Court File and Parties

Court File No.: 15-64523 Date: 2018/07/12 Ontario Superior Court of Justice

Between: Hoya Lens Canada Inc., Plaintiff – and – 2364141 Ontario Inc. o/a Vision Tech Labs Ottawa, Carl Gauthier and 3531244 Canada Inc., Defendants

Counsel: Caitlin Cardill, for the Plaintiff

Heard: July 12, 2018 (at Ottawa)

Endorsement

o’bonsawin J.

[1] The Plaintiffs, Hoya Lens Canada Inc. (“Hoya”), seek the following:

a) an order striking the Defence and Counterclaim of the Defendants, 2364141 Ontario Inc., o/a Vision Tech Labs Ottawa and Carl Gauthier (“Vision Tech”) and 3531244 Canada Inc. (hereinafter “353”) without leave to amend;

b) Judgment in favour of the moving party in the amount of $235,402.63 plus interest in accordance with the Franchise Agreement;

c) Its costs on a total indemnity basis including HST; and

d) Such further relief as counsel may advise and this Honourable Court may deem just.

[2] Hoya relies, in particular, on Rules 1.04, 20.04(2), 31.07(1), 34.15(1)(b) and 34.15(1)(d) of the Rules of Civil Procedure.

[3] Hoya and Vision Tech entered into a Franchise Agreement (“Agreement”) on March 26, 2013 whereby Hoya agreed to grant to Vision Tech certain licenses for the operation of a Vision Tech Labs Franchise in Ottawa. Carl Gauthier signed in his personal capacity the Agreement as a Guarantor for Vision Tech.

[4] I will list below the relevant sections of the Agreement:

• 1.10 – Joint and Several – the Guarantor and the Franchisee shall be considered to be joint and several.
• 8.01 – Initial Franchise Fee – the Franchisee shall pay to the Franchisor contemporaneously with the execution of this Agreement the initial franchise fee.
• 8.02 – Royalty Fees – the Franchisee agrees to pay to the Franchisor continuing royalty fees.
• 14.15 – Interest Charges and N.S.F. Payments – all unpaid fees and payments shall bear the interest at an annual rate of Prime plus 5%.
• 14.16 – Arbitration – issues related to the Agreement shall be determined by arbitration upon the application of any of the parties in dispute.
• 16.01 – Guarantee by the Guarantors – the Guarantor unconditionally and irrevocably guarantees, jointly and severally, the payment of all sums due and payable by the Franchisee to the Franchisor.

[5] An Addendum to the Franchise Agreement (“Addendum”) was signed by the parties on March 26, 2013 whereby Hoya agreed to permit Vision Tech to pay the Initial Franchise Fee as follows:

• On or before the date on which the Francised Business opened for business, Vision Tech was to pay the sum of $21,000 plus applicable taxes; and
• Subject to certain adjustments, Vision Tech agreed to pay Hoya a monthly amount of $5,000 plus applicable taxes until the balance of the Initial Franchise Fee was paid in full.

[6] Hoya supplied products to Vision Tech in accordance with the Agreement and individual purchase orders were issued by Vision Tech.

[7] Vision Tech have failed and/or refused to pay any portion of the initial Franchise Fee, Royalty Fees or for product orders.

[8] Vision Tech abandoned the premises on or about February 27, 2015. Hoya did not consent to Vision Tech abandoning the premises.

[9] Mr. Ahmos Henry, the President of Hoya, provided an Affidavit sworn on January 23, 2018 in which he confirms the following:

• Vision Tech has not paid Hoya the Initial Franchise Fee in the amount of $69,000 plus HST which equals $77,970.00;
• Vision Tech has not paid the amount of $5,138.30 plus HST equals $5,806.28;
• Vision Tech defaulted in making payments for products supplied by Hoya in or about February 2014. The invoices total $132,747.35;
• Vision Tech never paid for products purchased of consigned goods in the amount of $18,879.98; and
• A significant portion of the orders made by Vision Tech from Hoya were made on behalf of 353. Carl Gauthier is the controlling mind of both companies. He knew or ought to have known that 353 has no intention of paying for such products. Based on the purchase orders, 353 directly owes Hoya the amount of $17,841.29.

