COURT FILE NO.: 15-65454 DATE: 20200428 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: TINY HOPPERS CORP., NASIM MANAGEMENT SOLUTIONS INC., TINY HOPPERS CANADA INC., BRIGIDA AVERSA, THERESA BERTUZZI, and RASHID NASIM Plaintiffs – and – 2402074 ONTARIO INC., 2359251 ONTARO INC., 2370471 ONTARIO INC., 2409133 ONTARIO INC., NAHID ALMASHNI, and JAMAL MANSOUR MAYALI Defendants
Counsel: Brent Craswell, for the Plaintiffs and Defendants by Counterclaim Wendy Greenspoon-Soer, for the Defendants and Plaintiffs by Counterclaim, 2370471 Ontario Inc., 2402074 Ontario Inc., and Nahid Almashni
HEARD: February 25, 2020
Reasons for Decision
R. smith j.
[1] The plaintiffs, collectively referred to as “Tiny Hoppers” or the (“Franchisor”), have brought a motion for summary judgment seeking an order:
a) that the defendants repay them the amount of $500,000.00 they paid in accordance with para. 16(d) of the Minutes of Settlement; and
b) absolving them from making any further payments to the defendants.
[2] Tiny Hoppers alleges that the defendants have breached para. 11 of the Minutes of Settlement by failing to disassociate themselves from the Franchisor and have also breached a term of the mutual release by making defamatory, disparaging and derogatory remarks about Tiny Hoppers. Tiny Hoppers also seeks damages for the defamatory and disparaging statements made about it by the defendants.
[3] The defendants (“Dino & Kidz”) or the (“Franchisees”) have also brought a motion for summary judgment seeking a dismissal of the plaintiffs’ claim and an order that the plaintiffs pay them $224,000.00, being the balance owing under the terms of the Minutes of Settlement, as claimed in their counterclaim.
[4] The Issues be decided are as follows:
i. Did the Defendants breach para. 16(d) of the Minutes of Settlement by failing to dissociate themselves from Tiny Hoppers?
ii. Did the Defendants make any statements that were disparaging or defamatory of Tiny Hoppers? If so, do any defences apply?
iii. What damages, if any, should be awarded?
Background Facts
[5] Tiny Hoppers is a Franchisor that holds the right to operate early learning centres under the Tiny Hoppers brand name. The centres were located in Guelph, Cambridge and Brampton, Ontario.
[6] Tiny Hoppers and the defendants entered into a franchise agreement to operate early learning centres or day nurseries under the Tiny Hoppers brand name at the above locations.
[7] In January of 2015, the defendants gave notices of rescission of their franchise agreements for all locations under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3.
[8] After the notices of rescission were given, Tiny Hoppers entered into negotiations with the defendant numbered corporations and their principals, Nahid Almashni and Jamal Mansour Mayali.
[9] On or about March 17, 2015, a settlement was reached regarding the statutory rescissions. Minutes of Settlement were signed by all the parties. The defendants were permitted to continue operating the early learning centres, but they were required to rebrand and Tiny Hoppers agreed to repay $750,000.00 to the defendants pursuant to an agreed-upon schedule.
[10] The defendants agreed that they would disassociate themselves from the Tiny Hoppers brand. In the Full and Final Mutual Releases, signed by the corporate defendants but not by the principals in their personal capacity, the corporate defendants also agreed that they would not disparage the Tiny Hoppers name.
[11] The Minutes of Settlement state that if the defendants failed to abide by the disassociation clause, then Tiny Hoppers had the right to recover the amounts paid to the defendants and that if such a breach occurred it would cancel any obligation Tiny Hoppers had to make any further payments.
[12] The plaintiffs complied with the payment schedule in the Minutes of Settlement until the end of August 2015, by which time they had paid five hundred thousand dollars ($500,000.00) to the defendants. The defendants’ claim for $224,000.00 being the balance owing under the Minutes of Settlement, and they have abandoned any claim for a greater amount.
