Court File and Parties

CITATION: 244674 Ontario Inc. v. Home Instead, Inc., 2015 ONSC 8004 COURT FILE NO.: CV-15-538478 DATE: 2015-12-21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 244674 Ontario Inc., Lindsay Reid, 2458317 Ontario Inc., and Brian Weinert, Applicants

-and-

Home Instead, Inc, Respondent

BEFORE: F.L. Myers J.

COUNSEL: M. Miller for the Applicants G. Shaw and D. Ronde for the Respondent

HEARD: December 18, 2015

ENDORSEMENT

The Motion

[1] The respondent moves for an order holding each of the applicants in civil contempt of court. The respondent alleges that the applicants acted in breach of the court’s order dated December 4, 2015. In that order, the court granted an interlocutory injunction enforcing the post-termination obligations set out in paragraph 17 of the applicants’ franchise agreements with the respondent. In the vernacular, the court required the applicants to shut down their businesses immediately. For the reasons set out below, I find that the respondent has proven beyond a reasonable doubt that the applicants intentionally committed acts that violated the letter and the spirit of the order dated December 4, 2015 and thereby committed civil contempt of court. However, as explained below, the findings are much more limited than what was sought by the respondent.

Background

[2] This case involves a dispute between a franchisor and two of its former franchisees. The respondent operates a franchise system under which franchisees provide non-medical home care assistance to seniors. 2458317 Ontario, Inc. is the former North York franchisee. Brian Weinert claims to be the sole owner of this company. 2444674 Ontario, Inc. is the former Scarborough franchisee. Lindsay Reid claims to be the sole owner of this company.

[3] The franchisor alleged that the franchisees committed numerous breaches of their franchise agreements including operating an unrelated third business out of their Scarborough franchise premises and actively misleading the franchisor by failing to disclose that they were in business together. The franchise agreements have specific prohibitions against franchisees operating other businesses out of their franchise premises and against owning interests in multiple franchises. At para. 5 of my Reasons granting the franchisor’s request for an interlocutory injunction (reported at 2015 ONSC 7630), I found:

In assessing the relative strength of the parties’ cases, it is fair to observe that the franchisees have serious credibility issues to surmount at trial. They clearly admit their business relationship in emails between them. They deny the relationship now. Mr. Weinert admitted the relationship to the franchisor when he feared a falling out with Ms. Reid. His girlfriend asserted information that could only have come from him. The franchisor recorded in writing its knowledge that Mr. Weinert’s girlfriend was going to offer to buy out Ms. Reid’s interest. Mr. Weinert denies knowing anything about the offer that was made. How could the franchisor have known about it before it happened if not from Mr. Weinert? Ms. Reid and Mr. Weinert held themselves out as partners or co-owners to third party suppliers. Ms. Reid wrote emails demanding to be shown in Mr. Weinert’s corporate documentation. Yet they have refused to produce their minute books in this litigation. They admit that neither Mr. Weinert nor his business has a bank account. Yet they have refused to produce their banking records in this litigation. It is enough for the purposes of this motion to note that by their own emails and actions they have built a large hill which they must climb and surmount to succeed at trial.

[4] The fact that the franchisees had significant credibility issues both as to whether they actively misled the franchisor and in presenting their evidence before the court was a significant factor in the assessment of the balance of convenience. The court was required to weigh the potential harm to each side of granting or not granting an interlocutory injunction. In paras. 15 and 16 of my Reasons, I wrote:

…If the franchisees actively colluded to deceive the franchisor, how can it be protected from further misconduct going forward? Its system is the franchisor’s and other franchisees’ chosen way to treat and protect vulnerable seniors. It may be a great system or a poor one. That is not the issue. The issue is that if the franchisor is proven correct, it will be faced with a rogue franchisee who cannot be expected to adhere to the franchisor’s system and thereby puts at risk of far greater enterprise.

[16] Looked at a different way, where a franchisor has a strong prima facie case that its franchisee has deliberately violated contractual prohibitions, the court should be more prepared to hold the franchisees to their bargain and less swayed by pleas to equity made by those who appear unwilling to do equity (or even make disclosure of documents).

