Franchise Law - SCJ

The plaintiff, Kalbow Restorations Inc., sought an urgent interlocutory injunction against its franchisor, Goodbye Graffiti Inc., and related parties, alleging improper termination of their franchise agreement.

The court dismissed the motion, finding that Kalbow had committed incurable material defaults under the agreement by using unauthorized chemicals and suppliers, and had not demonstrated a strong prima facie case or a serious issue to be tried.

The court also found no irreparable harm and that the balance of convenience favoured the defendants.

Costs were awarded to the defendants on a partial indemnity basis.

The court considered a Rule 21 motion by Shell Canada Products and Tosh Skalosky to strike the claim against Skalosky personally.

The court found that the plaintiffs failed to plead material facts supporting personal liability against Skalosky, as required by law.

The claim against Skalosky was struck, but the plaintiffs were granted leave to amend their claim if they could plead sufficient facts.

Each party was ordered to bear their own costs.

The Ken Breau Corporation, a Dairy Queen franchisee, sought a declaration that DQC Canada Inc. breached its statutory obligations of fair dealing and good faith under section 3 of the Arthur Wishart (Franchise Disclosure) Act, 2000, and sought to restrain DQC from awarding a new restaurant to another franchisee within eight kilometres of its territory.

The court found that DQC had not breached its obligations, as the Franchise Agreement clearly defined the applicant’s territory and DQC’s actions were consistent with both the contract and commercial standards.

The application was dismissed.

The franchisors sought leave to appeal two arbitral awards: one finding Marcel Hachem and Eastern Canadian Coffee Company Ltd. to be "franchisor's associates" liable for rescission costs, and another regarding costs.

The franchisees sought court enforcement of these awards.

The court dismissed the franchisors' application for leave to appeal the "franchisor's associate" finding, determining it was a question of fact, not law.

The court also dismissed leave to appeal the costs award, finding that while it raised a question of law, it lacked sufficient importance to the parties.

Consequently, the franchisees' application to enforce the arbitral awards was granted.

The plaintiff, a franchisee, brought an urgent motion seeking a stay of a prior decision denying injunctive relief and a mandatory injunction to restore possession of the franchise premises, pending leave to appeal to the Divisional Court.

The franchisor had locked out the plaintiff after the initial injunction motion was dismissed.

The court found it lacked jurisdiction to grant the requested relief, determining that the Divisional Court, as the court to which leave to appeal was being sought, was the proper forum for such interim orders under section 134(2) of the Courts of Justice Act.

The motion was transferred to the Divisional Court.

This is a costs decision following a judgment in a complex multi-party litigation involving franchise disputes.

The court determined the quantum and scale of costs for various successful and unsuccessful claims and counterclaims.

Premium Host Inc. was awarded partial indemnity costs against Paramount Franchise Group Inc. and related entities.

Versatile Holdings Inc. and Everest Group Inc., whose claims were dismissed, were ordered to pay partial indemnity costs to the Paramount group.

The court declined to award elevated costs, reduced the defendants' claimed costs due to duplication and litigation conduct, and clarified the liability of individual guarantors for corporate litigation costs, holding them jointly and severally liable only for costs related to counterclaims where they were proper parties.

The plaintiff, Coffee Time (2015) Corporation, sought summary judgment against the defendants, 1685247 Ontario Limited and Khursheed A. Choudhry, for unpaid franchise fees and rent arrears under a franchise agreement and sublease.

The defendants raised several defenses, including limitation periods, the effectiveness of the assignment of the agreements to the plaintiff, disputes over the calculation of fees and rent, a claim for accelerated rent, and credit for abandoned property.

The court granted partial summary judgment, finding the assignment effective as an equitable assignment, adjusting the calculation of rent arrears based on a reduced minimum rent, denying the claim for accelerated rent as the tenancy was month-to-month, and denying credit for abandoned property due to insufficient evidence.

The plaintiff was awarded specific amounts for franchise fees and rent arrears, with interest on franchise fees.

The plaintiff, Lightbox Enterprises Ltd., moved for interlocutory injunctive orders against the defendant, 2708227 Ontario Inc., concerning their business relationship involving retail cannabis stores.

