Overview

[1] Pet Valu Canada Inc. (“Pet Valu”) and 1250264 Ontario Inc. (“125”) were embroiled in a class action proceeding from December 2009 to October 2016. In that proceeding, Pet Valu was awarded over $1.7 million in costs against 125, who was the representative plaintiff. To date, 125 has not paid any of the costs awarded to Pet Valu.

[2] In October 2016, Pet Valu commenced this action against the Defendant, Robert Rodger (“Mr. Rodger”), the sole shareholder of 125, for payment of the costs orders. Pet Valu relies upon an indemnification provision in the franchise agreement entered into by the parties, and the terms of a personal guarantee signed by Mr. Rodger.

[3] Pet Valu brings this motion for summary judgment of its claim. Mr. Rodger brings a cross-motion for summary judgment dismissing Pet Valu’s claim. The Defendant disputes the application of the provisions of the franchise agreement and guarantee upon which Pet Valu relies. Mr. Rodger also argues that Pet Valu’s claim is statute-barred, or, alternatively, that Pet Valu released the claim in the settlement of another action.

[4] The Statement of Claim originally included a claim against the Defendant for fraudulent conveyance against Mr. Rodger and his spouse, Laurel Christine Irvine-Rodger. The claim for fraudulent conveyance was discontinued with prejudice and without costs, and is not at issue in this motion.

[5] For the reasons that follow, I grant Pet Valu’s motion for summary judgment and dismiss Mr. Rodger’s cross-motion.

Factual Background

The Franchise Agreement

[6] The Plaintiff, Pet Valu, is a wholesaler and retailer of pet food, supplies and related services. Pet Valu grants franchises for Pet Valu pet supply stores in Ontario and other provinces. The Defendant, Mr. Rodger, is the sole shareholder, director, and officer of 125.

[7] On March 11, 2005, Pet Valu and 125 entered into a franchise agreement for 125 to operate a Pet Valu franchise in Aurora, Ontario (the “Franchise Agreement”). The Franchise Agreement was executed by Mr. Rodger on behalf of 125 as franchisee, and in his personal capacity. The Franchise Agreement includes an indemnification provision, under which a franchisee agrees to indemnify Pet Valu for costs incurred in defending any action or claim brought by the Franchisee against Pet Valu (the “Indemnification Provision”).

[8] At around the same time, Mr. Rodger also executed an “Unlimited Continuing Guarantee” (the “Guarantee”), pursuant to which he guaranteed 125’s performance of its obligations under the Franchise Agreement, and prompt payment of amounts owed by 125 to Pet Valu.

[9] Mr. Rodger received independent legal advice before executing both the Franchise Agreement and the Guarantee.

The Class Action

[10] In the fall of 2009, Mr. Rodger advised Pet Valu that he wanted Pet Valu to buy back the Franchise. The parties were significantly apart on the price, and no agreement was reached.

[11] On November 4, 2009, 125, through its counsel, sent a letter to Pet Valu detailing its dissatisfaction with the lack of profitability of the franchise arrangement. At the time, Pet Valu and 125 were still exchanging email messages about a potential buy-back of 125’s franchise. On December 1, 2009, Pet Valu wrote to 125 requesting its financial statements and seeking further time to resolve the issues raised in the November 4 letter.

[12] On December 9, 2009, 125 commenced a $100 million class action against Pet Valu (the “Class Action”). 125, on behalf of Pet Valu franchisees, alleged breach of contract and breach of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000 c. 3 (the “AWA”), among other things. The gist of the claims was that Pet Valu had not shared volume rebates that it received from suppliers with the franchisees and that it overcharged franchisees for certain items. The class was certified by Strathy J. (as he then was) on January 14, 2011, but only in relation to the issue of volume rebates.