[5] As a result, the court granted the interlocutory injunction sought. The following are terms of the court’s formal order dated December 4, 2015:

1. THIS COURT ORDERS THAT the applicants, or any of them individually, are prohibited from breaching their post-termination covenants under section 17 of their respective Franchise Agreements dated January 1, 2015 and April 1, 2015, including but not limited to:

(a) immediately and permanently cease to operate Home Instead Senior Care franchised business no. 3001 operating within the exclusive territory as set out at Schedule A' hereto and Home Instead Senior Care® franchised business no. 3013 operating within the exclusive territory as set out at Schedule B' hereto (collectively, the "Franchised Businesses") in accordance with section 17(A)(1) of the Franchise Agreements;

(b) comply with the post-termination covenants restricting the applicants from owning or otherwise having an interest in any non-medical companionship and domestic care service business competitive to a Home Instead Senior Care® franchised business in accordance with section 17(A) (10) and 17(C) of the Franchise Agreements;

(c) immediately cease using Home Instead's Confidential Information and Licensed Marks in accordance with section 17(A)(2) and (10) of the Franchise Agreements and as defined therein;

(d) immediately pay to Home Instead all outstanding royalties and interest due and furnish a complete accounting of all amounts owed to Home Instead in accordance with section 17(A)(3) of the Franchise Agreements;

(e) immediately make modifications or alterations as are necessary to distinguish the offices of the Franchised Businesses so clearly from its former appearance and other Home Instead Senior Care® franchised businesses as to prevent any possibility of confusion by the public, including the removal of all distinctive signs and emblems, in accordance with section 17(A)(4) of the Franchise Agreements;

(f) take any action required to cancel all fictitious or assumed names or equivalent registrations relating to any of the Licensed Marks in accordance with section 17(A)(5) of the Franchise Agreements;

(g) notify the appropriate telecommunications company and all listing agencies of the termination of the applicants' right to use any telephone numbers, and any directory listings and take active steps to assist in the transfer of the telephone numbers in accordance with section 17(A)(6) of the Franchise Agreements; and

(h) return to Home Instead all Operations Manuals, as defined therein, and all software (including the BOSS software) or other programs licensed by Home Instead used in connection with the Franchised Businesses in accordance with section 17(A)(9) of the Franchise Agreements.

[6] The order required the applicants to shut down their businesses. It required that they do so immediately in accordance with Article 17 of their franchise agreements. The applicants did not challenge the reasonableness or applicability of the post-termination restrictive covenants contained in their franchise agreements. Those covenants prohibit the applicants from diverting customers and from being engaged in any competing home care business within 75 km of any franchised outlet. So they could not simply continue to carry on business under a new name. They agreed to shut down on termination of their franchises and the court ordered them to fulfil their agreements.

[7] The effect of the order was to limit the applicants’ case to a claim for damages.

[8] The applicants understood that their ability to stay in business was in issue on the interlocutory injunction motion. In fact, they raised the issue to argue that they would suffer irreparable harm if the interlocutory injunction was granted.

[9] In his affidavit, dated October 14, 2015, Brian Weinert swore:

If the Franchisor is not prevented from terminating 245’s Franchise Agreement and is not required to immediately restore the internet, website and referral system in the normal course, 245 will likely be required to shut down, resulting in the loss of employment for those caregivers as well as several office staff.]

[10] In addition, paragraph 63 of the factum delivered on behalf of all the applicants provides:

In this case, damages are insufficient potential remedy. The Applicants will be completely out of business if the requested injunctions are not granted.

[11] I asked Mr. Shaw whether the franchisor was seeking to implement a period of a wind down to facilitate transition of the business from the applicants. He responded that the franchisor was not asking the court to implement any wind down period. Rather, the franchisor was ready to step in and had arranged for other franchisees to take over servicing the customers of the applicants’ businesses. As the businesses provide home care services for vulnerable seniors, it was important that customer care not be interrupted. However, under the terms of the order granted, that was not an issue for the applicants. They were simply required to shut down immediately.

[12] It seems clear however, that the applicants’ initial reaction to the court’s order was that they wanted to protect their customers and they wanted to keep their businesses running to live to fight another day at trial. However, through the respondent’s subsequent efforts to enforce the injunction and probably with some assistance from the applicants’ counsel as well, the binding nature of the court’s order was brought home to the applicants who have now taken steps to bring themselves into compliance almost completely.

