Court File and Parties

COURT FILE NO.: CV- 14-510796 DATE: 20160527 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Luciano Butera, 1515404 Ontario Inc., operating as Niagara Mitsubishi and Canterra Property Holdings Inc., Plaintiff / Responding Parties AND: Chown Cairns LLP and Harry Korosis, Defendants / Moving Parties

BEFORE: Justice Edward P. Belobaba

COUNSEL: John D. Campbell for the Defendants / Moving Parties Neil G. Wilson for the Plaintiffs / Responding Parties

HEARD: May 12, 2016

MOTION FOR PARTIAL SUMMARY JUDGMENT

[1] When the plaintiffs’ Niagara Mitsubishi dealership failed, they sued the automobile manufacturer for breach of contract, misrepresentation, negligence and breach of provincial franchise legislation. The action was dismissed on a motion for summary judgment because it was commenced after the limitations period. [1] The Court of Appeal affirmed the dismissal, agreeing with the motion judge that the action was time-barred. [2] The other grounds of appeal were not addressed.

[2] The plaintiffs now sue their lawyer and his law firm for missing the limitations period. The plaintiffs say that because the defendants missed the limitations period, they lost the opportunity on appeal to argue the merits of their misrepresentation, negligence and Arthur Wishart Act [3] claims. The plaintiffs are seeking $5 million in “lost opportunity” damages.

[3] The plaintiffs’ action for solicitor’s negligence is proceeding to trial. However, the defendant law firm asks in this motion for partial summary judgment that the misrepresentation component of the plaintiffs’ damages claim be dismissed because the trial judge’s finding that no misrepresentations were made by Mitsubishi was not appealed to the Court of Appeal and thus, at least with regard to the misrepresentation claim, there was no “lost opportunity.”

The dismissal of the action against Mitsubishi

[4] The heart of the plaintiffs’ case against Mitsubishi was that Mitsubishi made predictions about the future performance of Niagara Mitsubishi based on the past performance of the Mitsubishi brand in the U.S. The plaintiffs claimed that these predictions were misleading. Mitsubishi denied making any misrepresentations, claimed that the lawsuit was brought outside of the limitation period, and brought a motion for summary judgment dismissing the action.

[5] Justice Hambly agreed with Mitsubishi and dismissed the action, primarily on the basis that the action was time-barred. Hambly J. also found that there had been no misrepresentations. The motion judge noted that the plaintiffs had “no evidence” that the U.S. data was inaccurate or misleading:

[The plaintiff] admits that he has no evidence that the figures presented to him of the sales of Mitsubishi vehicles in the United States prior to his signing the Dealer Agreement on September 17, 2002 were not accurate. He also has no evidence that the agents of the defendants did not honestly believe their predictions of success of the Mitsubishi brand both in the United States and Canada. [4]

[6] Hambly J. concluded that Mitsubishi’s predictions of success were opinions about the future that were honestly held and did not in law amount to misrepresentations. [5] He also found that the “entire agreement” and release provisions in the dealer licence agreement were complete defences to the plaintiffs’ claims and that the Arthur Wishart Act did not apply, and if it did apply, that Mitsubishi “made no representation which would give the plaintiffs a cause of action [under s. 7(2) of the Act].”

[7] The plaintiffs appealed Justice Hambly’s decision. The Court of Appeal dismissed the appeal, agreeing with the motion judge that the action against Mitsubishi was out of time. [6]

The parties’ positions on the motion before me

[8] The defendant law firm moves for partial summary judgment dismissing the misrepresentation component of the damages claim. The defendant submits that Hambly J.’s findings on misrepresentation were not appealed and therefore should form no part of the “lost opportunity” damages claim that may be addressed at trial (if the solicitor’s negligence claim succeeds). By removing the misrepresentation component from the damages claim, says the defendant, the upcoming trial will be less costly, more focused and more manageable. [7]

[9] The plaintiffs ask that the defendant’s motion for partial summary judgment be dismissed. They argue that misrepresentation was appealed and point, in particular, to paragraph 4 of the Notice of Appeal.