[13] On September 1, 2015 Tiny Hoppers failed to make an installment payment of seventy-five thousand dollars ($75,000.00) and has also failed to make any further instalment payments as agreed in the Minutes of Settlement.
Summary Judgment Motions
Analysis
[14] All of the parties agreed that there was no genuine issue requiring a trial and that a summary judgment motion would allow the court to make a fair and just adjudication of the merits. I agree that a summary judgment motion provides the most proportionate, expeditious, and least expensive means to achieve a just result as set out by the Supreme Court decision of Hryniak v. Mauldein, 2014 SCC 7.
Issue #1: Did the Defendants breach para. 16(d) of the Minutes of Settlement by failing to disassociate themselves from Tiny Hoppers?
[15] Paragraph 16(d) of the Minutes of Settlement (the “Minutes”) states as follows:
- Without limiting the generality of the foregoing and without diminishing the effect of the full and final release, the Franchisees do hereby immediately agree to the following:
(d) They shall immediately cease and desist from referring to the Franchisors as “head office”, “corporate” or any such similar description, and will disassociate themselves from the Franchisors when discussing any matter with any third party, especially including the Ontario Ministry of Education.(emphasis added)
[16] In RBG Dominion Securities Inc. v. Crew Gold Corp., 2016 ONSC 5529, at para. 52, Gans J. adopted principles of contract interpretation as outlined by Newbuild J. in Nortel Networks Corp., Re.. The principles are as follows:
- When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said.
- The court construes the contract as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective.
- In interpreting the contract, the court may have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties.
- The court should interpret the contract to accord with sound commercial principles and good business sense and avoid commercial absurdity.
- If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity.
- While the factual matrix can be used to clarify the intention of the parties, it cannot be used to contradict that intention or create an ambiguity where one did not previously exist.
[17] Paragraphs 17(a) and (b) of the Minutes of Settlement state that if the defendants breached paragraph 16(d), then the plaintiffs were entitled to a return of any money paid to the Franchisees, and any further payments to be made pursuant to para. 11 of the Minutes were waived.
[18] After the settlement was reached on March 17th the defendants proceeded to rebrand and continued to operate the day nurseries under the new name of Dino & Kidz. They amended their Master Business Licenses to reflect this name change as of March 17, 2015 and gave notice to their insurer and their banks of the name change at that time. These were reasonable steps to disassociate themselves from the Tiny Hoppers brand.
[19] In addition, on March 22, 2015 the defendants: sent a letter to all of the parents regarding a Parent-Owner Information Session scheduled for April 6, 2015. The letter advised the parents that the defendants were rebranding the Centres and were transitioning to carry on business under the name of Dino & Kidz. In this letter the defendants were not associating themselves with or holding themselves out as part of Tiny Hoppers. In fact, the letter advised the parents that the learning centres were now operating under a new name with new ownership, and advised that they were no longer operating as franchisees of Tiny Hoppers.
[20] I find that upon settlement the defendants immediately stopped operating business as Franchisees of Tiny Hoppers, they immediately removed all of Tiny Hoppers’ signage and pictures of Ms. Aversa and Ms. Bertuzzi and returned the Tiny Hopper mascot “Smoggles”. These actions were reasonable commercial steps to disassociate the defendants from the Tiny Hoppers brand or franchise.
[21] Notwithstanding the steps taken by the defendants, the plaintiffs submit that each time the defendants referred to issues they had to address or referred to changes they were now free to implement in several communications, they were failing to disassociate themselves from Tiny Hoppers.
A. Post on Momstown.ca
[22] On May 21, 2015 the defendant, Nahid Almashni published a statement on the above-mentioned website, which was followed by approximately 5,000 parents (primarily mothers in the Kitchener Waterloo area).
[23] The post addressed several topics including “Why the Name Change” and Ms Almashni stated that Dino & Kidz had recently taken over three locations from Tiny Hoppers in Cambridge, Guelph and Brampton. This was accurate information.
