In 1201059 Ontario Inc. v. Pizza Pizza Limited,3 the Ontario Divisional Court dismissed a franchisee’s appeal that essentially sought to re-litigate findings of fact on the issue of statutory materiality that had already been determined by the Ontario Superior Court of Justice.

Background

The issue at the root of the appellant’s action was what, if any, disclosure obligations the franchisor was obliged to make pursuant to the Arthur Wishart Act (Franchise Disclosure), 2000, SO 2000, c 3 in the context of the renewal of a franchise agreement. The appellant alleged that the franchisor failed to adequately disclose in writing its plans for proposed renovations when he renewed his franchise agreement for a further 5-year term. The appellant did not want to incur the costs for renovations and alleged that it suffered damages when the franchisor attempted to proceed with renovations and allegedly terminated the agreement before its date of completion.

In concluding that there were no material changes in the renewal agreement that could be considered fundamental to the appellant’s business operations, the Superior Court dismissed the appellant’s action. Our Franchise Group’s review of this decision back in October 2013 can be found here.

The Appeal

While four main issues were raised on appeal, the first was probably the most significant – whether the Superior Court erred in finding as a fact that there had been no material change in the operation of the respondent’s business which would have triggered any disclosure obligation under the Wishart Act. The other three issues involved the assessment of damages.

In upholding the lower court finding that the franchisor did not breach its disclosure obligation, the Divisional Court noted distinction between a trial and appellate court. The trial judge is in the unique position of having heard the evidence and assessed the witnesses, and for this reason, is granted deference by appellate courts when it comes to findings of fact. Unless the appellate court finds that the trial judge made a palpable and overriding error, this deference remains. In this appeal, however, the appellant was seeking to re-litigate the trial judge’s findings of fact that were grounded in the evidence.

In finding that “the appellant had his day in court,” the Court concluded that the findings of fact on those issues determined by the trial judge did not come remotely close to passing the threshold of palpable and overriding error. The Divisional Court held that the trial judge had closely reviewed all of the evidence before him and that based on such review, the appellant’s witness was not credible. Having made the determination concerning whom he believed, in the Court’s view, he correctly concluded that the respondent did not breach its disclosure obligations under the Wishart Act and that there was no material change in the operation of the respondent’s business between when the appellant entered into the original franchise agreement and when it entered into the renewal agreement.

Key Take-Away Principles

So what does all this mean? In upholding the Superior Court’s decision, it is clear that courts will continue to assess materiality on a case-by-case basis. For this reason, it is important to closely consider all of the circumstances of the franchise relationship when deciding what information to disclose in advance of the renewal of a franchise agreement.

On a broader scale, this decision lends itself in support of defining the role of the appellate court in Ontario – it is not meant to be a second kick at the can for parties to re-litigate their claims. This is not to say that errors warranting appellate intervention will not occur, but it is safe to say that the appellate court will show great deference to a trial judge’s decision unless the error is plain and obvious.

The Ontario Divisional Court’s decision can be viewed here.