Analysis

[10] The defendant’s motion turns on whether there was an appeal from Justice Hambly’s finding that there was no misrepresentation. If the misrepresentation finding was appealed, then the plaintiffs arguably lost the opportunity to argue and possibly prevail on this ground. But if it was not appealed, then no such opportunity was lost. The plaintiffs’ Notice of Appeal (which is attached in full in the Appendix) lists four grounds of appeal that in essence provide as follows:

1. The motion judge erred in dismissing the action as statute-barred;
2. The motion judge erred in finding that the waiver and release provisions were a “complete defence” to the appellants’ action;
3. The motion judge erred in interpreting and applying the Arthur Wishart Act;
4. The motion judge erred in applying the full appreciation test enunciated by the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633. [8]

[11] The word “misrepresentation” is used in two of the four grounds of appeal but only for the purpose of either framing the limitations argument (the first ground) or suggesting a statutory damages remedy for non-disclosure under s. 7 of the Arthur Wishart Act (the third ground). However, there is no indication of any intention to appeal Justice Hambly’s finding that there were no misrepresentations. I will explain.

[12] The first ground only dealt with the motion judge’s decision to dismiss the action as statute-barred. It is clear from the “overview” section of the plaintiffs’ appeal factum, that the first error ascribed to the motion judge was a “failure to apply [the] six year limitation period” under the predecessor statute. This argument was struck on the day of the appeal hearing by the Court of Appeal because it had not been argued below. Accordingly, the appeal was considered on the basis of Justice Hambly’s findings about the applicability of the two-year limitation period under the Limitations Act, 2002. [9]

[13] The second ground dealt with the motion judge’s finding that the waiver and release provisions in the franchise agreement between the parties were a complete defence to the plaintiffs’ action. The plaintiffs appealed this finding primarily on the basis of s. 11 of the Arthur Wishart Act which renders void any purported waiver or release of a franchisor’s statutory obligation.

[14] The third ground of appeal also addressed the Arthur Wishart Act and mentioned “misrepresentation” in paragraph 3(c), but only in the context of the omission of certain required information from the disclosure document. Here there was no disclosure document. This fact may result in a damages award under s. 7(1) for “failure to disclose” and for non-compliance with s. 5 (if the Act is found applicable), but not for “misrepresentation.” [10] I will say more about this point below.

[15] The fourth ground of appeal asserted that “the motion judge erred in applying the full appreciation test enunciated by [the Court of Appeal] in Combined Air Mechanical Services Inc. v. Flesch.” The plaintiffs rely heavily on this fourth ground for the proposition that Justice Hambly’s findings on misrepresentation were indeed appealed to the Court of Appeal. They point to para. 67 of the plaintiffs’ appeal factum which challenged some of the inferences drawn by the motion judge in paragraph 22 of his reasons. In their supplementary factum before this court, the plaintiffs argue as follows:

Paragraph 67 of the appeal factum is a direct challenge to Justice Hambly’s findings on misrepresentation. Paragraph 22 of Justice Hambly’s reasons is cited no less than three times. The findings therein were explicitly challenged as “unsupported by the evidence” in the appeal factum. It cannot be said that the appellants did not appeal or challenge the misrepresentation findings.

[16] I do not agree with the submission that paragraph 67 of the plaintiffs’ appeal factum, “is a direct challenge to Justice Hambly’s findings on misrepresentation.” Paragraph 67 of the appeal factum challenged certain inferences made by the motion judge about the plaintiff Butera’s legal and industry knowledge and his knowledge about Mitsubishi’s sales history and practices. These were inferences about Mr. Butera’s personal knowledge base rather than inferences about any alleged misrepresentations made by the defendant Mitsubishi.