[24] The plaintiffs object to the last two paragraphs of this post which state as follows:
In the process of taking over the centers, we the owners, inherited and assumed all prior issues relating to Guelph and Cambridge. Our decision to leave the franchise was a strategic business decision. It stemmed on the basis of providing us the owners, full control of handling previous lingering issues, under the Tiny Hopper Brand.
In removing the center from the brand name, we now have the ability to make immediate necessary changes, relevant to each centre, without restriction, as was the case under the previous brand name.
B. Lingering Issues
[25] Tiny Hoppers submit that the reference to “handling previous lingering issues, under the Tiny Hopper brand” implied that the owners of Dino & Kidz, were not to blame for any “lingering issues” that predated the change in branding, and that those issues were the fault of Tiny Hoppers. The plaintiffs submit that this was an attempt to associate Dino & Kidz with Tiny Hoppers and to blame it for their problems.
[26] The defendants argue that the reference to “previous lingering issues” referred to the following ongoing issues:
a) the Ministry of Education had recommended that they change their theme-based curriculum in May of 2014 which had not been completed at the date of settlement; and
b) the plaintiffs had expressed interest in setting up infant classes, the need to improve communications with parents, and the need to change the colour of the paint to less distracting colours, all of which had not been completed.
[27] The nature of the lingering issues was not specified in the post. The objective evidence of the “factual matrix” was that a new owner was continuing the same business under a different name. The post communicated to the parents that the new owners were now in full control and were responsible to address any issues that had existed under the previous name brand.
[28] Tiny Hoppers dispute that the paint colour of the centres was an ongoing issue because the defendants have not changed the colours. However, a Ministry of Education Program visit report indicated that the Ministry preferred neutral based colours. As a result, I am satisfied that the bright colours of the centres used by the Tiny Hopper’s brand was an ongoing or lingering issue.
[29] Tiny Hoppers agreed that the Ministry had requested that they move to a more theme-based curriculum and they were in the process of changing to follow the Ministry’s request, and so this was a lingering issue. Tiny Hoppers also agreed that the defendants had expressed a desire to introduce infant classes at the Guelph and Brampton locations. Tiny Hoppers was concerned with the expense but stated that they always allowed franchisees to decide if they wanted to run infant classes. I find that this was not an ongoing issue at the time of the post.
[30] Tiny Hoppers stated that it was not aware of any communication problems with the parents and that there were no prohibitions on how the franchisees could communicate with parents. In this context, communications with the parents would be an ongoing issue which would have to be continually addressed.
[31] The starting principle of contract interpretation is to determine the intentions of the parties in accordance with the language used in the written document. In this case the objective evidence of the “factual matrix” is also relevant. The defendants and Tiny Hoppers agreed to rescind the franchise agreement and the defendants would continue to operate the early learning centres, but were prohibited from referring to Tiny Hoppers as the “head office”, “corporate”, or any similar description and were to disassociate themselves from Tiny Hoppers in any discussions with third parties. I am satisfied that the defendants’ actions of changing the business name were reasonable steps to disassociate themselves from Tiny Hoppers and in accordance with good commercial practice.
[32] I find that the plain meaning of the words used in paragraph 16(d) indicate that the parties intended that the defendants would disassociate themselves from the Tiny Hoppers. In other words, the defendants agreed they would not associate themselves with the Tiny Hoppers’ name brand and agreed that they would not hold themselves out as being connected to or to pass themselves off as being part of Tiny Hoppers.
[33] The Minutes of Settlement must also be read as a whole to determine the intentions of the parties. The parties agreed to rescind the franchise agreement and the defendants agreed to immediately cease holding themselves out as franchisees of Tiny Hoppers, to immediately remove any signs or trademarks, and return the mascot. The defendants were allowed to continue using all of Tiny Hoppers’ programming in their possession and the plaintiff agreed to provide further programming materials for two months.
[34] The parties understood and intended that the defendants could and would continue to carry on business as early learning centres with the existing children at the same locations. I find that the parties understood and expected that the defendants would communicate with the parents and advise that they had taken over the learning centres from Tiny Hoppers. The post stated that the new owners, Dino & Kidz, had inherited and assumed responsibility for all prior issues.