[13] Pet Valu brought a motion for summary judgment on all of the common issues. Pet Valu’s motion was substantially successful, but one of the common issues was answered in favour of the class: 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2014 ONSC 6056; 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2015 ONSC 29. In January 2016, the Court of Appeal reversed the motion judge’s decision and dismissed all of the claims against Pet Valu: 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONCA 24, 344 O.A.C. 222. The Class Action concluded in October 2016 when the Supreme Court of Canada refused to grant 125’s application for leave to appeal: 1250264 Ontario Inc. v. Pet Valu Canada Inc., [2016] S.C.C.A. No. 105.

[14] After the Court of Appeal dismissed the Class Action, on September 6, 2016, Belobaba J. determined costs of the summary judgment motion (the “Costs Decision”). In the Costs Decision, Belobaba J. noted that the certified common issues were answered in favour of Pet Valu and the action was dismissed in its entirety: 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONSC 5496, at para. 1. Pet Valu was awarded $1,703,896.94 including applicable taxes. In the Costs Decision, Belobaba J. dismissed Pet Valu’s argument for joint and several liability for costs against Mr. Rodger, but specifically stated that Pet Valu would not be precluded from commencing an appropriate proceeding against Mr. Rodger directly, to determine Mr. Rodger’s personal liability for these costs under s. 41(e) of the Franchise Agreement and/or the provisions of the Unlimited Continuing Guarantee (Costs Decision, at para. 2).

[15] During the course of the Class Action, five other costs orders were made in favour of Pet Valu:

• Order of the Court of Appeal dated December 12, 2012 for $3,000.00;

• Order of Belobaba J. dated April 4, 2014 for $1,500.00;

• Order of the Court of Appeal dated January 7, 2015 for $2,000.00;

• Order of the Court of Appeal dated January 14, 2016 for $25,000.00;

• Judgment of the Supreme Court of Canada dated October 6, 2016 and certificate of taxation dated April 12, 2017 for $1,278.60 in costs.

[16] The total of all of the costs awards is $1,736,675.54 plus applicable interest (the “Costs Awards”). This is the amount that Pet Valu seeks to recover in this proceeding.

The Sale of 125’s Franchise

[17] In January 2012, while the Class Action was still proceeding, Mr. Rodger sold the assets of 125 to a third party and left the Pet Valu franchise system. The purchase price of the franchise was $320,000.00 and resulted in a significant profit to Mr. Rodger.

[18] 125 then opened a pet food store called “The Hungry Pet,” which resulted in Mr. Rodger competing directly with existing Pet Valu franchises, in breach of the non-competition provisions of the Franchise Agreement. Pet Valu commenced an action and obtained an injunction to prevent 125 from operating The Hungry Pet (the “Injunction Proceeding”). On December 5, 2012, Mr. Rodger and 125 consented to an order requiring The Hungry Pet to close down.

[19] At the examination in aid of execution of 125, Mr. Rodger admitted that 125 retained none of the proceeds of the sale of the franchise in 2012, and that the proceeds were used to begin The Hungry Pet in 2012. 125 ceased active operations in 2013. 125 is now a shell corporation with no assets, and which has not made any corporate filings since 2007.

[20] On September 16, 2016, Pet Valu delivered a Notice of Demand to Mr. Rodger seeking payment of the unpaid Costs Awards pursuant to his obligations under the Franchise Agreement and the Guarantee.

Issues

[21] The motion and cross-motion for summary judgment raise the following issues:

(i) Is Mr. Rodger liable for the Costs Awards pursuant to the Indemnification Provision in the Franchise Agreement?

(ii) Is Mr. Rodger liable for the Costs Awards under the Guarantee?

(iii) Is Pet Valu’s claim statute-barred by the Limitations Act, 2002?

(iv) Did Pet Valu release its claim against Mr. Rodger?

Analysis

Principles Applicable to Summary Judgment

[22] Rule 20.04(2)(a) states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[23] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.

[24] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using the fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2): Hryniak, at para. 66.

[25] The court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97.

[26] In this case, the parties’ dispute centres upon the applicability and legal effect of the agreements into which they have entered. The facts are not significantly in dispute, and the parties agree that the summary judgment process allows the court to make the necessary findings of fact and to apply the law to those facts.

