all parties in a joint mediation will likely increase the prospects of settlement, which is a benefit to all parties. Accordingly, I order that the actions proceed with common documentary and oral discovery and common mediation.

Motion for case management

[26] Counsel all seek an order that I assign these cases to myself for case management. Given that one of these actions is four years old and there have not yet been examinations for discovery, and given the tortuous progress of the motions that I have already heard, I am satisfied that these are appropriate cases for case management. Accordingly, I hereby assign actions nos. CV-09-385586 and consolidated action CV-11-441713 to myself for case management.

Costs

[27] Counsel all provided costs outlines at the end of the motion, but requested the opportunity to make submissions following the release of this decision. If counsel cannot agree to the disposition of costs, they shall contact Mr. Chan to arrange a hearing to speak to the issue.

Master A. Graham

DATE: November 12, 2013