The Ontario Superior Court of Justice recently granted partial summary judgment in favour of a franchisor in2176693 Ontario Ltd. et al. v. The Cora Franchise Group Inc. et al.,1 a long-running action commenced by a franchisee.
This decision confirms the suitability of motions for partial summary judgment in the franchise context where the franchisor is faced with a “kitchen sink” claim containing unfounded allegations amenable to being decided without the time and expense of a trial. The court cautioned would-be plaintiffs to draft narrow and focused claims, as “surplusage” will only interfere with the efficient prosecution of a case.
Cassels Brock acted for the franchisor on the motion.
The plaintiff franchisee commenced an action in 2011 raising a myriad of allegations and numerous causes of action, including misrepresentation, breach of contract and various claims under the Arthur Wishart Act (Franchise Disclosure), 2002, SO 2000, c 3, in a 53 page, 128 paragraph, amended claim, even after a successful preliminary motion to strike brought by the franchisor.
Faced with what amounted to a “kitchen sink” claim, purporting to raise issue with many aspects of the franchise relationship, including disclosure, construction, pre- and post-opening training and support (including marketing support), the franchisor brought a motion for partial summary judgment to narrow the issues for discovery and trial. As recognized by the motion judge, at its heart the action essentially involves a claim of financial misrepresentation, with the excess interfering with the efficient prosecution of the case.
The Court ultimately found in favour of the franchisor and dismissed 14 causes of action (some of which were unopposed by the franchisee) on the basis that they were statute-barred under the Limitations Act, 2002, SO 2002, c. 24 and/or without any basis in law or fact.
Of particular interest to franchisors, the Court confirmed that there is no common law tort dealing with the form and content of a franchise disclosure document that exists separate and apart from the statutory obligations imposed by the Wishart Act. Moreover, franchisees will be held to the strict two year limitation period under theLimitations Act, which runs from the time they knew or reasonably ought to have known a claim arose, in this case, from when they received invoices for opening and construction costs. The Court rejected the franchisee’s argument that the distractions caused by opening the franchise delayed discoverability of the claim, also noting that an expert opinion was not required to determine if a cause of action arising from such costs existed.
Of more general interest, the Court also confirmed the importance of a court-sanctioned schedule for a motion, noting that requests for discovery must be made before the hearing of a summary judgment motion. Plaintiffs cannot defeat a summary judgment motion by merely asserting at the hearing that discovery (or other evidence) is required. As is well-established, parties responding to a summary judgment motion must “lead trump” or risk losing.
Finally, the Court recognized that the franchisee’s overreaching claims in this case were the cause of its legal misfortunes, advising that “if parties want an efficient and affordable remedy and process, they should consider focusing on the strength of the causes and shedding the junk that gets in the way and gives the other side ammunition.”
Key Take-Away Principles
As always, plaintiffs should carefully consider the scope of a potential action and resist the temptation to include claims that have no legal or factual basis. In the franchise context, this decision confirms that partial summary judgment may serve as a useful tool in a franchisor’s tool belt where a franchisee (or any potential plaintiff) commences an unwieldy “kitchen sink” action and there are discrete issues that are amenable to being decided without a full trial. The potential tactical and cost saving benefits of such a motion are significant. An early finding on certain claims may bring the parties closer to a resolution and/or significantly narrow the issues for documentary disclosure and discoveries and, ultimately, for trial.