Principles of Contractual Interpretation

[27] The Supreme Court of Canada has observed that the courts’ approach to contract interpretation “has evolved towards a practical, common-sense approach not dominated by technical rules of construction”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. The primary object of contract interpretation is to give effect to the intention of the parties at the time of contract formation: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 45. The “intent of the parties and the scope of their understanding,” is determined by reading a contract “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva Capital, at para. 48. The Supreme Court has noted, quoting Lord Reid in L. Schuler A.G. v. Wickman Machine Tool Sales Ltd., [1974] A.C. 235 (U.K.H.L.), at p. 251, that “[t]he more unreasonable the result, the more unlikely it is that the parties can have intended it.” Bhasin v. Hrynew, at para. 45.

[28] Similarly, in The Plan Group v. Bell Canada, 2009 ONCA 548, 96 O.R. (3d) 81, at para. 37, the Court of Appeal held that a commercial contract should be interpreted: (i) as a whole, by giving meaning to all the terms of a contract to avoid an interpretation that would render any term ineffective; (ii) by determining the intention of the parties with reference to the words used in the contract; (iii) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to subjective intention; and (iv) to the extent that there is any ambiguity in the contract, in a fashion that accords with sound commercial principles and good business sense and that avoids a commercial absurdity.

Is Mr. Rodger Liable to pay the Costs Awards under the Indemnification Provision?

[29] Pet Valu relies upon the Indemnification Provision, paragraph 41(e) of the Franchise Agreement, as a basis for its claim against Mr. Rodger. Mr. Rodger seeks to avoid the application of the Indemnification Provision in the circumstances on the basis that: (i) the Indemnification Provision does not apply to class actions; and (ii) the provision does not apply to the Costs Awards.

[30] Paragraph 41(e) of the Franchise Agreement states:

In the event that the Franchisee asserts any action or claim against PVCI or its officers, directors or Affiliates, in relation to the Documentation and/or any other matter, the Franchisee shall, without limiting the generality of Subsection 38(e), save PVCI, its officers, directors and/or its Affiliates harmless from any and all costs of defence (including legal costs on a solicitor and client basis and all administration costs to prepare and carry forward such a defense) in proportion to the fraction obtained by subtracting the amount awarded (“y”) from the amount claimed (“x”) and dividing the result by the amount claimed – i.e. (x-y)/x. In the event of a non-monetary claim, the Franchisee shall similarly save PVCI, its officers, directors or Affiliates harmless proportionately to the extent of their failure to obtain judgement in their favour.

[31] In effect, if a Franchisee brings an action against Pet Valu, the Franchisee must indemnify Pet Valu for legal costs in inverse proportion to the Franchisee’s recovery in the proceeding. For example, if a Franchisee brings an action against Pet Valu for $5 million (x) and recovery is $4 million (y), then they will have to indemnify Pet Valu for its legal costs multiplied by a factor of 0.2 ([$5,000,000-$4,000,000]/$5,000,000 = 0.2.). In the Class Action, 125 claimed $100 million, but recovered nothing. The factor would be determined as follows: ($100,000,000.00 - $0)/$100,000,000 = 1. As a result, by operation of the Indemnification Provision, 125 would have to indemnify Pet Valu for 100 percent of its legal costs.

Does the Indemnification Provision Apply to Class Actions?

[32] The Indemnification Provision refers to “any claim or action” commenced by 125 “in relation to the Documentation and/or any other matter.” Given the broad and open-ended nature of the language used in the provision, there is nothing in the Indemnification Provision to suggest that it would exclude a class proceeding. The Indemnification Provision does not contain any particular limits or exclusions. If the parties had intended to exclude a particular type of claim or proceeding, they could have done so expressly.

[33] Indemnification for legal costs in the franchise context is not unusual. In Home Instead Inc. v. 244674 Ontario Inc., 2016 ONSC 255, at para. 1, Myers J. considered an indemnification clause for substantial indemnity costs in a franchise agreement, and observed that indemnity for costs is an industry standard, and a normal incident of becoming a franchisee.