[17] Consider also the context of paragraph 67 in the appeal factum as a whole. The purpose of this paragraph was to support the argument that Hambly J. erred in deciding the action summarily given the “full appreciation” test that prevailed at the time – the plaintiffs argued on appeal that the issues and the evidence in the case required a trial. In other words, according to the plaintiffs, the motion judge could not “fully appreciate” the evidence in dispute, was wrong to draw the inferences that he did, and should have dismissed the motion for summary judgment.

[18] In my view, and I say this respectfully, it is a tendentious distortion to characterize paragraph 67, which is focused on Justice Hambly’s alleged misapplication of the “full appreciation” test, as a “direct challenge to Justice Hambly’s findings on misrepresentation.”

[19] The plaintiffs also submit that they appealed on the issue of statutory misrepresentation. Here they point in particular to paragraph 3(c) of the Notice of Appeal, to the effect that the Arthur Wishart Act deems the omission of any information that ought to be disclosed in a disclosure document “to be a misrepresentation grounding a claim under section 7.” As I have already noted, [11] the non-disclosure of information that is required under s. 5 of the Act may well ground a claim for damages for insufficient disclosure but this will be a claim relating to such non-disclosure, not a claim relating to any “misrepresentation.”

[20] In any event, even if the plaintiffs were right to say in para. 3 (c) of their Notice of Appeal that the Arthur Wishart Act deems the omission of any information that should be disclosed in a disclosure document “to be a misrepresentation grounding a claim under section 7”, this would (to repeat) be a claim for damages for breaching the s. 5 disclosure requirements. It would not be a claim for damages for any of the misrepresentations that were allegedly made by the defendant Mitsubishi. Indeed, a close reading of the Notice of Appeal and the appeal factum reveals, notwithstanding the imprecision in the language employed, that the claim pursued by the plaintiffs under ss. 5 and 7 of the Arthur Wishart Act was not one grounded in any statutory misrepresentation by Mitsubishi.

[21] I therefore conclude that the plaintiffs did not appeal any findings made by Justice Hambly on the issue of misrepresentation, common law or statutory. The finding of the motion judge that no misrepresentations were made was never before the Court of Appeal. The plaintiffs therefore did not lose any opportunity to pursue an appeal on this ground in the Mitsubishi action.

Disposition

[22] The defendants’ motion for partial summary judgment is granted. The common law and statutory misrepresentation component of the damages claim is dismissed. [12]

[23] The costs issue is somewhat complicated. At the hearing, the defendants said they would seek $15,000 if they were successful on this motion; the plaintiffs said they would ask for $25,000. The plaintiffs also submitted that the costs award should take into account the “costs wasted” on the defendants’ original motion for summary judgment dismissing the action in its entirety. The defendants’ initial motion did not proceed and was revised and transformed into this motion for partial summary judgment.

[24] The defendants were successful on this revised motion and, in principle, are entitled to costs. However, the plaintiff clearly incurred costs responding to the defendants’ original motion. I have reviewed the original material. In my view, it would be fair and reasonable to call it a wash and not award costs to either side. If either party strongly disagrees, they may forward a brief written submission and the other side may reply within 10 days thereafter.

[25] My thanks to counsel for their assistance.

Belobaba J. Date: May 27, 2016

APPENDIX: NOTICE OF APPEAL

COURT OF APPEAL FOR ONTARIO

BETWEEN:

LUCIANO BUTERA, 1515404 ONTARlO INC. operating as NIAGARA MITSUBISHI and CANTERRA PROPERTY HOLDINGS INC. Plaintiffs (Appellants)

-and-

MITSUBISHI MOTORS CORPORATION, MITSUBISHI MOTOR SALES OF AMERICA INC., MITSUBISHI MOTORS NORTH AMERICA, INC., MITSUBISHI MOTORS CREDIT AMERICA, INC. and MITSUBISHI MOTOR SALES OF CANADA, INC. Defendants (Respondents)

NOTICE OF APPEAL

THE PLAINTIFFS (APPELLANTS) APPEAL to the Court of Appeal from the judgment of Justice P.B. Hambly dated August 31, 2012 made at St. Catharines, Ontario.