[35] Those two paragraphs do not imply that Dino & Kidz continued to be associated in any way with Tiny Hoppers. When the post is considered as a whole, the message stated that there was no ongoing associations with Tiny Hoppers. The post presents this disassociation in a positive light as they offer the explanation that they can now address any lingering or outstanding issues free of any restrictions from the previous franchisor. This is a true statement which does not specify what issues the defendants were referring to. When considered in the context of the continued operations of the same business with the same existing clients, I find that the defendants were not associating Dino & Kidz with Tiny Hoppers but were attempting to reassure the customers that they were continuing to operate the business under a different name and were now able to address any issues or concerns directly without any involvement of Tiny Hoppers.
[36] In the post on Momstown.ca the defendants did not hold themselves out as being connected to Tiny Hoppers in any way and this post did not amount to a breach of para 16(d) of the Minutes. At its highest the post implies that there were some ongoing or lingering unspecified issues which the defendants were now responsible to address.
Disposition of Issue #1
[37] For the above reasons I find that the defendants have not breached paragraph 16(d) of the Minutes of Settlement as they disassociated themselves in a commercially reasonable manner and did not associate themselves with Tiny Hoppers, the previous franchisor. The plaintiffs claim that the defendants have breached the terms of the Minutes of Settlement is dismissed.
Issue #2: Did the defendants make any statements that were disparaging or defamatory of Tiny Hoppers? If so, do any defences apply?
[38] In Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 SCR 640, at paras 28-29 the Supreme Court set out the test for defamation and held that a plaintiff in a defamation action was required to prove the following on a balance of probabilities:
- that the impugned words were defamatory, in the sense that they would tend to lower the plaintiff’s reputation in the eyes of a reasonable person;
- that the words in fact referred to the plaintiff; and
- that the words were published, meaning that they were communicated to at least one person other than the plaintiff.
[39] In Bernstein v. Poon, 2015 ONSC 155, at para 98 the court described the defence of justification as follows: “Justification, that is, truth, is a complete defence to an action for defamation.”
[40] At paragraphs 100-103 of Bernstein the court set out the defence of fair comment set out by the Supreme Court of Canada:
a) The comment must be on a matter of public interest; b) The comment must be based on fact; c) The comment, though it can include inferences of fact, must be recognizable as comment; d) The comment must satisfy the following objective test: could any man honestly express that opinion on the proved facts?; and e) Even though the comment satisfies the objective test, the defence can be defeated if the plaintiff proves that the defendant was actuated by express malice.
C. The Momstown.ca post
Analysis
[41] The plaintiff submits that the same posts and statements that constituted a failure to disassociate itself from Tiny Hoppers also constitutes defamatory or disparaging statements that were published and referred to the plaintiff.
[42] The defendants argue that the words used in the post on Momstown.ca by the defendants were not defamatory because they do not lower the plaintiff’s reputation in the eyes of a reasonable person. I agree.
[43] The same finding applies to the statement that removing the centre from the Tiny Hoppers brand name gave the owners “full control of handling previous lingering issues while under the Tiny Hoppers brand.” The statement does imply that there was some delay in addressing issues. However, the issues are not defined and could be serious or minor and could involve the transition to the new brand name, employees or the issues identified by the defendants including the Ministry of Education’s indication that it wanted the centre to move away from themed programming.
[44] The statement that the defendants had control and assumed responsibility for all prior lingering issues relating to the Guelph and Cambridge centres is not defamatory. It does not specify what issues are being referred to and as such the statement does not tend to lower Tiny Hoppers’ reputation in the eyes of a reasonable person
[45] I find that Tiny Hoppers’ reputation would not be lowered in the eyes of a reasonable person reading the defendant’s post on Momstown.ca. Even if the post was found to be defamatory, I find that the defence of justification has been established because it was true, there were ongoing lingering issues to be resolved.