[34] As Pet Valu argues, a class action is not a particular type of claim, but rather, a means through which multiple claims of a similar nature can be brought in a single proceeding. Class actions are procedural in nature and do not create substantive rights, modify existing rights or augment the courts’ jurisdiction: 1146845 Ontario Inc. v. Pillar to Post Inc., 2014 ONSC 7400, 65 C.P.C. (7th) 282, at para. 70. There is nothing so inherently distinct about class actions that would lead me to conclude that they would not be encompassed by the Indemnification Provision.

[35] Mr. Rodger argues that as a representative plaintiff, 125 should only be responsible for a proportionate share of the Costs Award. In Ontario, the class proceedings regime follows the ordinary costs rule, which is that the losing party can expect to pay costs to the successful party at any stage of the proceeding. Section 31 of the Class Proceedings Act, 1992, S.O. 1992, c. 6, provides that s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 applies to class proceedings, and that representative plaintiffs are responsible for paying costs, rather than the class members: Houle v. St. Jude Medical Inc., 2017 ONSC 5129, 9 C.P.C. (8th) 321, at para. 43. As Perell J. noted in Houle, exposure to an adverse costs award is designed to be a significant economic barrier to litigation: at para. 43.

[36] Mr. Rodger’s position that the Costs Awards should be shared proportionately by all class members is not consistent with his own treatment of costs awards made in favour of 125 in the Class Action. On cross-examination on his affidavit, Mr. Rodger admitted that when costs awards were made in favour of the class, for example, on the certification motion, 125 did not share the costs with other members of the class.

Does the Indemnification Provision Include Costs Awards?

[37] The language of the Indemnification Provision makes clear that it is specifically intended to deal with legal costs. The provision is unambiguous and specifically refers to “costs of defence (including legal costs on a solicitor and client basis and all administration costs to prepare and carry forward such a defense).”

[38] Where there is a contractual right to costs, the court will generally exercise its discretion so as to reflect that right: Bossé v. Mastercraft Group Inc. (1995), 1995 CanLII 931 (ON CA), 123 D.L.R. (4th) 161 (Ont. C.A.). The parties’ agreement, however, cannot exclude the court’s discretion. The court may exercise its discretion to refuse to enforce a contractual right if a party has engaged in inequitable conduct or where the outcome is unduly onerous or unfair in the circumstances: Bossé, at p. 178.

[39] In this case, there is no basis upon which the court should exercise its discretion to disregard the parties’ agreement on costs. Pet Valu is seeking indemnification for amounts ordered by the court in the Class Action, which have already been determined appropriate in the circumstances. There is no unfairness or inequitable conduct that would justify refusing to enforce Pet Valu’s contractual right. In fact, Pet Valu will recover less it is entitled to under the Indemnification Provision, which would allow recovery of one hundred percent of its legal costs in the event of complete success on the merits.

[40] In any event, as Belobaba J. noted, 125 did not question the reasonableness of the amount sought by Pet Valu for costs of the summary judgment motion, a total of $1.8 million on a partial indemnity basis. In the Costs Decision, Belobaba J. observed that the amount “is neither surprising nor disturbing” given the length and complexity of the litigation. He further noted that costs awards in the range of $1.5 to $5 million are not unusual for the merit-based portion of a class proceeding, whether by trial or by summary judgment: Costs Decision at para. 4.

[41] Based on the foregoing, there is no basis to find that the Indemnification Provision is not applicable to the Costs Award made in the Class Action.

Is Mr. Rodger Bound by the Indemnification Provision?

[42] In the Franchise Agreement, “Franchisee” is defined as the Franchisee Corporation, the shareholders thereof, and their respective successors, heirs, trustees, personal representatives, and any permitted transferees, all jointly and severally. The term “Franchisee” thus includes Mr. Rodger, as 125’s sole shareholder. In addition, Mr. Rodger signed the Franchise Agreement, on behalf of 125 and on his own behalf, and in his capacity as shareholder, indicating that he intended to be bound to the terms of the Franchise Agreement personally as a Franchisee.