[10] This action was commenced by way of Notice of Action on June 2, 2015. A Statement of Claim was issued on July 2, 2015. The Statement of Defence was delivered on May 25, 2016. The Statement of Claim was amended on August 2, 2017. The Defendants delivered an Amended Statement of Defence and Counterclaim on May 25, 2016. Hoya delivered a Reply and Statement of Defence to the Amended Statement of Defence and Counterclaim on August 3, 2017.

[11] Mr. O’Brien, counsel for Hoya, made many attempts to schedule dates for mediation beginning on August 15, 2016. On January 13, 2017, he continued to correspond with Mr. Pierre Gauthier, counsel for Vision Tech and proposed further dates for mediation. Hoya’s unsworn Affidavit of Documents together with Schedule “A” productions were attached. Mr. O’Brien requested a copy of Vision Tech’s Affidavit of Documents.

[12] Mr. O’Brien did not receive any response from Mr. Gauthier and he scheduled the mediation for February 27, 2017 and Examinations for Discovery on March 6, 2017. Mr. Gauthier advised that he was not available on the date of the mediation. Finally, March 28, 2017 was confirmed for the mediation.

[13] On March 3, 2017, three days prior to the scheduled Examination for Discovery, Mr. Gauthier advised the he was “completely unaware” that this was scheduled for the upcoming Monday. He undertook to provide his client’s Affidavit of Documents by March 17, 2017. Vision Tech’s Affidavit of Documents was ultimately delivered on March 24, 2017. Following a review of Vision Tech’s Affidavit of Documents, it was apparent that it contained only the documents that Hoya produced on January 13, 2017.

[14] Understandably, on May 1, 2017, Mr. O’Brien wrote to Mr. Gauthier seeking additional production of documents that Vision Tech undertook to provide at mediation. Mr. O’Brien also provided Mr. Gauthier with a list of seven possible dates in May 2017 to attend Examinations for Discovery. Mr. O’Brien added that Hoya would proceed unilaterally to schedule Examination for Discovery should he not receive a response by May 3 at 4:00 p.m.

[15] Mr. Gauthier finally responded that his client would not attend the scheduled examinations as his client was in the process of declaring bankruptcy. On May 8, 2017, Hoya obtained a certificate of non-attendance. On May 16, May 18, June 9 and June 16, 2017, Mr. O’Brien and his assistant followed up with Mr. Gauthier requesting further information regarding the failure to attend examinations and the alleged bankruptcy.

[16] On June 12, 2017, having not received any reply from Mr. Gauthier, Mr. O’Brien conducted relevant bankruptcy searches to no avail.

[17] A second Notice of Examination and the relevant bankruptcy searches were delivered to Mr. Gauthier on June 16, 2017 in addition to a caution that Mr. O’Brien will immediately move to have the Statement of Defence and Counterclaim struck should Vision Tech fail to attend the second attempt at examinations. Vision Tech did not attend and a second certificate of non-attendance was obtained.

[18] At the hearing this morning, Ms. Cardill provided me with three further documents. The first is a Notice of Intention to Act in Person signed by Mr. Carl Gauthier on July 6, 2018. The second is an email and letter dated July 6, 2018 from Mr. O’Brien to Mr. Carl Gauthier advising him that his client objects to the obvious delay tactic. In addition, Mr. O’Brien wrote: “In accordance with Rule 15.01(2) of the Rules of Civil Procedure, a corporation shall be represented by a lawyer, except with leave of the Court. Despite having had knowledge of the within motion for months, such leave has not been sought.” The third is a string of emails between Mr. O’Brien and Mr. Carl Gauthier in which the latter writes on July 9, 2018 at 10:23 a.m.:

As you are now aware I have no choice but to represent myself as I have already abused much of my brother in these matters.

I’m writing to you this morning letting you know that I will be present on Thursday, alone with no counsel as I can’t afford one anymore.

I will be asking the judge to consider the franchise agreement clause “mediation” and ask him to send us back to “mediation” as the franchise agreement clearly states for all franchisees…If we can’t come to a mutual agreement with the “mediation” or any other outcome, then I will have no other options then to put myself under the bankruptcy protection.