Lightbox alleged breach of license and service agreements and misuse of confidential information and trademarks ("Dutch Love", "Hobo Cannabis"). 2708227 Ontario Inc. counter-claimed, asserting the relationship was a franchise governed by the Arthur Wishart Act and that Lightbox failed to provide disclosure, entitling 2708227 Ontario Inc. to rescind the agreements.

The court dismissed Lightbox's motion for injunctive relief, finding no contractual basis for the primary relief sought, insufficient evidence to establish a strong prima facie case for breach of confidence, no irreparable harm, and that the balance of convenience favored the defendant.

The defendants (Franchisor Group) brought a motion for a collective security for costs order against three corporate plaintiffs (Franchisees) involved in related but unconsolidated actions, seeking a global payment of $597,427.32.

The court dismissed the motion, finding no legal basis under Rule 56.01 for a collective security for costs order against plaintiffs in separate actions.

The court also declined to grant alternative relief (separate security orders) under the "basket clause" of the notice of motion, citing procedural unfairness due to lack of proper notice and the arbitrary nature of quantifying security without a detailed breakdown of costs per action.

This motion, brought under Rule 21.01(1)(a) of the Rules of Civil Procedure, sought a determination of a question of law: whether a claim in a pleading (specifically, a Third Party Claim) constitutes proper notice under section 6(3) of the Arthur Wishart Act (Franchise Disclosure) 2000.

The franchisee (Shearer) and franchisor (The Works) argued that the pleading was not proper notice, while the franchisee's former lawyer (Msi), who was being sued for negligence for failing to provide proper notice, argued that it was.

The court found that a Rule 21 motion was appropriate and, following binding authority and legal principle, concluded that a Third Party Claim cannot constitute a proper notice of rescission under subsection 6(3) of the Wishart Act, as a pleading and a statutory notice serve distinct purposes and have different temporal and functional implications.

This decision addresses an application for leave to appeal an arbitrator's decision and a cross-application to enforce arbitral awards.

The central issue was whether a franchisee is entitled to damages under section 7(2) of the Arthur Wishart Act (Franchise Disclosure), 2000 (AWA) for misrepresentation in a disclosure document voluntarily provided by a franchisor, but not legally required under section 5 of the AWA.

The court found that the arbitration agreement's "final, conclusive and binding" language excluded a right of appeal.

Even if leave to appeal were possible, the court was not satisfied that the importance of the matters at stake justified an appeal.

The court upheld the arbitrator's decision, finding it reasonable and correct, that section 7(2) of the AWA only applies to misrepresentations in disclosure documents *required* by section 5, not those voluntarily provided, especially for commercially sophisticated franchisees.

Consequently, the application for leave to appeal was dismissed, and the application to enforce the arbitral awards was granted.

The plaintiff, a former franchisee, brought a motion for summary judgment against the franchisor and its principal, alleging deficiencies in disclosure documents, fraud, and forgery, and seeking damages over $2,000,000.

The defendants opposed the motion, arguing numerous factual disputes and credibility issues.

The court dismissed the motion for summary judgment, finding that the case involved too many disputed issues of fact, including allegations of fraud and forgery, which required an assessment of credibility that could not be resolved on a paper record.

The court also noted that a complex legal issue regarding the effect of a notice of rescission required a full appreciation of the factual matrix, best achieved at trial.

The representative plaintiff, a Tim Hortons franchisee, and the defendant franchisor sought approval of a settlement agreement in two companion class actions concerning the use of an Ad Fund and the formation of a franchisee association.

The motion also sought approval of class counsel fees and litigation funding agreement amounts.

The court approved the settlement, finding it fair, reasonable, and in the best interests of the class, despite one objector's concerns.

The settlement included monetary payments for marketing initiatives, legal costs, and significant non-monetary benefits such as enhanced transparency, audit rights, and freedom for franchisees to negotiate contracts.

The court also approved the requested fees for the litigation funder and class counsel, deeming them reasonable given the overall settlement value.

The Third Party, RE/MAX Ontario-Atlantic Canada Inc. o/a RE/MAX Integra, brought a motion to strike portions of the Amended Third Party Claim filed by the Defendant, RE/MAX Core Realty Inc. The claims sought to be struck included allegations of unfair business practices, breaches of common law duties of fair dealing and good faith, breaches of the Arthur Wishart Act, and intentional interference with economic relations.

The court struck the claims for unfair business practices (by consent) and intentional interference with economic relations (without leave to amend).