[43] Paragraph 42(f) of the Franchise Agreement states that each person signing the agreement acknowledges that he has received and had ample time to read the agreement and to be advised by advisors of their choosing. On cross-examination on his affidavit in the certification motion, Mr. Rodger acknowledged that he read the Franchise Agreement and retained a lawyer to advise him on it. Mr. Rodger signed an acknowledgement that he read and understood the terms of the agreement, and that he obtained independent legal advice.

[44] At the examination in aid of execution, Mr. Rodger acknowledged that when he commenced the Class Action, he was aware that he was exposed to the risk of a potential adverse costs award in the Class Action. Notwithstanding his awareness of this exposure, Mr. Rodger did not make efforts to obtain funding for the costs from any third party sources. In the Costs Decision, Belobaba J. found that “Rodger must have known that he would not necessarily be shielded from liability for costs given [his] indemnity obligations under s. 41(e) of the Franchise Agreement and his execution of the Unconditional Continuing Guarantee: Costs Decision, at para. 13. Not only is Mr. Rodger personally bound by the terms of the Indemnification Provision, he was aware or ought to have been aware that he was bound.”

[45] Mr. Rodger argues that the Franchise Agreement is a contract of adhesion and should therefore be interpreted against Pet Valu. There is no interpretation of the Indemnification Provision, however, that would be consistent with its language and purpose that would not impose liability on Mr. Rodger. It is worth noting that in the Class Action, 125 relied upon the terms of the Franchise Agreement as a basis for its claims, but Mr. Rodger now seeks to avoid the application of a term of the same agreement.

[46] Mr. Rodger also claims that Pet Valu is not entitled to rely upon the Indemnification Provision because it breached the Franchise Agreement by failing to respond to 125’s notice under Paragraph 41(b) of the Franchise Agreement. To begin with, the provision does not impose an obligation on Pet Valu to respond. In any event, Pet Valu did respond seeking further time, but 125 commenced the Class Action soon after. Moreover, throughout the Class Action, no court has found any breach of the Franchise Agreement by Pet Valu.

[47] The grounds upon which Mr. Rodger relies to avoid the application of the Indemnification Provision fail. Based on the application of the Indemnification Provision, there is no genuine issue requiring a trial regarding Mr. Rodger’s liability for the Costs Award.

Does the Guarantee Apply to the Costs Awards?

[48] Based upon my conclusion on the application of the Indemnification Provision, it is not strictly necessary to determine whether or not Mr. Rodger is liable under the terms of the Guarantee. In the event I am mistaken in the interpretation of the Indemnification Provision, I find that Mr. Rodger would nonetheless be personally liable to pay the Costs Awards pursuant to the terms of the Guarantee.

[49] Section 1 of the Guarantee (“Section 1”) signed by Mr. Rodger states as follows:

The Guarantor hereby unconditionally and irrevocably guarantees to the Franchisor, its successors and assigns, the due, prompt and complete performance by the Franchisee of all the terms, covenants, conditions, and provisions of the Franchise Agreement including, without limitation, the due and punctual payment to the Franchisor of all fees, royalties, and other present and future amounts payable or accruing due under the Franchise Agreement, including interest as provided therein, and the due and prompt punctual payment to the Franchisor of all present and future debts, liabilities and other amounts from time to time payable by the Franchisee to the Franchisor however incurred, including, without limitation, amounts due to the Franchisor by way of subrogation, operation of law or otherwise, arising from payments made by the Franchisor to third parties on behalf of or for the account of the Franchisee, whether pursuant to any guarantee of the Franchisee’s indebtedness issued by the Franchisor or otherwise, and any ultimate unpaid balance of any of the foregoing, such balance to be calculated without taking into account any claim, set-off, or counterclaim available to the Franchisee, including, without limitation, those based on negligence or other tortious conduct of the Franchisor, its employees, directors, officers, and/or agents, or breach of contract under or in connection with the Franchise Agreement or any other agreement or arrangement between the Franchisor and the Franchisee pertaining to the Franchise. (all of the foregoing being hereinafter collectively referred to as the “Obligations”).