The Facts

[13] The defendant Weinert was away on a cruise ship in the Caribbean when the injunction was granted on December 5, 2015. He learned of the order on December 6, 2015 although he says that he only had a chance to speak to counsel about it more fully on December 8, 2015. Ms. Reid became aware of the order and spoke to counsel about in on December 6, 2015.

(i) The Franchisor Changes its Tune

[14] Ms. Reid testifies that she spoke to the franchisor’s representative on Tuesday, December 8, 2015 to discuss the transition. She says that the franchisor asked her to continue filling shifts for seniors that had already been booked until the other franchisees were able to enter into new contracts with the customers. The franchisor’s representative gave evidence that on December 8, 2015, the franchisor mailed letters to the customers and caregivers of the two franchises advising them that the applicants “are winding down their operations on December 11, 2015.” This seems to support Ms. Reid’s testimony that the franchisor was indeed looking to the applicants to fill booked shifts for a few days to allow the other franchisees to get up and running with the applicants’ customers.

[15] Mr. Shaw tried to argue that what his client did was consistent with what he had said in court at the hearing of the injunction. He argues there was no need for the court to order a wind down because his client immediately implemented its own transition. But what the respondent implemented invited the applicants to act in breach of the injunction that the respondent sought and obtained. I expressly covered the issue of transition with Mr. Shaw during the hearing of the interlocutory injunction. The respondent’s position was that it was ready to go and was not asking for any wind down period. It asked for and received an order requiring the applicants to shut down fully, completely, and immediately on December 5, 2015. The respondent’s letter stating that the applicants would wind down on December 11, 2015 therefore is inexplicable to me. Moreover, it was apparently not explained to the applicants either. The date was chosen unilaterally by the franchisor. I do not know what right the franchisor exercised in purporting to require the applicants to continue assisting in a wind down. The fact that it did so makes its complaints about the applicants’ conduct considerably less significant. While I find that some of the applicants’ conduct discussed below did violate the order, I would not hold them in contempt for those elements that merely did as the respondent asked or where there is understandable confusion flowing from the respondent’s own conduct.

(ii) Communications from the Applicants

[16] By December 8, 2015, counsel for the applicants reported to counsel for the franchisor that the applicants were receiving multiple calls from customers and caregivers who were confused or upset. Representatives of other franchisees’ were said to be showing up at seniors’ doors trying to sign them up to contracts. There is some suggestion that the other franchisees were actively competing for the business among themselves so that multiple different salespeople might have been showing up at the same seniors’ doors.

[17] I note that much of the evidence presented on this motion is hearsay, double, triple or more times. There are emails within the franchisor reporting calls from a caregiver who reports a call with another franchisee or with the applicants. In many cases, the statements reported are not used for their truth but just to show that the applicants were competing by the mere making of a statement. For example, where the applicants said “we are staying in business,” I am not considering the truth of their statement. In fact they are not staying in business. The statement is not true. But the fact that it was said at all is evidence of breach of the interlocutory injunction. I am not content with being asked to find contempt of court based on hearsay although the Rule allows some hearsay for non-contentious matters. I intend to confine my holdings to clear actions by the applicants and clear statements out of their mouths (or penned by their hands)

[18] While the applicants say they were continuing to fill shifts at the respondent’s request and they were reporting significant confusion in the market place, the respondent caught wind that more was afoot in the applicants’ camp.

[19] On December 8, 2015, Diane Robinson, an employee of both of the applicants’ franchises sent an email to caregivers. The email displayed Ms. Robinson’s North York signature. It is common ground that the back office operations of both franchises was combined and ran from the Scarborough office.

[20] In her first email, Ms. Robinson told caregivers, among other things:

*PLEASE BE ADVISED THAT THERE WILL BE NO CHANGES IN THE WAY WE ARE CONDUCTING BUSINESS. Everyone will still be paid AND PAID ON TIME. Our office will remain open long past this Friday

…We have contacted all of our clients already and each one has promised that they will stay with us, partly because they too would like to keep the same caregivers as we all know, they do not like changes

…We are currently in a battle with the Home Instead Senior Care Inc. who does sales of 1.1 Billion dollars. They want to put us out of business because we found out a number of disgusting things behind the scenes and chose to question them about it. We are here for the long.

