|
Franchise - Damages - Misrepresentation. Raibex Canada Ltd. v. ASWR Franchising Corp.
In Raibex Canada Ltd. v. ASWR Franchising Corp. (Ont CA, 2018) the Ontario Court of Appeal allowed an appeal by a franchisor, this brought against motion judge's decisions which "held that the franchise agreement had been validly rescinded and dismissed the Franchisor’s claim for damages".
Here the court considers a AWAFD ['Damages for misrepresentation, failure to disclose'] issue, brought on cross-appeal by the franchisee:Issue 4 – Did the motion judge err in dismissing the Franchisee’s claims based on misrepresentation and breach of the duty of fair dealing?
[72] In its cross-appeal, the Franchisee submits the motion judge should not have dismissed its claims under s. 3 and s. 7 of the AWA. The Franchisee notes that the motion judge dismissed these claims only after finding that the Franchisee was entitled to rescission. The Franchisee concedes that if the motion judge’s ruling on rescission is upheld, there may not be any further basis to claim damages for misrepresentation and breach of the duty of fair dealing. However, if that ruling is overturned on appeal, the Franchisee submits the arguments raised in respect of rescission “cascade” onto the s. 3 and s. 7 claims and should be remitted for trial.
[73] The Franchisor contends that the motion judge correctly dismissed the s. 3 and s. 7 claims. They were not particularized in the Franchisee’s statement of claim and were largely ignored in its oral and written argument. By not mounting a defence to the cross-motion, the Franchisee failed to “put [its] best foot forward”. Further, argues the Franchisor, the s. 3 claim does not “cascade” from the Franchisee’s rescission arguments. A failure to include material facts in a disclosure document does not constitute unfair dealing in the performance of a franchise agreement: 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONCA 24, 344 O.A.C. 222, at para. 62.
[74] Alternatively, the Franchisor submits the s. 3 and s. 7 claims should have been dismissed for lack of merit. Addressing the s. 3 claim, the Franchisor submits it was honest, candid and forthright in its performance of the franchise agreement. It closely involved Mr. Bastaros in the location selection process and, by his own admission, used suitable best efforts to implement the agreement. The motion judge expressly stated that she was not suggesting that “this Franchisor set out to abuse this prospective franchisee.”
[75] Turning to the s. 7 claim, the Franchisor notes that Mr. Bastaros admitted to acquiring the franchise with full knowledge that the location and lease details were unconfirmed. Section 7(4) of the AWA precludes damages under s. 7(1) where the franchisee “acquired the franchise with knowledge of the [alleged] misrepresentation or of the material change”.
[76] I agree with the Franchisor’s position. I see no reason to interfere with the motion judge’s dismissal of these claims on the basis that the Franchisee failed to “put its best foot forward”. I also disagree with the Franchisee that its submissions on rescission “cascade” onto the claims under s. 3 and s. 7. Pet Valu is, in my view, dispositive of the “cascade” argument as it relates to the s. 3 claim. I also fail to see how any of the Franchisee’s submissions regarding rescission raise a genuine issue requiring a trial in respect of its allegations of misrepresentation.
|