[50] The parties propose differing interpretations of the Section 1. The interpretation of the Guarantee is not assisted by the manner in which it is drafted, as one paragraph-long sentence without any indication as to which are the main clauses and which are sub-clauses. In order to assist in its interpretation, Section 1 can be broken down as follows:

(1) The Guarantor hereby unconditionally and irrevocably guarantees to the Franchisor, its successors and assigns,

(a) the due, prompt and complete performance by the Franchisee of all the terms, covenants, conditions, and provisions of the Franchise Agreement including, without limitation,

the due and punctual payment to the Franchisor of all fees, royalties, and other present and future amounts payable or accruing due under the Franchise Agreement, including interest as provided therein, and

(b) the due and prompt punctual payment to the Franchisor of all present and future debts, liabilities and other amounts from time to time payable by the Franchisee to the Franchisor however incurred, including, without limitation,

amounts due to the Franchisor by way of subrogation, operation of law or otherwise, arising from payments made by the Franchisor to third parties on behalf of or for the account of the Franchisee, whether pursuant to any guarantee of the Franchisee’s indebtedness issued by the Franchisor or otherwise, and

(c) any ultimate unpaid balance of any of the foregoing, such balance to be calculated without taking into account any claim, set-off, or counterclaim available to the Franchisee, including, without limitation,

those based on negligence or other tortious conduct of the Franchisor, its employees, directors, officers, and/or agents, or breach of contract under or in connection with the Franchise Agreement or any other agreement or arrangement between the Franchisor and the Franchisee pertaining to the Franchise.

(all of the foregoing being hereinafter collectively referred to as the “Obligations”).

[51] According to the terms of Section 1, three broad categories of obligations are guaranteed: (a) performance of the terms of the Franchise Agreement; (b) payment of all debts and liabilities; and (c) unpaid balances on the preceding two types of obligations. Each clause is followed by a sub-clause that further describes or enumerates the main clause. Because each is preceded by the language “including, without limitation,” the obligation contained in the main clause is not confined to or limited by the description in the sub-clause.

[52] Pursuant to the terms of the Guarantee, the outstanding Costs Awards are obligations for which Mr. Rodger could be responsible to pay under any one of the three broad categories. First, he guaranteed the first type of obligations, 125’s performance of the terms Franchise Agreement, including payment of all fees and amounts payable. This would include payment due under the Indemnification Provision, which as determined above, includes the Costs Awards.

[53] Second, Mr. Rodger guaranteed the second category of obligations, 125’s payment of all present and future debts or liabilities, however incurred. The Costs Awards would fall under this category because they are a judgment debt, owing from 125 to Pet Valu.

[54] Third, Mr. Rodger guaranteed the unpaid balance of the preceding two categories of obligations. Since the Costs Awards remain unpaid, they would also fall under the third category.

[55] Based on the terms of the Guarantee, Mr. Rodger’s position that Section 1 refers only to debts payable to third parties is without basis. The reference to payments made by the Franchisor to third parties is clearly only an enumeration of the category of obligation that precedes it, which is (b), past and future debts and liabilities payable by the Franchisee to the Franchisor, “however incurred”.

[56] If the Guarantee were limited to indebtedness of 125 to third parties, Pet Valu would have no recourse against Mr. Rodger for amounts owed to it by 125. This would be inconsistent with the express language of Section 1. The other categories of obligations would have no meaning and serve no purpose. If the Guarantee related only to payments made by Pet Valu to third parties, it would need only to state that, and all of the remaining language would be unnecessary. The principles of contract interpretation require the court to give meaning to all the terms of a contract and to avoid an interpretation that would render any term ineffective: Plan Group, at para. 37.