THE APPELLANTS ASK that:

1. The judgment be set aside;
2. Costs of the motion for summary judgment and this appeal be awarded to the appellants on a substantial-indemnity basis pursuant to Rule 20.06 (a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194; and
3. Such further and other relief as this Honourable Court may deem just.

THE GROUNDS OF APPEAL are as follows:

1. The motion judge erred in dismissing the action as statute-barred for the following reasons: Claims in misrepresentation: a. the appellants' claim against the respondents for misrepresentation relates to pre-contractual misrepresentations which induced the appellants to enter into a franchise agreement with the respondents in September 2002 and to invest in a franchised automotive dealership; b. the claims for misrepresentation are based on the statutory cause of action for misrepresentation under section 7 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 ("Wishart Act"), and on the common law of misrepresentation; c. both the statutory and common law misrepresentation claims were prescribed by a six-year limitation period under the Limitations Act, R.S.O. 1990 c. L.lS, s. 45(l)(g) ("Former Limitations Act"); d. the transition provisions in s. 24(5) (2) of the Limitations Act, 2002, S.O. 2002, c 24, Sch B ("Limitations Act, 2002'') state that a claim that is discovered before January 1, 2004 is prescribed by the limitation period under the Former Limitations Act; e. s. 5(2) of the Limitations Act, 2002 states that a claim is deemed to be discovered on the day the act or omission on which the claim is based took place, unless the contrary is proved. Accordingly, the appellants were deemed to have discovered the claims for misrepresentation in September 2002, unless the contrary was proved; f. this action was commenced on October 31, 2007 and therefore was commenced within six years of the deemed discovery date; g. the motion judge failed to consider either the transition provisions in s.24(5)(2) or the deemed discovery provision in s. 5(2) of the Limitations Act, 2002 ; h. the motion judge found that the appellants discovered their claims by April 11, 2005 "at the latest' and ought to have known of the claims "substantially before that date." The April 11, 2005 date was an arbitrary date which did not correspond with actual discovery by the appellants. Nevertheless, accepting as correct the factual finding that the appellants ought to have discovered their claims "substantially before" April 11, 2005, the appellants could well have discovered their claim before January 1, 2004 and therefore have been subject to the six-year limitation period under the Former Limitations Act. There was no evidence on which the court could conclude that the appellants discovered the claim after December 31, 2003 but before April 11, 2005; i. whether the date of discovery of the misrepresentation claims is the deemed date on which the act or omission on which the claims are based took place, i.e. September, 2002, or any date before January 1, 2004, the appellants commenced the misrepresentation claims within the applicable six-year limitation period; j. further, and in the alternative, the appellants discovered their Wishart Act claims against the respondents in the summer of 2007 but were prevented from discovering such claims before then because of the respondents unlawful and bad faith denial of their status as a franchisor and franchisor's associate and agent within the meaning of the Wishart Act , which denial continues to this day; Claims in negligence and breach of contract: k. the acts or omissions upon which the post-contractual negligence and breach of contract claims are based occurred from the date of signing of the franchise agreement, i.e. September 17, 2002, onward. Thus the claims were deemed to have been discovered before December 31, 2003; l. claims for negligence and breach of contract discovered on or before December 31, 2003 were subject to a six-year limitation period under the Former Limitations Act ; m. the motion judge found that the appellants discovered their negligence claim (and, implicitly, although not expressly, the breach of contract claim) by April 11, 2005 "at the latest' and ought to have known of the claims "substantially before that date." n. there was no evidence on which the court could conclude that the "substantially before" date was after December 31, 2003; and o. whether the date of discovery of the claims for negligence and breach of contract is the deemed date on which the act or omission on which the claims are based took place, i.e. on or after September 17, 2002, or any other date before January 1, 2004, the appellants commenced those claims within the applicable six-year limitation period.
2. The motion judge erred in finding that the waiver and release provisions contained in the franchise agreement are a "complete defence" to the appellants' action for the following reasons: (a) section 11 of the Wishart Act renders any purported waiver or release of an obligation on a franchisor or franchisor's associate under the Wishart Act to be void; (b) the respondents were a franchisor or franchisor's associate; (c) the waiver and release provisions purported to waive or release liability for statutory misrepresentation and breach of section 5 of the Wishart Act and were therefore void; and (d) the waiver and release provisions cannot operate prospectively so as to defeat claims based on facts arising after the entering into of the franchise agreement and thus cannot defeat the claims in post-contractual negligence and breach of contract.
3. The motion judge erred in interpreting and applying the Wishart Act in the following important respects, each of which led or contributed to the dismissal of the action by summary judgment: (a) failing to find and give effect to the fact that the dealership operated by the appellant was a franchise and that the respondents are a franchisor or franchisor's associate or agent within the meaning of the Wishart Act ; (b) finding that sections 3 , 7 and 9 of the Wishart Act "do no more than codify the common law;" (c) finding that the appellants, before they entered into the franchise agreement, were required to request financial information from respondents, search the internet and newspapers for material facts concerning the franchisor, accept at face value uncertified information, including financial information, within the sole knowledge of the respondents when the Wishart Act requires all material facts including prescribed financial information concerning the franchisor and the franchise system to be disclosed to a prospective franchisee in a disclosure document, certified by at least one officer of the franchisor, and provided to the prospective franchisee in one document at one time at least 14 days before entering into a franchise agreement, and deems the omission of any such information or certification to be a misrepresentation grounding a claim under section 7 thereof. It is an agreed fact that the respondents did not provide any disclosure document to the appellants.
4. The motion judge erred in applying the full appreciation test enunciated by this Court in Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633.
5. Such further and other grounds as counsel may submit and this Honourable Court may receive.

