INTRODUCTION

[1] This refusals motion was significantly narrowed at the hearing but there remain two broad issues for me to decide. The first is the relevance of documents which might shed light on the business knowledge and experience of William Porteous. The second is about the scope of privilege in connection with independent legal advice (ILA) Mr. and Ms. Porteous received about the franchise agreements and related documents that they signed.

Issue 1

[2] This case was the subject of a summary judgment motion which succeeded but which was overturned on appeal. I therefore have had the benefit of being able to review both the reasons for decision in the motion (2017 ONSC 1643) and the appeal (2018 ONCA 670), which helps to understand the issues and has helped me assess the relevance of the disputed questions.

[3] Both parties agree that the meeting in May 2010 is central to the outcome of this case. The question of whether earnings projections were shown to the plaintiffs at the meeting is crucial. Both the summary judgment motion decision and the appeal decision also make it clear that this meeting and the question of whether earnings projections were shown are crucial.

[4] At the examination for discovery of the plaintiff William Porteous which took place on July 15, 2020, counsel for the defendant, Mr. Mackay, tried to elicit evidence from Mr. Porteous regarding Mr. Porteous’s business knowledge and experience. He wants to be able to test Mr. Porteous’s position that he was shown earnings projections at the May 2010 meeting. The defendants say none existed or were provided to Mr. Porteous at that meeting. They say that a business plan provided to Royal Bank was developed with Mr. Porteous at a later date.

[5] Mr. Mackay asked Mr. Porteous whether he had ever applied for a small business loan from RBC or another bank, and Mr. Porteous confirmed that he had done so. Mr. Porteous acknowledged that he had two coffee shops and a franchise operation from Century 21. He had applied for a small business loan for the Century 21 franchise. He could not remember if he had applied for a small business loan for the coffee shops. He had partners in the coffee shops.

[6] On the basis that it was not relevant, Mr. Porteous refused to ask the partners whether any small business loan was made. He refused to ask the potentially applicable banks for the application paperwork for the Century 21 loan or to state whether he remembered what documents he signed to obtain the Century 21 loan. He refused to say whether a business plan was provided to the bank to obtain the Century 21 loan. He refused to provide information as to whether a business plan was created for the coffee shops or whether there were any projections of business for the coffee shops.

[7] Mr. Porteous did say (Q. 177) that he had never dealt with a business plan, and he was not asked to provide a business plan. This answer seemed to be in connection to Century 21. I was not taken to any part of the transcript that dealt with when he applied for the Century 21 loan and I did not see this. I am unclear on how long ago this was. I did see in the transcript that he was operating the coffee shops and the Century 21 franchise as at 2010 (Q.162).

[8] On behalf of the plaintiff, Mr. Schorr argued that all that matters is whether the plaintiffs were shown the earnings projections in the May 2010 meeting. That is a pure credibility issue. He argues that whether Mr. Porteous was experienced or not, under s. 6(2) of the Arthur Wishart Act, the franchisee may rescind the franchise agreement within two years after entering into the franchise agreement if the franchisor never provided the disclosure document. Mr. Schorr argues that it does not help the analysis to know how experienced or knowledgeable Mr. Porteous was, and therefore these questions are irrelevant. The remedy is available regardless of how experienced or inexperienced the franchisee is.

[9] In response, the defendants say Mr. Porteous’s knowledge and experience about earnings projections and business plans is relevant because if he had knowledge and experience, and if earnings projections were shown to him, it’s unlikely he would have left the meeting without a copy of the earnings projections. They say that, alternatively, if there had been earnings projections at the time of the meeting, he would have followed up to obtain copies after the meeting. Thus Mr. Mackay argues that he was entitled to explore Mr. Porteous’s business experience in detail not because of its relevance to the remedy, but because of its relevance to what happened at the May 2010 meeting. He argues that Mr. Porteous portrays himself as naïve in respect of that meeting, and the defence is entitled to test that by exploring his knowledge and experience.

[10] In response to the argument that the requested information and documents go purely to credibility, Mr. Mackay argues that they go beyond credibility and to his experience. He notes that the Court of Appeal allowed the appeal specifically because viva voce evidence and cross examination is required to properly assess what occurred at the May 2010 meeting.

[11] I have concluded Mr. Mackay should have been permitted to further explore Mr. Porteous’s experience at his discovery. Mr. Porteous shall answer questions designated as items 1, 2, 5, 6, 7 and 8 listed at page 13 to 14 of the motion record (or as these questions may be more precisely set out in the transcript). The questions should be limited to the time period before the May 2010 meeting. Further, if there are business plans or earnings projections for the coffee shops or the Century 21 franchise that were prepared before the May 2010 meeting, they shall be produced, if they can be found. Mr. Porteous shall make appropriate inquiries of the Royal Bank or the National Bank for documentation or shall provide authorizations to allow the defence to make these inquiries, on the understanding that any documentation or information obtained will be shared. Given the length of time that has gone by, it is to be expected that there will be no documentation, but it is not difficult to make the inquiries. Items 3, 4 and 9 on the same list need not be answered.

Issue 2

[12] The plaintiffs saw a lawyer, Mr. Jack Laurion, and received independent advice before they signed the franchise agreement and other agreements or documents associated with the franchise. Mr. Laurion certified that he provided independent legal advice on several occasions.

[13] The meeting or meetings with Mr. Laurion took place between May of 2010 and June of 2010.

[14] The defendants assert that in the context of this case, information and documents provided to the ILA lawyer are not privileged, only the advice is privileged. The defendants argue that it will shed light on the May 2010 meeting to know what information and documentation was provided to Mr. Laurion. If, for instance, he was provided with a copy of the alleged earnings projections, that would certainly assist. Of course, such a document would be relevant and should already have been listed in the plaintiffs’ affidavit of documents if it was in the plaintiffs’ possession, control or power at any time. Non-privileged documents don’t become privileged just because they are given to a lawyer. However, an order is not necessary to require production of such documentation, and I have not been pointed to any evidence that relevant non-privileged documentation exists.

[15] Ms. Porteous refused to answer questions about the discussions with Mr. Laurion and the advice given. The questions all attempted to trample on the privilege between a lawyer and client. The refusals were proper.

Costs

[16] If the parties cannot agree on costs, they may make written submissions to me. The submissions should not exceed three single-spaced pages plus any supporting documentation such as offers, costs outlines, or supporting evidence. The defendant shall deliver costs submissions by February 8, 2021. The plaintiff shall file responding submissions by February 15, 2021. No reply without leave. The submissions may be sent to me by email through my judicial assistant.

Signed: Justice R. Chown

Released: January 28, 2021

COURT FILE NO.: CV-19-3356-00

DATE: 20210128

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2212886 Ontario Inc., William Porteous and Kirsten Porteous

Plaintiffs

and -

Obsidian Group Inc., Obsidian Inc. and Gus Karamountzos

Defendants

REASONS FOR DECISION

Chown J.

Released: January 28, 2021

2212886 Ontario v. Obsidian, 2021 ONSC 706

Case Summary

INTRODUCTION

Issue 1

Issue 2

Costs

REASONS FOR DECISION

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues