ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-450503-00CP
DATE: 20141222
BETWEEN:
1146845 ONTARIO INC., 1634481 ONTARIO INC. and J.P. CLEGHORN PROFESSIONAL PROPERTY INSPECTION SERVICES INC.
Plaintiffs
– and –
PILLAR TO POST INC., D.R. STEWARD, also known as DAN STEWARD and KIM CLARKE
Defendants
Jill M. Knudsen for the Plaintiffs
Gerald L.R. Ranking and Zohaib I. Maladwala for the Defendants Pillar to Post Inc. and Dan Steward
Paul Emerson for the Defendant Kim Clarke
Proceeding under the Class Proceedings Act, 1992
HEARD: December 10 and 11, 2014
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] The Plaintiffs 1146845 Ontario Inc. (“Radomski’s Franchise”), 1634481 Ontario Inc. (“Clermont’s Franchise”), and J.P. Cleghorn Professional Property Inspection Services Inc. (“Cleghorn’s Franchise”) are franchisees. They bring a proposed class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6. Their claim is for $25 million in general damages and an additional $400,000 in damages for each franchisee in the proposed class of franchisees.
[2] Relying on an arbitration clause in the franchise agreement, the Defendant Pillar to Post Inc. brings a motion to stay the class action. If Pillar to Post’s motion is successful, then the proposed class action will be stayed.
[3] If Pillar to Post’s motion for a stay motion is unsuccessful, then the parties differ on whether the preferable procedure criterion of the test for certification will have been satisfied. Pillar to Post submits that arbitration is the preferable procedure and that a class action should not be certified for failure to satisfy the preferable procedure criterion of the test for certification. The Plaintiffs disagree, but, in any event, whether the other criteria for certification are satisfied would remain to be determined.
[4] For the reasons that follow, I need not decide whether arbitration is the preferable procedure. I conclude that the Plaintiffs’ proposed class action should be and indeed must be stayed leaving them to arbitrate their claims.
B. OVERVIEW
[5] Radomski’s Franchise, Clermont’s Franchise, and Cleghorn’s Franchise are franchisees of Pillar to Post, which operates a home inspection business across the United States and Canada.
[6] The Plaintiffs alleged that Pillar to Post has breached its obligations under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “AWA”) and other similar franchise legislation across Canada. The Plaintiffs major allegation is that Pillar to Post unilaterally and without complying with its statutory disclosure obligations made fundamental changes to the franchise system and converted its franchise system from exclusive territories to non-exclusive territories causing serious and continuing losses to current and former franchisees.
[7] The Plaintiffs wish to pursue their claims by a class action. However, in Pillar to Post’s standard form franchise agreements, there is a waiver of the right to pursue a class action. Pillar to Post, however, does not rely on the waiver provision. Rather, it relies on the arbitration provision in the standard form franchise agreement, and it submits that the proposed class action should be stayed.
[8] The Plaintiffs resist the stay of their proposed class action, and they submit that the arbitration provision in the franchise agreements contravenes ss. 4 and 11 of the Arthur Wishart Act (Franchise Disclosure), 2000 which render void any contractual provision which purports to limit franchisees’ rights under the AWA, including the right to associate.
[9] More precisely, relying on 405341 Ontario Ltd. v. Midas Canada Inc., [2009] O.J. No. 4354 (S.C.J.), the Plaintiffs submit that under the AWA they have a protected right to associate that includes the right to bring a class action, and, therefore, they argue that they have a unilateral right to vitiate the arbitration provision in the standard form franchise agreement and to pursue a class action should they choose to do so. Further, the Plaintiffs submit that a class action is the preferable procedure method for adjudicating the disputes between the franchisees and Pillar to Post.
[10] As I shall explain below, I disagree with the Plaintiffs’ argument. In my opinion, the Supreme Court of Canada’s decision in Seidel v. TELUS Communications Inc., 2011 SCC 15 is dispositive of Pillar to Post’s motion to stay, and a stay should be granted.
... (continues verbatim with all remaining paragraphs exactly as in the decision) ...
Perell, J.
Released: December 22, 2014
COURT FILE NO.: CV-12-450503-00CP
DATE: 20141222
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1146845 ONTARIO INC., 1634481 ONTARIO INC. and J.P. CLEGHORN PROFESSIONAL PROPERTY INSPECTION SERVICES INC.
Plaintiffs
– and –
PILLAR TO POST INC., D.R. STEWARD, also known as DAN STEWARD and KIM CLARKE
Defendants
REASONS FOR DECISION
PERELL J.
Released: December 22, 2014