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Contracts

Franchise agreements

Franchisor was not excused from statutory mandatory disclosure obligations

Franchisor provided franchisee with Franchise Disclosure Document (FDD) that indicated franchisor had “no reasonable means of estimating or predicting” costs of converting existing premises in lieu of building new premises. Franchisee and guarantors executed franchise agreement at time when location for franchise had not been determined, and franchisee later signed sublease before seeing head lease. Conversion costs ended up being in range of costs for building new premises, and franchisee and guarantors ultimately served notice of rescission. Franchisee and guarantors commenced action against franchisor and related companies for, among other things, declaration that franchise agreement was validly rescinded by them. Franchisee and guarantors brought motion for partial summary judgment relating to entitlement to rescind franchise agreement. Franchisor and related companies brought cross-motion for summary judgment dismissing claim of franchisee and guarantors in its entirety. Motion granted; cross-motion granted in part. Franchisor and related companies were not excused from their statutory mandatory disclosure obligations in s. 5 of Arthur Wishart Act (Franchise Disclosure), 2000 (Ont.) simply because location of proposed franchise was not identified before franchise agreement was signed. Form of lease included in FDD was materially incomplete, and FDD expressed uncertainty about costs. It was insufficient for franchisor to simply say that required material information was not known at time of disclosure, and plain words of Act did not allow for introduction of concepts of waiver or contracting out of disclosure obligations. It was premature to purport to deliver FDD under Act and enter into franchise agreement, and notice of rescission under s. 6(2) of Act was timely and effective since lack of disclosure was egregious. Peripheral claims were dismissed since franchisee and guarantors did not provide any focussed argument seeking to demonstrate that either of those claims had been proved or required trial.
Raibex Canada Ltd. v. ASWR Franchising Corp. (Sep. 7, 2016, Ont. S.C.J., W. Matheson J., CV-14-518145) 270 A.C.W.S. (3d) 752.


Bankruptcy and Insolvency

Arrangements

Judge did not have jurisdiction to apply doctrine of equitable subordination

Company was in Companies’ Creditors Arrangement Act (Can.) (“CCAA”) protection. Former employees of company claimed its American parent company ran company into insolvency to further its own interests. Former employees sought to have CCAA judge apply American legal doctrine of “equitable subordination” to subordinate parent company’s claims to former employee’s claims. CCAA judge held that he had no jurisdiction to apply doctrine of equitable subordination. Union appealed. Appeal dismissed. Nowhere in words of, nor did it fall within scheme of statute, which focused on implementation of plan of arrangement or compromise. Words “may make any order it considers appropriate in circumstances” in s. 11 of CCAA must be read as “may in furtherance of purposes of act make any order it considers appropriate in circumstances”. There was no support for concept that phrase “any order” in s. 11 provided at-large equitable jurisdiction to reorder priorities or to grant remedies as between creditors. Section 6(8) of CCAA effectively subordinates “equity claims”, as defined, to claims of all other creditors. “Equitable subordination” is form of equitable relief to subordinate claim of creditor who has engaged in inequitable conduct, such claim was not “equity claim” as defined. There was no “gap” in legislative scheme to be filled by equitable subordination through exercise of discretion, common law, court’s inherent jurisdiction or by equitable principles.
U.S. Steel Canada Inc., Re (Sep. 9, 2016, Ont. C.A., George R. Strathy C.J.O., P. Lauwers J.A., and M.L. Benotto J.A., CA C61331) 270 A.C.W.S. (3d) 471.

Appeal

Leave to appeal

Court not authorized to dispense with statutory leave requirement

Judgment dealt with custody, access and child support. Responding party was declared to be vexatious litigant. Responding party’s application to set aside order was dismissed and further order was made declaring responding party to be vexatious litigant. Responding party was denied leave to continue appeal. Responding party court should dispense with compliance with requirement that he obtain leave. Moving party sought order dismissing responding party’s appeal of judgment. Motion granted. Responding party’s appeal was quashed. Rule 2.03 of Rules of Civil Procedure (Ont.) permitted court to dispense with compliance with Rules, but did not authorize court to dispense with compliance with statutory leave requirement set out in s. 140 of Courts of Justice Act (Ont.).
Vermette v. Nassr (Sep. 6, 2016, Ont. C.A., K. Feldman J.A., Janet Simmons J.A., and P. Lauwers J.A., CA M46599 (C59706)) 270 A.C.W.S. (3d) 463.


