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Torts - Conspiracy (2). Cervantes v. Pizza Nova Take Out Ltd.
In Cervantes v. Pizza Nova Take Out Ltd. (Ont Div Ct, 2026) the Ontario Divisional Court mostly dismissed two separate class proceedings appeals (by both plaintiff and defendants), here brought against orders "to certify some but not all of the claims in this class action", here concerning whether "delivery drivers for the 141 Pizza Nova Franchisees are each employees, rather than independent contractors, and they should have received certain entitlements under the Employment Standards Act, 2000".
Here the court considers (and allows on appeal) the civil 'conspiracy' element of "combination by agreement or with a common design":[24] Conspiracy: The Plaintiff claimed that all of the defendants conspired together and with each other. The motion judge found that the conspiracy claim disclosed a cause of action against all of the Franchisees and the Franchisor.
[25] The motion judge considered the allegations in the amended statement of claim. The overt acts that were pleaded and cited by the motion judge related to the Franchisor’s requirements of its Franchisees. There were no acts pleaded as between the Franchisees.
[26] The motion judge found that the required elements of conspiracy were sufficiently pleaded, alleging that the Defendants acted in combination or with common design to breach the ESA, CPP, EI and WSIA. The motion judge certified the claimed conspiracy between all of the Defendants as if they all conspired together, and with one another, and any one Franchisee would be exposed for the allegedly unlawful employment classification of the class members that did work for the other Franchisees.
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Conspiracy
[49] The Franchisees submit that the motion judge erred in law in certifying the Plaintiff’s claim that all of the defendants conspired together and with each other. The Franchisees submit that the alleged conspiracy amongst all the Defendants cannot be certified because it is entirely based on the Franchisor’s arrangements.
[50] The alleged conspiracy was described by the motion judge as follows: “In effect, the [Plaintiff] alleges that the defendants sought to implement a universal, franchise-wide practice, directed towards the Class, to deprive the Class of their [statutory employment benefits].” However, this description of the pleading by the motions judge, which places the defendants on an equal footing, is inconsistent with other pleadings in the amended statement of claim that the Franchisor, not the Franchisees, retained extensive control over the terms and conditions of the agreements with the drivers. Further, the motion judge relied on the overt acts that were pleaded in support of the alleged conspiracy, which were entirely about the Franchisor’s agreements with each Franchisee.
[51] It was apparent in the submissions in this Court that the broad conspiracy claim is significant to the Plaintiff as a way to satisfy the principles in Hughes/Ragoonanan and certify against all the Franchisees rather than just those that the Plaintiff did deliveries for. However, the avoidance of Hughes/Ragoonanan is not the issue. The issue is whether the motion judge erred in his decision to certify the conspiracy claim as pleaded in the amended statement of claim. The Plaintiff claimed that all of the Defendants conspired together and with each other.
[52] The Plaintiff further submits that aspects of the conspiracy test should not be challenged now because the motion judge said that they were not challenged on the motion. This is disputed. Further, reading the Decision as a whole, it is apparent that there were no formal admissions in this regard. The motion judge comprehensively addressed each element of the conspiracy test.
[53] The Franchisees raise several issues with the conspiracy decision. I need not deal with all of them to address this issue.
[54] There is no question of the threshold test for a claim under s. 5(1)(a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6. It is the “plain and obvious” test as set out in the Decision at para. 52.
[55] Further, the motion judge made no error in setting out the five-part test for the tort of a conspiracy to commit an unlawful act, as follows: (i) that the co-conspirators act in combination by agreement or with a common design; (ii) that their conduct is unlawful; (iii) that their conduct is directed towards the plaintiff; (iv) that the co-conspirators should know that, in the circumstances, injury to the plaintiff is likely to result; and, (v) that their conduct causes injury to the plaintiff: Decision, at para. 127.
[56] The Franchisees distinguish this case from other authorities because an independent contractor relationship is not presumptively unlawful, unlike, for example, price fixing. That is so. However, based upon the facts as pleaded here, it is alleged to be unlawful. That is sufficient.
[57] Moving to the first requirement for a conspiracy to commit an unlawful act, the Plaintiff must plead that the Defendants acted in combination by agreement or with a common design. Although a formal agreement is not required, the core element of a conspiracy is agreement. To plead a civil conspiracy, a statement of claim must state the agreement to conspire to commit the unlawful act: Ontario Consumers Home Services v. Enercare Inc., 2014 ONSC 4154, at para. 24; Berry v. Pulley, 2012 ONSC 1790, at para. 374.