The claims for breaches of common law and statutory duties of good faith were struck but with leave for the Defendant to amend its pleading to include necessary material facts linking the allegations to the Franchise Agreement.

The court also clarified that allegations regarding a disciplinary matter could be included as particulars for the good faith claims, provided they were properly tied to the Franchise Agreement.

The defendants brought a motion seeking a further and better affidavit of documents from the plaintiff due to alleged overproduction and lack of categorization, and both parties sought security for costs as none were ordinarily resident in Ontario.

The court ordered the plaintiff to categorize its 24,000 documents and denied the plaintiff's request for increased discovery time.

Both 6Points Food Services Ltd. and Carl's Jr. Restaurants LLC were ordered to post $80,000 each in security for costs, with the court finding Carl's Jr. to be an "initiating plaintiff" despite being a defendant by counterclaim, due to its prior commencement of proceedings in California.

The plaintiffs moved for summary judgment, arguing their "Exclusivity Agreement" with the defendant was a franchise agreement under the Arthur Wishart Act, requiring disclosure which was not provided.

The defendant contended it was not a franchise.

The court found the agreement constituted a franchise based on payment requirements, trademark association, and significant control exercised by the defendant.

Consequently, the plaintiffs were entitled to rescission due to non-disclosure and damages for loss of income and moving expenses.

Claims for misrepresentation and other business expenses were dismissed or required further proof at trial.

The defendants brought a motion to stay the plaintiffs' proceeding in favour of arbitration, citing arbitration clauses in enrollment and license agreements.

The court dismissed the motion, finding the arbitration clauses ambiguous and contradictory with exclusive jurisdiction clauses.

The court also determined that the individual defendants and the Canadian Association of Correactology were not parties to the arbitration agreements.

Furthermore, the plaintiffs' allegations of a fraudulent scheme, misrepresentation, and breaches of the Arthur Wishart Act and Private Career Colleges Act fell outside the scope of the arbitration clauses and raised serious public policy concerns regarding the legality of the defendants' business, making a stay inappropriate and a partial stay unreasonable due to intertwined issues.

The Applicants (YESCO, Young, Wardle) brought a motion for summary judgment to dismiss a counterclaim filed by the Respondents (226 Ontario Inc., Goldlust).

The counterclaim alleged breach of contract, breach of the Arthur Wishart Act (Franchise Disclosure), and negligent misrepresentation, primarily concerning YESCO's alleged failure to develop a "National Accounts" program as promised in the franchise agreement and disclosure document.

The court dismissed the motion for summary judgment on limitations grounds, finding that the "appropriate means" test under the Limitations Act, 2002, was not met as the Respondents were reasonably relying on the franchisor's ongoing ameliorative efforts.

The court also dismissed the motion for summary judgment on the substantive merits of the breach of contract and Wishart Act claims, citing significant factual disputes and the risk of duplicative findings with the main action.

However, the court granted summary judgment dismissing the negligent misrepresentation claims, holding that an "entire agreement" clause in the franchise agreement barred such claims, given the commercial sophistication of the parties.

The defendants moved to set aside service ex juris, dismiss for want of jurisdiction, or stay the action on the basis of forum non conveniens in a franchise dispute.

The plaintiffs sought a declaration of valid rescission of Saab Dealer Sales and Service Agreements under the Arthur Wishart Act (Ontario) and Alberta Franchises Act, and damages for statutory misrepresentation or breach of contract.

The court found a real and substantial connection to Ontario because the defendant franchisor carried on active business in the province.

The court also determined that California was not a clearly more appropriate forum, considering factors such as the residence of plaintiffs, location of witnesses, governing law, and the avoidance of proving Ontario law in a foreign jurisdiction.

The motion was dismissed.

A motion was brought to set aside a registrar's order dismissing an action for delay, which was prematurely issued due to a court staff error.

The court found the registrar lacked authority to issue the dismissal order, rendering it a nullity.

Despite some delay attributable to former counsel's inadvertence and the plaintiffs' initial inaction, the court emphasized the policy bias towards hearing cases on their merits.

The defendant's claims of prejudice were not substantiated or causally linked to the plaintiffs' delay, and their passivity in addressing the dismissal order undermined their position.

The motion was granted, setting aside the dismissal order and reinstating the action with new deadlines for mediation and setting down for trial.