[57] The purpose of a guarantee is to provide a contracting party with recourse in the event that the principal debtor is unable to pay: Global Food Traders Inc. v. Massalin, 2015 ONCA 362, 43 B.L.R. (5th) 1, at para. 13. Other provisions of the Guarantee make clear that its purpose is to ensure the franchisee’s performance of its obligations under the Franchise Agreement. Section 2 of the Guarantee, for example, states that the Guarantor “agrees to adopt and be bound by each and every term… of the Franchise Agreement.” Section 3 states that the “Guarantor shall render payment or performance of any Obligation guaranteed hereunder forthwith upon demand if the Franchisee fails, neglects or refuses punctually to render such payment or performance….” These provisions support the interpretation that Mr. Rodger guaranteed amounts owing by 125 to Pet Valu. By contrast, the interpretation proposed by Mr. Rodger is incompatible with these provisions and the general purpose of a guarantee.

[58] In Home Instead, Myers J. enforced the guarantee given by the principal of the corporate franchisee, finding no basis to relieve the individual defendants from their commercial bargain: at para. 1. In this case, Mr. Rodger obtained independent legal advice specifically in relation to the Guarantee. The certificate confirms that his lawyer explained the contents of the Guarantee and advised him of “the nature, effect and potential consequences thereof and of the potential liability and obligations which [Mr. Rodger] would be assuming by executing [the Guarantee].” The Franchise Agreement would not have been concluded without the Guarantee. Having received the benefit of the bargain, Mr. Rodger cannot avoid the obligations that he entered into and personally guaranteed.

[59] It is also worth noting that Mr. Rodger admitted on examination that the assets of 125 were dissipated after the sale of the franchise, despite 125’s potential liability for costs. Mr. Rodger also admitted that he did not avail himself of funding sources for the Class Action that would have protected against his personal liability for costs. Belobaba J. noted this in the Costs Decision, at para. 5. The consequences of these choices should not be borne by Pet Valu, which was ultimately entirely successful in defending against the Class Action, but rather by Mr. Rodger, who made the choices, in full awareness of his obligations under the agreements that he signed.

[60] Based on the ordinary meaning of the terms used in Section 1 and reading the Guarantee as a whole, I find that there is no genuine issue requiring a trial regarding Mr. Rodger’s liability to pay the Costs Awards.

Is the Action Statute-Barred?

[61] Mr. Rodger argues that Pet Valu’s claims for the Costs Awards are statute barred. Irrespective of whether Mr. Rodger’s liability for the Costs Awards arises under the Indemnification Provision or the Guarantee, this argument is without merit.

[62] There is no limitation period in respect of a proceeding to enforce an order of a court: Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 16(1)(b). However, since this action is against Mr. Rodger, as opposed to 125, the basic limitation period of two years under s. 4 of the Limitations Act would apply.

[63] This proceeding was commenced on October 18, 2016. The Costs Decision on the summary judgment motion in the Class Action, was made on September 5, 2016, after the matter was referred back by the Court of Appeal. Three other costs awards were also made less than two years before this proceeding was commenced (on January 7, 2015, January 14, 2016 and April 12, 2017). In respect of all of these costs awards, the proceeding was commenced within the two-year limitation period. Two costs awards were made more than two years before this proceeding was commenced (on December 12, 2012 and April 4, 2014), and will be addressed below.

[64] Mr. Rodger relies upon Pet Valu’s counterclaim for costs in the Class Action to argue that the claim arose in 2009, when the Class Action was commenced. At that stage, however, Pet Valu’s claim could only have been for future costs, and the claim had not crystallized because Pet Valu would not be entitled to costs if it lost. Pet Valu could not have litigated its counterclaim for costs at the same time as the Class Action because its entitlement to costs was not, and could not have been, determined until such time that it was successful in defending against the Class Action. While Mr. Rodger argues that the only issue to be determined was the quantum of costs, this is plainly incorrect. Even when costs of the summary judgment motion were being argued before Belobaba J. in 2016, 125 maintained that no costs should be ordered. Pet Valu’s cause of action against Mr. Rodger did not arise until the Costs Awards were granted, and arguably not until the expiry of the relevant appeal period.