Facts: Our office will continue to operate past this Friday.

Brian will ensure that you are paid and keep working. There is no assurance that the other office will hire or keep you regardless of what they say.

PLEASE PLEASE for the love of our seniors go to all of your shifts. Don’t let our seniors down, they need you now more than ever.

[21] Ms Robinson’s email confirms several breaches of the post-termination obligations of the franchisees. They remained in operation and stated an intention to continue to operate beyond just filling a few more shifts. They contacted clients to try to divert their business. They were soliciting the caregivers to stay. I note as well that this email is an emotional call to arms. They invoked the size of the respondent to try to create a David and Goliath scenario. They claimed that they were being targeted for whistleblowing about “a number of disgusting things behind the scenes.” There was no evidence presented at the injunction motion to suggest that the applicants had found or questioned wrongdoing within the franchisor. To the contrary, the franchisor was the one who discovered the applicants’ alleged dishonesty and was asking the questions.

[22] Mr. Weinert wrote a letter to the North York franchise’s customers on December 7, 2015 before, he says, he had a chance to speak thoroughly to counsel, His letter provided in part:

The Home Instead North York franchise is currently in a legal battle with the Giant American Corporation “Hoe Instead Senior Care Inc.” who does sales of 1.1 Billion dollars. They want to put us out of business because we found out a number of disturbing things behind the scenes and choose to question them about it.

As many of you know am I am [sic] older gentleman in my late 50’s and received part of the funding to purchase this office from a dear friend who is a senior of 83 and wanted to be part of helping other seniors.

Home Instead sees no problem in is this wonderful lady losing a large portion of her life savings instead of working together to settle this amicably.

It is a back and forth game that will take us to court in a few months. Until then however they are allowing the other Home Instead offices in Ontario to contact you and try to make you change over to them, even though they charge more.

…I am asking you to stay with your North York Team and say no thanks to the other offices…….Here’s Why…….

…4. We will be discounting all charges by 5% as a thank you for remaining with us.

We are here for you all the time, any time Brian Weiner, Owner & The Office Team [Emphasis in original]

[23] In this letter, Mr. Weinert continued the David and Goliath and whistleblower themes although he softened the descriptor “disgusting” to “disturbing.” His disclosure regarding his elderly lender is noteworthy as he had refused to disclose information about his funding in this litigation. Of greatest significance, however, is his description of this litigation as a “back and forth game” that will play out until trial some months hence. While of course true that there can be a trial in the future, Mr. Weinert has now realized that this not a game and there is no back and forth when it comes to complying with a court order. The interlocutory injunction did not provide that other franchisees can contact North York’s customers as Mr. Weinert wrote. It requires the franchisees to obey their post-termination covenants and to shut down.

[24] By email dated December 9, 2015, Ms. Robinson wrote to the caregivers using her Scarborough signature. The subject matter of this communication dealt with the caregivers picking up their pay cheques. Ms. Robinson concluded the message as follows:

From all of us in the office, we want to thank each and every one of you for your support and understanding during these times, we sincerely regret the impact it may cause you emotionally and ensure [sic] you that there are and will be no changes to your schedules moving forward. [Emphasis added]

[25] This is not consistent with Ms. Reid’s evidence that she was shutting down Scarborough and all she was doing was filling a few shifts at the franchisor’s request.

[26] By email dated December 11, 2015 this time using her North York signature, Ms. Robinson again wrote to caregivers. This email provides in part:

If anyone is interested to work Christmas Eve, Christmas Day, Boxing Day, New year’s eve and/or New Year’s Day kindly let me know please.

…Once this is all over we will certainly be doing something to show each of you how much we love and appreciate you as well as your efforts. [Emphasis in original]

[27] This email shows that the businesses intended to remain open at least to the new year. Moreover the suggestion that there would be some consideration provided to those who stay is perhaps an increase in competitive tactics.