D. The CTV Statements
[46] Prior to the story being aired, Tiny Hoppers was contacted by Krista Simpson, a videographer/producer for CTV Kitchener, by email on July 27, 2015.
[47] Ms. Simpson’s email, stated in part, that:
I am working on a story today about a former Tiny Hoppers location in Cambridge. In the spring it was renamed to Dino & Kidz and I understand it also left the Tiny Hoppers franchise around that time. But during the time it was Tiny Hoppers, there were several complaints made by parents. In the end the Ministry of Education identified several concerns that led to Dino & Kidz being given a provisional license, while they addressed the problems.
A Dino & Kidz representative tells me that many of the issues stemmed from the previous manager, Colleen Stewart, who was hired by Tiny Hoppers, and who (Dino & Kidz says) they were unable to easily remove due to the fact that Tiny Hoppers handled personnel.
[48] The plaintiffs rely on a statement made by Krista Simpson in her email to Tiny Hoppers in which she stated that a representative of Dino & Kidz told her that many of the issues at the learning centres stemmed from a previous manager that had been hired by Tiny Hoppers. Krista Simpson did not present any affidavit evidence on this summary motion and as such her statements of what someone else told her are hearsay which is not evidence that can be relied on for the truth of its contents. As such it can only be considered as part of the narrative. The prejudice of admitting this statement for its truth is outweighed by the prejudicial value as the truth of the statement cannot be tested under cross-examination and there are no indicia of reliability.
[49] Justification or the truth of the statement is a defence to a claim for defamation. The previous manager was hired while the defendants were operating under the Tiny Hoppers franchise. The evidence is unclear whether the defendant franchisees or the franchisors hired the previous manager.
[50] Krista Simpson’s hearsay statement does not constitute evidence of a breach of para 16(d) of the Minutes by the defendants. Even if her hearsay statement was admissible evidence for its truth it does not constitute evidence that Dino & Kidz were associating themselves with the Tiny Hoppers franchise. The statement was an attempt to blame Tiny Hoppers for hiring the previous manager who allegedly failed to follow Ministry Guidelines, and as a result the Ministry of Education issued a provisional licence.
[51] The words used in Krista Simpson’s statement referred to the plaintiffs. However, the plaintiffs have failed to prove that the defendants actually made the statement to Krista Simpson. In addition, the substance of the statement was true, as the previous manager had worked at the learning centres both before and after the Minutes were signed and had failed to follow Ministry Guidelines. A statement that a previous owner of a business had hired a manager, who failed to perform all of her duties as required, would not lessen the reputation of the previous owner in the mind of a reasonable person. Even if Tiny Hoppers hired the previous manager, which they deny, I find that the statement is not defamatory.
[52] On July 27, 2015, CTV Kitchener broadcast a news story detailing a number of issues that the Ministry of Education had found with the Dino & Kidz center in Cambridge. It largely highlighted the center’s non-compliance with the provisions of the Day Nurseries Act, including the following findings:
a) Dino & Kidz failed to keep up-to-date records for each child that included a parent’s signed written instructions concerning any special requirements for diet, rest, or exercise; b) Dino & Kidz failed to ensure that all children were supervised at all times by an adult; c) Dino & Kidz failed to ensure that a child who seemed sick was taken home by a parent; d) Dino & Kidz failed to keep a daily written record of any events affecting the health, safety or well-being of any child or a staff member.
[53] The CTV broadcast also noted that the Ministry had received ten complaints regarding the Dino & Kidz Cambridge location between March and May of 2015.
[54] The story noted that Dino & Kidz blamed many of the problems there were experiencing on the center’s previous director, who they dismissed in March of 2015. This comment was a reference to Ms. Colleen Stewart, although she was not directly mentioned in the broadcast.
[55] The story also indicated that Dino & Kidz left the previous franchise system under which they had operated and changed their name. This statement is true.
