Determination of who was franchisor’s associate required full factual record

Franchise agreements

Determination of who was franchisor’s associate required full factual record

US auto manufacturer’s predecessor declared bankruptcy. As part of court-supervised restructuring, manufacturer received assets of bankrupt predecessor company and bailouts from, among others, Canadian and Ontario governments. Canadian dealers brought action against manufacturer and Canadian subsidiary alleging manufacturer’s preferential financial support to US dealers constituted breach of duty of good faith in performance of franchise agreements and breach of Arthur Wishart Act (Franchise Disclosure), 2000 (Ont.). Manufacturer and subsidiary brought successful motion under R. 21 of Rules of Civil Procedure (Ont.) to strike claims. Motion judge dismissed entire claim against manufacturer without leave to amend, finding, among other things, that manufacturer was not party to franchise agreement and could not be held liable under s. 3(2) of Act or at common law for alleged breaches of franchise agreement by subsidiary. Dealers appealed. Appeal allowed with costs fixed at $20,000. It was not plain and obvious action that manufacturer was not franchisor’s associate. Motions judge approached motion as if it were motion for summary judgment and required dealers to demonstrate that they would succeed rather than requiring manufacturer to demonstrate that dealers could not possibly succeed. Interpretation of “party” in s. 3 would likely have important precedential value and answer should be decided on full record. Determination of duties owed under remedial legislation such as Act involved important questions of legal interpretation, were subject of limited jurisprudence, and required factual record. Interpretation of “party” and extent of duty in s. 3 would likely have important precedential value and answer should be decided on full record, as did question of whether level of control alleged and special obligations owed in context of franchise relationship could open door for imposition of common law duty. Determination of who was franchisor’s associate required full factual record. Motion judge concluded that manufacturer could not be “directly involved in grant of franchise” because grant of franchise occurred before manufacturer was in existence, but conclusion was based on improper treatment of document on R. 21 motion as evidence. Conclusion required trial based on full record, not R. 21 motion.
Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd. (May. 3, 2016, Ont. C.A., Doherty J.A., G. Pardu J.A., and M.L. Benotto J.A., CA C60644) Decision at 254 A.C.W.S. (3d) 334 was reversed. 267 A.C.W.S. (3d) 329.