[28] Ms. Robinson’s role in this piece deserves note. The franchisor has a rule, that is lawful in Ontario, that prohibits franchisees from hiring employees who have a criminal record. While it sounds harsh, the business involves providing very personal services in the homes or hospital rooms of vulnerable seniors. Our law expressly allows for criminal records to be taken into account in such circumstances. One of the complaints leveled by the franchisor against the franchisees was that they hired Ms. Robinson despite her criminal record. At the hearing of the injunction, the applicants submitted that Ms. Robinson had a minor back room role that was deeply buried in the organization. However, in this part of the case, Ms. Robinson is plainly the voice of both franchisees at least to the caregivers if not to customers. She could not have been writing these cri de guerre messages without the support of the owners.

(iii) The Motions Process

[29] On December 9, 2015, the respondent wrote to the court to request an urgent hearing. On December 11, 2015, I convened a Case Conference by telephone and scheduled the first return of this motion for December 14, 2015. At the hearing on the 14th, the applicants requested a brief adjournment to allow them more time to respond to the motion. I expressed a concern that if the applicants wanted the indulgence of an adjournment, they ought to be satisfying the respondent and the court that pending the return of the motion, the applicants would obey the interlocutory injunction. The parties negotiated and agreed on several terms although I was required to rule on a few issues in contention. I made the following order on December 14, 2015 (although the formal order is dated December 15, 2015):

1. THIS COURT ORDERS an adjournment of the motion to Friday, December 18, 2015 at 10:00 am on the following terms:

(a) Immediately and in any event, by no later than 6 pm on Wednesday, December 16, 2015, the applicants, and all of them individually, shall:

(i) cease operation of the former Franchised Businesses;

(ii) cease all communications with their current or former employees and CAREGivers in any way related to matters prohibited by Article 17C of their Franchise Agreements, save and except to arrange for their final remuneration;

(iii) cease any and all communications with their current and former clients in any way related to matters prohibited by Article 17C of their Franchise Agreements, save and except to allow them to collect any outstanding payments from them;

(iv) forward the telephone numbers (416) 512-8989 and (416) 291-4811 for the former Franchised Businesses to Home Instead's number (416) 698-1384;

(v) terminate or shut down all social media accounts for the former Franchised Businesses, including but not limited to the combined Facebook account for the former Franchised Businesses;

(vi) send by email, with a copy to Home Instead, a clarifying email in the form attached hereto as Schedule "A" to all CAREGivers of the former Franchised Businesses;

(vii) send by mail (and email where applicable), to all clients who received any communication from a representative of the former Franchised Businesses, with a copy to Home Instead, a clarifying letter in the form attached hereto as Schedule "B";

(viii) identify the CAREGivers and clients in writing to Home Instead for the purpose of (vi) and (vii) above;

(ix) terminate any other use of the licensed trade name Home Instead and cease use of all Home Instead licensed marks, except for final billing of unbilled accounts, provided that his does not allow for collection of billed amounts;

(x) provide Home Instead with all information, documentation and items related to the Be A Santa To A Senior (BASTAS) program;

(xi) assign to Home Instead by December 31, 2015 the phone numbers (416) 512-8989 and (416) 291-4811 by contacting Rogers (their service provider) and arranging for such assignment to be made; and

(xii) provide access to their offices located at 100 Cawdray Court, Suite 328, Scarborough, Ontario M1S 5C8 and 862 Eglinton Avenue East, Suite 206, Toronto, Ontario M4G 2L1 to allow Tanya Morrison, Jennifer Rozgay or such other individual as Home Instead may designate to collect all confidential information, including all copies of the Operations Manuals.

(b) The applicants, and each of them individually, will by no later than 6 pm on Wednesday, December 16, 2015, (a) cease use of the homeinstead.solutions email accounts operated by the applicants or their employees; (b) post an out-of-office/bounce back reply email to all homeinstead.solutions email accounts in the form attached hereto as Schedule `C'; and (c) shutdown the @homeinstead.solutions email accounts at the direction of Home Instead, subject to the undertaking of counsel for the applicants to preserve all emails contained therein.

(c) The applicants, and each of them individually, will by no later than 6 pm on Wednesday, December 16, 2015, provide Home Instead with access (remote or otherwise) to each of the applicants' BOSS data systems so that a final version can be copied by Home Instead. The applicants shall no longer be permitted to access, use or retain the BOSS system or any information contained therein except as positively required by law.