[56] The report then referred to a portion of a statement from the defendant, Jamal Mayali, on behalf of Dino & Kidz Cambridge. The full statement was subsequently posted on CTV Kitchener’s Facebook page, and read as follows:
Since rebranding our three locations back in March 2015, we have met with the Ministry and forwarded a detailed plan of action that has been implemented to address the non-compliances and have put measures in place to prevent any repeat occurrences. We have been very transparent with all the families who come to visit out centers as we are confident that our daycares are one of the best in the Region and we invite and encourage all families to come tour our centers and speak with our director and area manager to clarify any concerns which they may have. A great deal of positive feedback has been provided by both the families and the Ministry and we are extremely confident in our centers and in the manner in which they are being operated. Parent-Owner information sessions have been held at all our locations in an effort to improve the communication between us and our clients and to gather feedback from the families so that their concerns are properly addressed.
We have made some positive staff changes and have appointed a Regional Manager to oversee the day to day operations across all of our locations to ensure 100% compliance is maintained. Enrollments have increased at all of our locations and we anticipate enrollments to continue to increase. With respect to our provincial license at our Cambridge location, this is simply a provisional license that is issued by the Ministry to provide a timeline in which the Owners are provided to come into compliance. The provisional licence expires in September of this year at which point, the Ministry will conduct another inspection to verify that we are in compliance. We are looking forward to the Ministry’s visit and are confident that the provisional licence will be rescinded at this time and w full licence will be provided to Dino & Kidz.
[57] The statement published on CTV Kitchener’s Facebook page does not mention the plaintiff and as such this statement does not meet the second test to establish defamation, namely that it referred to Tiny Hoppers. The statement refers to steps being taken to get the Ministry of Education to rescind the provisional license it had issued.
[58] In addition, I find that the words used in the statement are not defamatory to Tiny Hoppers because they would not lower Tiny Hoppers reputation in the eyes of a reasonable person.
[59] Finally, the statement contained in Krista Simpson’s email was only sent to the plaintiffs and not to another party, as such it was not published.
[60] The statements in the email are also hearsay as no affidavit evidence was filed by Ms. Simpson, setting out what she was told and by whom.
[61] As a result, I find that the statements in Krista Simpson’s email dated July 27, 205, do not constitute defamation of the plaintiffs.
E. Facebook Post
[62] Ms. Almashi admitted that she wrote a Facebook post stating:
As soon as Dino & Kidz took over the other franchise they changed everything, and in only four months this happens. 100% great new staff and programming! Thank you Cambridge.
[63] I agree with the defendant that the “other franchise” referred to Tiny Hoppers but this is not a defamatory comment or a disparaging comment as it refers to what the Dino & Kidz have done. This statement does not lower Tiny Hoppers’ reputation in the eyes of a reasonable person and is therefore not defamatory. I also find that this statement does not amount to associating with Tiny Hoppers but rather is distinguishing or disassociating Dino & Kidz from Tiny Hoppers.
Disposition of Issue #2
[64] For the above reasons I find that the plaintiffs have failed to prove that the defendants have made any statements that were defamatory or disparaging of the plaintiffs. As a result, the plaintiffs claim for damages for defamation or making disparaging comments about the plaintiffs is dismissed.
Issue #3: What damages should be awarded?
[65] The plaintiffs are not awarded any damages as I find the defendants did not breach the terms of the Minutes of Settlement or make defamatory or disparaging statements about the plaintiffs.
Issue #4: Are the defendants entitled to damages on their summary judgment motion on their counterclaim?
[66] The defendants have brought a motion for a summary judgment for $224,000.00 being what they calculated was the balance owing pursuant to the Minutes of Settlement.
[67] The plaintiffs do not dispute that there remains a balance of at least $224,000.00 owing pursuant to the Minutes of Settlement, if there was no breach by the defendants, which I have found.
Disposition of the Defendant’s Summary Motion
[68] The plaintiffs are ordered to pay the defendants $224,000 plus prejudgment interest at the applicable rate from the date when each payment was due, being the balance owing pursuant to the Minutes of Settlement
Costs
The defendants shall have 20 days to make written submissions on costs, the plaintiff shall have 20 days to respond and the defendants shall have 10 days to reply.