[58] The amended statement of claim does not allege any agreement to control, or attempt to control, the relationship of one Franchisee’s drivers by any other Franchisee, or an agreement to collectively mischaracterize their drivers as independent contractors. There are no allegations beyond the individual relationships between the Franchisor and each Franchisee.
[59] The Plaintiff submits that it is enough that each Franchisee entered into a franchise agreement with the Franchisor and pursuant to that agreement hired its drivers as independent contractors when they allegedly should have been treated as employees. The Plaintiff submits that conduct is enough to plead a conspiracy to commit an unlawful act. Under this approach, every franchise relationship would meet the requirement that the franchisor and the franchisees acted in combination, together and with each other. While I do not say that direct communications between the Franchisees is required, the use of standard form agreements is not enough.
[60] The motion judge relied on those standard form contractual arrangements. He noted the relevant pleadings in the amended statement of claim, and the documents incorporated by reference, including the agreements between the Franchisor and each Franchisee that required, among other things, that each Franchisee agreed to follow the Manual including its requirement that drivers be hired as independent contractors.
[61] However, the motion judge erred in failing to consider the amended statement of claim as a whole. It also alleged that the Franchisor controlled the terms of the standard delivery driver contract and required that the Franchisees use only that contract. The claim alleges that the Franchisor, not the Franchisees, retained extensive control over the terms and conditions of the agreements with the drivers.
[62] At best, the claim, read as a whole, shows that the Franchisees each acquiesced to the Franchisor’s requirements regarding drivers. Acquiescence is insufficient for a conspiracy: Berry, at para. 375, citing McKinlay Transport Ltd. v. Motor Transport Industrial Relations Bureau of Ontario, 1996 CarswellOnt 413. Further, conduct can be evidence of an agreement but there is no tort of engaging in acts that further someone else’s conspiracy: Pontillo v. Zinger et al., 2010 ONSC 5537, at para. 15.
[63] This case is unlike Crosslink v. BASF Canada, 2014 ONSC 4529 (Div. Ct.), cited by the motion judge. In Crosslink, leave to appeal was sought in part because allegedly there were insufficient particulars for the conspiracy claim in the statement of claim. Yet in Crosslink, unlike this claim, there were pleadings setting out direct communications. It was expressly alleged that the senior executives and employees of each of the defendants had telephone conversations and meetings with each other and agreed to allocate the volumes of sales and markets amongst themselves in breach of the Competition Act: Crosslink, at para. 75. That pleading was sufficient, but, in this case, there are no such allegations as between the Franchisees in the Cervantes amended statement of claim.
[64] The motion judge also relied on Quizno's Canada Restaurant Corporation v. 2038724 Ontario Ltd., 2010 ONCA 466, 100 O.R. (3d) 721, the certification of an unlawful conspiracy case for alleged price fixing under the Competition Act, R.S.C. 1985, c. C-34. In that case, the franchisees were suing the franchisor and its food and supply distributor companies. It is not a case of an alleged conspiracy by franchisees with one another or with the franchisor. And the primary issue was damages. I therefore do not find it helpful on this issue.
[65] Essentially, the Plaintiff’s position is that this business structure will result in an unlawful conspiracy between the franchisor and all the franchisees if any aspect of the franchisor’s contractual arrangements, required to become a franchisee, turns out to be unlawful and the other requirements for the tort are met. In turn, all of the franchisees could be liable to all class members for an unlawful conspiracy, not just to the class members they dealt with. This gives rise to other issues under the test, such as the requirement that the Defendants know that their conduct is likely to cause injury to not just the Plaintiff (for the four Franchisees that contracted with him), or to that Franchisee’s own drivers, but to all of the drivers for all 141 Franchisees.
[66] This case does not turn on a lack of particularity. It is plain and obvious that the Plaintiff is relying on the relationship as determined by the Franchisor in its requirements about drivers, which it is pled that the Franchisor controlled, not on any other conduct to conspire including the Franchisees. The motion judge erred in certifying the claimed conspiracy between all of the Defendants as if they all agreed to commit an unlawful act with one another.
[67] I would therefore grant the appeal on this ground.
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