2. THIS COURT RESERVES to the December 18, 2015 hearing its Order as to costs.

3. THIS COURT ORDERS that service of the Notice of Motion and Motion Record is hereby validated.

[30] If the applicants had any doubt as to the manner of implementation of the interlocutory injunction, the doubts were removed by the December 15, 2015 order. Yet the respondent points out that the applicants have yet to provide a list of customers of the Scarborough franchise whom they had contacted and were thus obliged to send the correcting letter set out in Schedule “B” to the December 15, 2015 order. At the hearing of the contempt motion, Mr. Miller submitted that no Scarborough names were provided because no Scarborough customers had been contacted initially and therefore no letters were required to be sent to them. This factual submission was contrary to the evidence adduced by the applicants. Ms. Reid swore at para. 23 of her affidavit dated December 17, 2015, that on December 16, 2015, she sent a letter to all past clients of the Scarborough franchise using the wording of schedule “B” to the December 15, 2015 order. Moreover, although counsel submitted that all customer and caregiver files of his clients’ businesses had been turned over to the franchisor as required by the franchise agreements, the franchisor says that it was given only 17 customer files for Scarborough and 45 for North York. Mr. Miller says that that is all that there are. It defies common sense to suggest that the Scarborough business had only 17 customers. The respondent’s computer records show that Scarborough had 47 customers and North York had 84. It may be that the computer shows both active and inactive customers. But Ms. Reid swore that she sent the Schedule “B” letter to “all past clients of Scarborough.” So counsel’s purported explanation that the computer was showing inactive too cannot pass muster. Ms. Reid must have had some records to let her send letters to all past clients. Moreover, even if a client is inactive, the applicants should still have files on them. It is the applicants who made submissions to me about the importance of keeping records just in case tax or legal issues arise in future.

[31] On reserving my decision on the contempt motion at the end of the hearing, I made a further order to wrap up the last remaining issues including requiring the applicants to deliver any remaining files, to take down signs, and to instruct Ms. Robinson to cease solicitation of customers and caregivers.

Contempt of Court

[32] The elements of contempt of court were set out by the Court of Appeal in Bell ExpressVu Limited Partnership v. Torroni, [2009] 0J No. 356 as follows:

21. The three constituent elements of the test for civil contempt were summarized by this court in Prescott-Russell Services for Children and Adults v. G(N) (2006), 2006 CanLII 81792 (ON CA), 82 O.R. (3d) 686, at para 27:

The criteria applicable to a contempt of court conclusion are settled law. A three prong test is required. First, the order that was breached must state clearly and unequivocally what should and should not be done. Secondly, the party who disobeys the order must do so deliberately and willfully. Third, the evidence must show contempt beyond a reasonable doubt. Any doubt must clearly be resolved in favor of the person or entity alleged to have breached the order.

The Applicants’ Responses

[33] For his part, Weinert made a clear and plain admission and apology in his affidavit. In para. 2 of his affidavit he testified:

I understand that by my actions as described herein I breached the Court Order made on December 5, 2015. I would like to sincerely apologize to the Court for doing so. I did not intend to disrespect the Court by my actions.

[34] Mr. Weinert explains that he was told by Ms. Reid that they were expected by the respondent to satisfy customers until they signed on with other franchisees. He forthrightly admits to instructing Mr. Robinson to send her email of December 8, 2015 to which I referred above. He says that Ms. Reid had nothing to do with either that email or his letter and had no knowledge of either. He plainly accepts that it was wrong to say that the business would continue to operate. He has nothing to say however about the suggestions of ongoing operations in Ms. Robinson’s subsequent emails.

