2018 ONSC 1519
COURT FILE NO.: CV-16-557931
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
8518076 CANADA INC.
Plaintiff/Responding Party
– and –
QUIZNOS CANADA RESTAURANT CORPORATION, KENNETH A. CUTSHAW, STUART K. MATHIS, GEORGE TRICHAS and MARC CHOY
Defendants/Moving Parties
Michael A. Kleinman, for the Plaintiff/Responding Party
Charles Hammond, for the Defendants/Moving Parties
HEARD: February 9, 2018
B.A. ALLEN J.
REASONS FOR DECISION
BACKGROUND
[1] The plaintiff, 8518076 Canada Inc. (“the Plaintiff”), and the defendants, Quiznos Canada Restaurant Corporation, Kenneth A. Cutshaw, Stuart K. Mathias, George Trichas and Marc Choy (“the Defendants”), entered in a franchise agreement (“the Agreement”) on July 25, 2013.
The Three Actions
[2] There are three actions brought in relation to this case.
[3] The Plaintiff commenced an action in the Ontario Superior Court of Justice in the civil trial division on August 4, 2016. That claim alleges misrepresentation by the Defendants in relation to information provided to the Plaintiff before the parties entered into the Agreement (“the misrepresentation action”).
[4] On October 9, 2017, the Plaintiff commenced a Small Claims Court action in Ottawa in relation to a promotion fund term under the Agreement (“the promotion fund action”). On November 30, 2017, the Plaintiff commenced a further Small Claims Court action in Ottawa in relation to a fee reduction term under the Agreement (“the reduction fee action”).
[5] On November 30, 2017, the Defendants brought this motion to stay or transfer to the Superior Court the promotion fund action. Subsequently, the Defendants amended the motion to include a motion to stay or transfer the fee reduction action.
[6] The Plaintiff alleges in the misrepresentation action in the Superior Court that the Defendants made material misrepresentations with respect to disclosure contrary to s. 7 of the Arthur Wishart Act (“the Act”). The Plaintiff alleges that the misrepresentations induced the Plaintiff and its principal into entering the Agreement. The inducements were in relation to projected revenue sales per year. The cost and earnings projections misrepresented the actual costs incurred and sales earned by Quiznos franchisees.
[7] The promotion fund action is based on a contractual breach. Under the Agreement the franchisees are required to pay into an advertising fund on a weekly basis. The Plaintiff made three requests asking the Defendants how the advertising fees were spent for the years ending 2014 and 2015. The promotion fund action alleges those requests were not responded to thereby constituting a breach of the Defendants’ disclosure obligations under sections 12.3 and 12.4 of the Act.
[8] The fee reduction action involves a provision under the Agreement where the Defendants offer an incentive amounting to a reduction of 4% to the fees a franchisee pays a franchisor. On December 6, 2016, the Defendants wrote the Plaintiff denying the benefit of the fee reduction for reason of the ongoing misrepresentation action in the Superior Court. The Plaintiff alleges that the Defendants arbitrarily discriminated against them in denying the benefit and further alleges that such discrimination is a breach of the fair dealing required under the Act.
THE LAW
[9] Section 138 of the Courts of Justice Act (“the CJA”) provides that “as far as possible, multiplicity of legal proceedings shall be avoided”. Section 107(1) of the CJA gives guidance on the application of s. 138:
107 (1) Where two or more proceedings are pending in two or more different courts, and the proceedings,
(a) have a question of law or fact in common;
(b) claim relief arising out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason ought to be the subject of an order under this section, an order may, on motion, be made;
(d) transferring any of the proceedings to another court and requiring the proceedings to be consolidated, or to be heard at the same time, or one immediately after the other; or
(e) requiring any of the proceedings to be
(i) stayed until after the determination of any other of them; or
(ii) asserted by way of counterclaim in any other of them.
(2) A proceeding in the Small Claims Court shall not be transferred under clause (1)(d) to the Superior Court of Justice without the consent of the plaintiff in the proceeding in the Small Claims Court.
[10] On the question of whether under s. 107 coincident proceedings can have common parties, common issues of fact and common issues of law, the court in Vista v. Double observed:
Section 107 clearly contemplates coincident actions in Small Claims Court and the Superior Court of Justice that may involve common parties, common issues of fact and common issues of law. The section clearly contemplates the existence in these two courts of separate actions involving claims for relief arising out of the same transactions or occurrences.
[Vista Double T, 2011 ONSC 3454, at para. 13, (Ont. S.C.J.)]
ANALYSIS
[11] I agree with the Plaintiff that the misrepresentation action is factually and legally distinct from the two Small Claims Court actions. The Small Claims Court actions do not raise disclosure and misrepresentation issues which are at the heart of the Superior Court Action.
[12] It is true the three actions involve the same transaction, but only insofar as that they each emerge in relation to the Agreement. However, the timing of when the Small Claims Court actions arose in relation to the Agreement differs from the claim before the Superior Court in that the misrepresentation occurred before the parties had entered into the Agreement and the breaches of contract in relation to the promotion fund and fee reduction claims happened after the parties began operating under the Agreement.
[13] The Superior Court action and the Small Claims Court actions have the Agreement in common and parties in common. However, the Superior Court action relies on a different set of facts and a different body of law from the Small Claims Court actions. For those reasons, I find that a multiplicity of proceedings with conflicting decisions will not result from the Small Claims Court proceedings being conducted separate from the action in the Superior Court.
[14] There is a further consideration raised by other courts. The burden to the Plaintiff of proceeding with the Small Claims Court claims in Superior Court would be prohibitive in terms of the increased time in having those matters heard in the Superior Court and in terms of the much increased cost. The complexity of a Superior Court proceeding will require the assistance of a lawyer. Litigating the matter in Toronto will increase the expense and inconvenience to the Plaintiff. Given the circumstances that favour separate proceedings, this is an unnecessary burden when the actions can more efficiently and effectively be managed separately: [Market Leadership Inc. v. Nicolini, 2008, O.J. 175, at para. 14, (Ont. S.C.J.)].
ORDER
[15] I decline to grant the motion transferring the Small Claims Court action to the Ontario Superior Court and refuse to grant a stay of the Small Claims Court actions.
COSTS
[16] The Plaintiffs seek costs on a substantial indemnity scale of $4,604.75. The Defendants seek partial indemnity cost of $5,848.90. I grant the Plaintiff their costs fixed at $5,000.00 inclusive of disbursements and interest to be paid within 30 days of this Order.
B.A. ALLEN J.
Released: March 6, 2018
2018 ONSC 1519
COURT FILE NO.: CV-16-557931
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
8518076 CANADA INC.
Plaintiff/Responding Party
– and –
QUIZNOS CANADA RESTAURANT CORPORATION, KENNETH A. CUTSHAW, STUART K. MATHIS, GEORGE TRICHAS and MARC CHOY
Defendants/Moving Parties
REASONS FOR DECISION
B.A. ALLEN J.
Released: March 6, 2018