Contempt of Court

Grounds

Contempt motion with respect to access orders was dismissed

Parties married in 2000, had two children, and separated in August 2012. Final consent order issued in 2013 provided for joint custody of children and that access would be shared in accordance with schedule. Parties returned to court requesting variation of joint custody order. Father alleged that mother was in contempt of court because she knowingly prevented his access with daughter. Contempt motion was dismissed, however, mother was to carefully consider Court of Appeal decision regarding contempt with respect to access orders. Mother clearly knew about consent order and that order was clear and unambiguous in terms of weekend access that it provided to father. It was not shown beyond reasonable doubt that mother intentionally did or failed to do something provided by that order. Mother believed that daughter could chart her own access terms once she reached certain age. Although this belief was not reasonable, it was not shown beyond reasonable doubt that mother’s belief was not reasonable. Father contributed in substantial way to problems in his relationship with daughter. There were complexities in custody and access issues relating to daughter and this was not clear cut case of parental alienation. Father contributed to problems by unilaterally changing access. Mother did not intend to completely remove access, and some attempts were made to try and restore access.
De Matos v. De Matos (Aug. 15, 2016, Ont. S.C.J., Lemay J., FS-12-76328-99) 270 A.C.W.S. (3d) 352.


Bankruptcy and Insolvency

Arrangements

Debtors obtained protection under Companies’ Creditors Arrangement Act (Can.)

Creditor was telecommunications company from whom debtors purchased telecommunication services for resale. While experiencing financial difficulty, debtors entered into asset purchase agreement (APA), conditional on court approval, with purchaser that was successful bidder under privately structured and supervised sales and investor solicitation process. APA contemplated purchaser might have to pay arrears owing under contracts to be assigned, and any arrears ultimately paid were allocated between purchasers and debtors. Debtors obtained protection under Companies’ Creditors Arrangement Act (Can.). Creditor consented to assignment without understanding that it would not be paid arrears or that it should have demanded payment of arrears. Creditor brought motion for order that court-appointed monitor pay creditor arrears owing from proceeds of sale of debtors’ assets. Motion dismissed. Discretion afforded court under s. 11 of Act did not encompass order for payment of creditor’s arrears. Consent request letters were neither unfair nor lacking transparency, and no advantage was taken of creditor’s mistaken understanding. Creditor had been made aware that APA would be posted on monitor’s website, and it was subsequently posted there. Because creditor had consented to assignment of its contracts and had not asked to be placed on e-service list, creditor had not been entitled to service of assignment motion. With respect to prejudice arising from creditor’s requested relief, this was situation where proverbial egg could not be unscrambled.
Primus Telecommunications Canada Inc., Re (Aug. 18, 2016, Ont. S.C.J. [Commercial List], Penny J., CV-16-11257-00CL) 270 A.C.W.S. (3d) 244.


Appeal

Procedure

Motion to quash appeal on jurisdictional ground was heard before appeal

Plaintiffs brought undertaking and refusals motion that was largely unsuccessful. Plaintiffs sought leave to appeal decision to Divisional Court, which was refused. Plaintiffs appealed denial of leave to appeal. Defendants sought to quash appeal in separate motion on grounds that court lacked jurisdiction. Defendants brought motion to extend time to deliver their responding materials for plaintiffs’ appeal; plaintiffs brought cross-motion to have motion to quash heard at same time as appeal. Motion granted; cross-appeal dismissed. Where basis for motion to quash was that court lacks jurisdiction to hear appeal, motion was heard before appeal. Defendants were granted 60 days to deliver their materials.
Yim v. Song (Aug. 24, 2016, Ont. C.A., B.W. Miller J.A., In Chambers, CA M46733, M46813, (C61980)) 270 A.C.W.S. (3d) 9.


Administrative Law

Judicial review

Standard of review for Civilian Police Commission’s decision was reasonableness

Hearing officer found police constable guilty of disciplinary offence of unsatisfactory work performance. Constable’s appeal to Civilian Police Commission was allowed. Application by city police service for judicial review was allowed. Constable appealed. Appeal allowed. On appeal, court had to determine whether appropriate standard of review was identified and applied on application for judicial review without any deference owed by appellate court to decision of Divisional Court on judicial review. Case law established that standard of review for Commission’s decision was reasonableness while standard of review that Commission had to apply to hearing officer’s decision was correctness for questions of law and reasonableness for other questions. Suggestion that both hearing officer and Commission be subject to standard of reasonableness on appeal or review was not accepted. Apparent paradox that Commission need only be reasonable in being sure that hearing officer was correct on questions of law was restricted to situations where there were more than one reasonable answer to question of statutory interpretation. There was nothing peculiar about reviewing court deferring to tribunal’s assessment of whether decision-maker answered question correctly, as its function was concerned mostly with justification, transparency and intelligibility within decision-making process. Objection that reasonableness standard resulted in no impetus for Commission to determine if hearing officer was correct rested on questionable proposition that it would only be accountable through intense level of judicial scrutiny. In any event, standard of review by which Commission was made answerable was not settled by efficacy but by discerning legislative intent. There was no justification for Commission’s argument that it owed no deference to decision of hearing officer on questions of fact, as existence of statutory power to hold de novo hearing did not mean that correctness was standard of review when that power was not exercised.
Ottawa Police Services v. Diafwila (Aug. 16, 2016, Ont. C.A., K. Feldman J.A., J.C. MacPherson J.A., and B.W. Miller J.A., CA C60683) Decision at 250 A.C.W.S. (3d) 507 was reversed. 270 A.C.W.S. (3d) 205.


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