[35] Ms. Reid’s position is more nuanced. She admits to breaching the December 4, 2105 order by filling customer orders at the franchisor’s request and she apologizes for doing so. . Mr. Miller then attacked the franchisor for failing to show him or Ms. Reid a copy of the franchisor’s transition plan. He said that when confusion surfaced in the market place and the applicants started to receive telephone calls from distressed customers, Ms. Reid was guided by her “big heart.” Her seniors were being confused and scared by men knocking at their doors with contracts for them to sign. Mr. Miller invoked the colourful image of Ms. Reid on the telephone trying to calm the attorney for a 98 year old client. He forgot that in her affidavit Ms. Reid denied speaking to that client. I took his submissions as a more generic reference to an allegedly harried and distraught Ms. Reid dealing with vulnerable clients who were upset or confused or both. Ms. Reid spends most of her affidavit discussing her perception of the failings of the franchisor and the other franchisees in deal with her vulnerable customers. She says that she was just servicing customers who had not yet entered into agreements with other franchisees as requested by the franchisor. She allows Mr. Weinert to fall on his sword for her and denies any knowledge of his letter or Ms. Robinson’s email of December 8, 2015. She also denies knowledge of Ms. Robinson’s email of December 9, 2015 that was sent out under her Scarborough signature.

[36] At the hearing before me, the Applicants’ counsel argued that the respondent is a big American bully who was acting un-Canadian in shutting down the franchisees rather than sitting down and offering to buy them out. Prejudice based on national stereotypes is not appropriate legal argument. Moreover, there is nothing remotely unpatriotic in seeking to enforce parties’ contracts.

[37] The franchisor too appealed to greater principles in seeking aggressive enforcement of the court’s order. Mr. Shaw asked me to take judicial notice of the importance of the franchise industry in Canada. He pointed to a court decision from a sister province that he says has raised concerns among franchisors and the franchisors’ side of the franchise bar. He therefore invited this court to send a strong message to reassure franchisors that their business is safe in Canada. I am honestly not spending much time worrying about franchisors’ views of their ability to protect themselves. I have never seen evidence suggesting that franchisors lack market power in Ontario. Nor is there any evidence before the court to suggest that the franchise sector is at all at risk because franchise agreements are not enforced by our courts. Franchisors draft their contracts and, like all, must live within the applicable law. The court enforced the post-termination covenants in the franchise agreements in this case because the franchisor made out a proper case to do so on the facts and in law. Likewise, the court will deal with this contempt motion on the facts and law and decidedly not to send any special messages to franchisors or to comment on decisions of other courts on other issues that are not before me.

Conflicting Affidavits

[38] At para. 45 of Prescott Russel, referred to above, Blair J.A. discussed the process of deciding a contempt motion. He held:

[45] The problem is that the entire evidence submitted to the court was in the form of affidavits. No one testified before the judge. The court should not thus rule on contradictory facts; a trial should determine what those are. This case involved a contempt of court charge -- a quasi-criminal process, where the moving party must establish beyond a reasonable doubt the accused's guilt.

[46] Therefore, with all due respect, the motion judge erred in law by ruling on contradictory facts contained in Ms. Bélanger's and the parents' affidavits. [page 701]

[39] Like that case, all of the evidence before me was also adduced through affidavits. All of the witnesses were present in court at the hearing of the contempt motion. All counsel declined the court’s offer to allow them to call viva voce evidence. Accordingly, there will be no order for a trial. I am therefore proceeding on the understanding that it would be an error of law for me to rule on competing evidence. This means that the franchisor cannot succeed on issues where facts are in dispute in competing affidavits.

Analysis

[40] As discussed at the outset, I accept the while the applicants were not complying with the December 4, 2015 order in servicing customers at the franchisor’s request, it does not lie in the franchisor’s mouth to complain. The letters that it sent purporting to invoke a wind down period were not consistent with the order that it sought and obtained. But they are consistent with Ms. Reid’s evidence that the franchisor requested her help. I am not sure if the franchisor’s request leads me to have a doubt as to whether Ms. Reid and Mr. Weinert were intentionally not complying with the court’s order or, perhaps, I am actually finding the franchisor estopped from enforcing the order despite the breaches. In either case, I would not hold the applicants to have committed contempt of court by reason only of their servicing of clients. As noted previously, the businesses have now ceased to operate.

[41] However, that does not end the matter. As discussed previously, Mr. Weinert admits to breaching the order by having Ms. Robinson send her December 8, 2015 email and in his own December 8, 2015 letter. He knew of the order. He knew that respondent was seeking an order to shut down the franchises and that he had lost the motion. I expect that he did not understand the consequences of breaching a court order. However, I have no doubt that he knew that he was doing what he had been prohibited from doing in rallying the troops to defy his post-termination obligations and the court’s order.