[19] At 11:26 a.m. on that same date, Mr. O’Brien then refreshed Mr. Carl Gauthier’s memory and advises him that this matter has already been through mediation and the motion would proceed today. Mr. Carl Gauthier responded at 11:35 a.m. “Please be advised that you will leave me no other choice but to go ahead with Bankruptcy. Mr. Daniel Trudel from Bernier & Associés …will be taking over my file.”

[20] At this morning’s motion, neither Mr. Carl Gauthier, Mr. Trudel nor any lawyer from Bernier & Associés were present. Ms. Cardill made her verbal submissions.

[21] I will now turn to my analysis regarding this matter. In Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2012 SCC 9, [2012] 1 S.C.R. 259, at issue was whether or not the respondents could move to seek dismissal of the action based on the arbitration and forum selection clauses in the agreements, notwithstanding the delivery of a Statement of Defence. The Supreme Court states:

This Court confirmed that, in the absence of specific legislation, the proper test in determining whether to enforce a forum selection clause is discretionary in nature. It provides that unless there is a “strong cause” as to why a domestic court should exercise jurisdiction, order and fairness are better achieved when parties are held to their bargains. (para. 9)

[22] In Ontario, there is a specific legislation: Arbitration Act, 1991, S.O. 1991, ch. 17. Subsections 7(1) and (2) read as follows:

Stay

7 (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

Exceptions

(2) However, the court may refuse to stay the proceeding in any of the following cases:

1. A party entered into the arbitration agreement while under a legal incapacity.
2. The arbitration agreement is invalid.
3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
4. The motion was brought with undue delay.
5. The matter is a proper one for default or summary judgment.

[23] In 1047358 Ontario Inc. v. Haliburton Broadcasting Group Inc. et al, 2012 ONSC 3115, Justice O’Neill concluded:

Even if I am incorrect in concluding there is no valid issue for arbitration, I would refuse a stay pursuant to s. 7(2) of the Arbitration Act, 1991 on the following basis:

(i) There is substantial evidence of the parties having voluntarily attorned to this court’s jurisdiction as outlined in paragraph 36 of the Plaintiff’s Factum.

(ii) In accordance with s. 7(2)(4) of the Arbitration Act, this court may refuse to stay a proceeding where the motion was brought with undue delay. The Defendants had much earlier opportunities to bring the within motion, either on the return of the summary judgment motion in 2011, or indeed earlier after the litigation had commenced. I view this as a case where the Defendants are estopped by their own conduct from bringing a motion for a stay. This is particularly so given that the external accountants reached an agreement in November of 2011, and that nothing further was heard from the Defendants until April of 2012, shortly before the return of the summary judgment motion to court.

In these circumstances, I conclude that the Plaintiff’s have met the onus of establishing that one of the exemptions and exceptions under s. 7(2) of the Arbitration Act applies in this case.

[24] Even though Vision Tech has not brought forward an application for stay, I will state that it has not filed any documents nor has it attended today. The only evidence that I have before me is that of Hoya. In its evidence, there is substantial evidence that Vision Tech voluntarily attorned to this Court’s jurisdiction. Consequently, I conclude that Hoya has met its onus of establishing that ss. 7(2) of the Arbitration Act, 1991 applies in this case.

[25] Consequently, I conclude that this court has the jurisdiction to hear Hoya’s motion.

[26] There is ample evidence provided by Hoya that Vision Tech has been purposefully trying to either delay this matter and/or have shown indifference to the Rules of Civil Procedure. Mr. Carl Gauthier’s threats that he will declare bankruptcy and the fact that he has failed to do so further support that he has acted inappropriately. His actions are not acceptable to this Court.

[27] Rule 34.15(1) of the Rules of Civil Procedure provides the following:

SANCTIONS FOR DEFAULT OR MISCONDUCT BY PERSON TO BE EXAMINED

34.15 (1) Where a person fails to attend at the time and place fixed for an examination in the notice of examination or summons to witness or at the time and place agreed on by the parties, or refuses to take an oath or make an affirmation, to answer any proper question, to produce a document or thing that he or she is required to produce or to comply with an order under rule 34.14, the court may,

(a) where an objection to a question is held to be improper, order or permit the person being examined to reattend at his or her own expense and answer the question, in which case the person shall also answer any proper questions arising from the answer;

(b) where the person is a party or, on an examination for discovery, a person examined on behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence;

(c) strike out all or part of the person’s evidence, including any affidavit made by the person; and

(d) make such other order as is just.