THE BASIS OF THE APPELLATE COURT'S JURISDICTION IS:

1. Leave is not required; and
2. The Judgment being appealed is a final Judgment.

September 28, 2012

[1] Butera et al. v. Mitsubishi Motors et al., 2012 ONSC 4980. [2] Butera v. Mitsubishi Motors Corporation, 2013 ONCA 99. [3] Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c.3. [4] Supra, note 1, at para 22. [5] Ibid., at para. 23. [6] Supra, note 2. [7] Counsel for the defendants notes that there were almost 2000 pages of evidence, 1000 pages of discovery and 500 pages of cross-examination before Hambly J. on the summary judgment motion and that most of this related to the misrepresentation claim. [8] The appeal was brought in 2012 when the “full appreciation” test as set out in Combined Air v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431 (C.A.) was the prevailing test. [9] Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. [10] The plaintiffs’ appeal factum notes at paras. 29 and 55 that s. 7 of the Arthur Wishart Act creates a cause of action for “misrepresentation” based on “failure to comply with s. 5.” This is not correct. Section 7 has two branches: damages for misrepresentation in a disclosure document and damages for non-compliance with s. 5. The second branch, which is the only branch that applies here, provides a cause of action for damages for non-compliance with s. 5; it does not provide a cause of action for “misrepresentation.” [11] Supra, note 10. [12] The defendants also asked for an order under Rule 20.05(1) that “Mitsubishi did not make any misrepresentations to the plaintiffs and that fact is not in dispute.” Given my ruling herein, this additional direction is completely unnecessary. But more importantly, Rule 20.05(1) is not available on the facts herein because the defendants’ motion for partial summary judgment was granted in its entirety. Rule 20.05(1) only applies where “summary judgment is refused or granted only in part .” (Emphasis added.)