[42] Ms. Reid’s explanations concerning filling a few shifts do not go to excuse the multiple other failures to fulfill the post-termination obligations set out in para. 17 of the franchise agreement. Pretending for the moment that the choice of signature used by Ms. Robinson on her emails matters, Ms. Reid cannot ignore the December 9, 2015 email sent out for her franchisee that provides that there will be no changes to caregivers’ schedules going forward. That is not consistent with a two day period of filling a few more shifts. Ms. Reid denies knowing of this email. I will return to that point.

[43] I cannot however, go further and find Ms. Reid liable for the December 8 communications of which she denies knowledge with Mr. Weinert’s support. While I am more than dubious of the applicants’ protestations of independence, I am constrained from finding proof beyond a reasonable doubt on contested affidavit evidence. Therefore, in respect of the email communication, I can only find the Scarborough franchisee liable for the one communication that went out under its name. Ms. Reid is the operating mind of the corporate franchisee. In my view she is and ought to be liable for its act of contempt.

[44] The order dated December 15, 2015 demonstrates several ways in which the applicants had not completely fulfilled their post-termination obligations that are consistent with their intention to remain in business. They were continuing to communicate with caregivers about future shifts. They continued to update their Facebook page. They did not assign their phone lines to the franchisor. They continued to use “homeinstead” email addresses. They continued to use the computer system. They continued to hold themselves out as Home Instead franchisees. At least until the contempt motion was brought, they were operating beyond just filling a few shifts for the franchisor.

[45] In retrospect, it was apparent that shutting down two businesses and transitioning the work without missing a shift would involve a process. I raised this issue myself in court. I could find the applicants in contempt for not starting quickly enough or in earnest until threatened with this contempt motion. But, in my view, the cause of the confusion lies principally at the feet of the franchisor. It asked for an order with immediate effect and then purported to require the franchisees to act contrary to the order. A few days of flailing around is explicable in light of the failure of the franchisor to manage the transition or to even send one clear letter to the franchisees setting out reasonable or realistic expectations. What is not explicable or excusable are the December 8, 2015 communications from Ms. Robinson and Mr. Weinert, Ms. Robinson’s email of December 9, 2015 on behalf of the Scarborough franchisee and her email of December 11, 2015. All meet the three-part test for civil contempt. The applicants knew of the order and deliberately acted to violate it in letter and in spirit in telling the market place that they were staying open and making the other statements that I have discussed above.. Proof is certainly beyond a reasonable doubt as it is from their own mouths and Mr. Weinert has forthrightly admitted as much.

[46] I make this finding for the corporate franchisees and the individual applicants who are their sole operating minds despite Ms. Reid’s evidence that she did not know of the December 9, 2015 email. On her own evidence she was the owner and the operator of the corporation. According to her, only she stood to profit from the corporation’s acts. I do not think that she can insulate herself from liability for her corporation’s contempt by denying knowledge of a specific communication when what underpins that communication is a corporate management decision to continue operating in breach of the court’s order. While it may have been quite transitory, I am satisfied beyond a reasonable doubt that both franchises, independently and together, initially decided to take a run at staying in business and communicated this to customers and/or caregivers in the marketplace.

[47] The court is now required to hold a hearing to determine the sentence, if any, for the contempt as found. It should be apparent that the court is not concerned that the acts of contempt as found reflect ongoing or serious challenges to the rule of law. It is also clear that the defendants’ mis-steps have now been overtaken by a proper recognition and implementation of the court’s order. There is no significant ongoing compliance issue. Mr. Weinert has already apologized and cooperated with steps to shut down the businesses. Ms. Reid apologized for breaches of the interlocutory injunction that were not found to amount to contempt of court. She has been ordered to take the final steps to confirm the shot down of her business. Assuming those steps are taken on a timely basis, there may little left to be done to purge the contempts as found. The parties are therefore urged to resolve the matter consensually if they can.

[48] My office will be in touch with counsel in early January to book a convenient date for a hearing if necessary. In my handwritten endorsement of December 18, 2015, I have already reserved costs to that hearing.

F.L. Myers J.

Date: December 21, 2015