[65] This is similar to the principles that apply to a proceeding to enforce a foreign judgment in Ontario, where the Court of Appeal has found that a claim is discoverable and appropriate only when the time to appeal has expired or all appeal remedies have been exhausted: Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44, 136 O.R. (3d) 202, at para. 77. Until that time, a foreign judgment could be overturned, potentially resulting in unnecessary or duplicative proceedings. In the case of costs, a costs order made during the course of a proceeding could be appealed or set-off against other costs orders made in the proceeding. Commencing a proceeding to enforce a costs order before the conclusion of the entire proceeding could result in unnecessary litigation.

[66] Two of the costs awards, totalling $4,500.00, were made over two years before this proceeding was commenced. At that time, however, the Class Action was still being litigated. The possibility remained that these costs awards could be set-off against others, in the event that the claim was ultimately successful. It would not have made sense for Pet Valu to bring a separate proceeding to enforce two orders for minimal amounts before the Class Action came to an end.

[67] Moreover, in respect of a continuing guarantee, such as the Guarantee signed by Mr. Rodger, a demand is a condition of the guarantee obligation, and the limitation period does not begin to run until the debtor defaults or a demand on the guarantee is made: Bank of Nova Scotia v. Williamson, 2009 ONCA 754, 97 O.R. (3d) 561, at para. 14; Graeme Mew, The Law of Limitations, 3d Edition (Markham: Butterworths, 2016), at p. 315. In this case, Pet Valu made the demand for payment of all of the Costs Awards on September 16, 2016. The action was commenced within one month of this date, and thus well-within the two-year limitation period.

Did Pet Valu Release its Claim Against Mr. Rodger?

[68] Mr. Rodger argues that the release executed in relation to the Injunction Proceeding to enforce the non-competition provision of the Franchise Agreement precludes Pet Valu’s claim. The release in that proceeding specifically applied to “all matters unrelated to the Class Action.” Because the Costs Awards arose out of the Class Action they do not fall within the terms of the release. In addition, the Costs Awards were made after all of the following steps in the Injunction Proceeding: (i) the filing of the Statement of Defence and Counterclaim, (ii) the settlement, and (iii) the execution of the release.

[69] The argument that the Release precludes Pet Valu’s claim to recover the Costs Awards is without basis and is rejected.

Conclusion

[70] Based on the issues in this case and the evidence before me, I find that this motion affords a process that allows the court to make the necessary findings of fact and apply the law to those facts. I also find that, as the parties have agreed, a summary judgment motion is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial. There is no genuine issue requiring a trial as to Mr. Rodger’s liability to pay the Costs Award, whether based on the Indemnity Provision or on the Guarantee. I therefore grant Pet Valu’s motion and grant judgment in the amount of $1,736,675.54 plus pre-judgment and post-judgment interest in accordance with the Courts of Justice Act.

[71] I dismiss Mr. Rodger’s cross-motion for summary judgment dismissing Pet Valu’s claim.

[72] The parties are encouraged to agree on the quantum of costs. If no agreement is reached, Pet Valu’s counsel shall make cost submissions within ten days of the release of this decision. Responding submissions on costs by Mr. Rodger’s counsel shall be made within ten days of receiving the Plaintiff’s cost submissions. All cost submissions must be less than five pages in length.

Nishikawa J.

Released: May 29, 2018

COURT FILE NO.: CV-16-562425

DATE: 20180529

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Pet Valu Canada Inc.

Plaintiff

– and –

Robert Rodger

Defendant

REASONS FOR JUDGMENT

Nishikawa J.

Released: May 29, 2018

Pet Valu Canada Inc. v. Rodger, 2018 ONSC 3353

Case Summary

Overview

Factual Background

The Franchise Agreement

The Class Action

The Sale of 125’s Franchise

Issues

Analysis

Principles Applicable to Summary Judgment

Principles of Contractual Interpretation

Is Mr. Rodger Liable to pay the Costs Awards under the Indemnification Provision?

Does the Indemnification Provision Apply to Class Actions?

Does the Indemnification Provision Include Costs Awards?

Is Mr. Rodger Bound by the Indemnification Provision?

Does the Guarantee Apply to the Costs Awards?

Is the Action Statute-Barred?

Did Pet Valu Release its Claim Against Mr. Rodger?

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 5

Legal Tests 3

Legislation 4