(2) Where a person does not comply with an order under rule 34.14 or subrule (1), a judge may make a contempt order against the person.

[28] Rule 34.15(1) provides this Court with discretion to require the re-attendance, to dismiss the action, to strike out the evidence or to make such other order as is just. In this case, it is clear that ordering the re-attendance of Vision Tech to attend Examination for Discovery is fruitless. It has demonstrated a complete disregard for this judicial system.

[29] In Cardoso v. Cardoso, [1998] O.J. No. 841, para. 19, Justice Kiteley stated:

Rule 34.15(1) gives the Court wide discretion to require re-attendance, to dismiss the action, to strike out evidence or to “make such other order as is just”. In motions such as this, the plaintiff is often given a further opportunity to comply with its obligations. In this case, it is pointless. It is clear from the answers to date on critical questions arising from the pleadings, that the plaintiff will not fulfil her disclosure obligations. The defendants have rights to full disclosure. Those rights have been undermined and resisted by the plaintiff. There is no prospect that the rights of the defendants will be respected. In these circumstances, there is no alternative but to dismiss the plaintiff’s claim.

[30] Striking out a Statement of Defence and Counterclaim is a harsh action. Based on Vision Tech’s action throughout this litigation, it is required. There is no prospect that Hoya’s rights will be respected. It is more than likely that Vision Tech will continue to disregard the judicial system. Consequently, I grant the order requested by Hoya and strike Vision Tech’s Defence and Counterclaim.

[31] I now turn to the request for this Court to order a Summary Judgment against Vision Tech. As per Rule 20.01(1) of the Rules of Civil Procedure, after a defendant has delivered a Statement of Defence or serve a Notice of Motion, a plaintiff may move for Summary Judgment on all or part of the claim in the Statement of Claim. As per Rule 20.04(1), the Court shall grant a Summary Judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. The framework for the granting of Summary Judgments is stated by the Supreme Court of Canada in Hryniak v. Mauldin 2014 SCC 7, [2014] 1 S.C.R. 87. The court states:

Summary judgment motions must be granted whenever there is no genuine issue requiring a trial. …There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[32] Furthermore, Hryniak sets out the obligations of a judge on a motion for Summary Judgment. In order for a judge to first determine if there is a genuine issue requiring a trial, he/she must make a determination based only on the evidence before him/her without using the new fact-finding powers. The new powers can be used by a judge if there appears to be a genuine issue requiring a trial. The new powers under Rule 20.04(2.1) include the weighing of evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence. In addition, as per Rule 20.04(2.2), a judge may order that oral evidence be presented by one or more parties, with or without time limits on its presentation. As per Ray J. in Ali v. Toyota Canada Inc. ONSC 5909 at para 8, when a defendant brings a motion for Summary Judgement, the plaintiff must put her best foot forward.

[33] In this matter, Vision Tech has not put its best foot forward. It has provided nothing to this Court. Based on the fact that I have struck Vision Tech’s Defence and Counterclaim, it is clear that there is no longer a genuine issue requiring a trial. I have only been provided with Hoya’s evidence which fully supports its claim. Consequently, I grant the Summary Judgment against Vision Tech.

[34] In conclusion, I order as follows:

(a) Vision Tech’s Defence and Counterclaim are struck without leave to amend;

(b) Judgment in favour of Hoya in the amount of $235,402.63 for the amounts not paid as per the Agreement plus interest in accordance with the Agreement;

(c) Judgment in favor of Hoya in the amount of $17,841.29 representing the amounts not paid for the orders made by Vision Tech on behalf of 353 from Hoya plus interest as per the Courts of Justice Act;

(d) Vision Tech shall pay Hoya’s reasonable costs in the amount of $69,605.66.

(e) Vision Tech shall make the payments listed in paragraphs (b), (c) and (d) within 30 days of this Decision.

Justice M. O’Bonsawin

Released: July 12, 2018