4287975 Canada Inc. v. Imvescor Restaurants Inc. et al., (2009) 247 O.A.C. 391 (CA)

• Judge: Borins, Cronk and LaForme, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: February 18, 2009
• Jurisdiction: Ontario
• Citations: (2009), 247 O.A.C. 391 (CA);2009 ONCA 308

4287975 Can. v. Imvescor Restaurants (2009), 247 O.A.C. 391 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. AP.050

4287975 Canada Inc. (appellant) v. Imvescor Restaurants Inc., Imvescor Inc., Baton Rouge Restaurants Company Ltd., Baton Rouge Restaurants Company, Sara-Mammas Corporation Inc., Jim Ragas, John Doe No. 1 to 10, Jane Doe No. 1 to 10 and Doe Companies No. 1 to 10 (respondents)

(C49363; 2009 ONCA 308)

Indexed As: 4287975 Canada Inc. v. Imvescor Restaurants Inc. et al.

Ontario Court of Appeal

Borins, Cronk and LaForme, JJ.A.

April 16, 2009.

Summary:

In June 2005, the franchisee paid the franchisor $15,000 relating to a franchise. In August 2005, prior to the execution of any franchise agreement, the franchisee received a document entitled "Ontario Franchise disclosure document" (disclosure document). In February 2006, the franchisee executed a franchise agreement with the franchisor. In February 2008, the franchisee served a notice of rescission on the franchisor. The franchisee asserted that it had a right of rescission under s. 6 of the Arthur Wishart Act (Franchise Disclosure). The franchisee brought a motion in the form of a special case under Civil Procedure Rule 22.

The Ontario Superior Court, in a decision reported at [2008] O.T.C. Uned. G12, held that the rescission rights under s. 6 of the Act were not available to the franchisee and dismissed the motion. The franchisee appealed.

The Ontario Court of Appeal dismissed the appeal.

Franchises - Topic 5

General - Legislation - Interpretation - In June 2005, the franchisee paid the franchisor $15,000 relating to a franchise - In August 2005, prior to the execution of any franchise agreement, the franchisee received a document entitled "Ontario Franchise disclosure document" (disclosure document) - In February 2006, the franchisee executed a franchise agreement with the franchisor - In February 2008, the franchisee served a notice of rescission on the franchisor - The franchisee asserted that it had a right of rescission under s. 6 of the Arthur Wishart Act (Franchise Disclosure) - Section 6(1) provided for a 60 day rescission period if either a franchisor failed to deliver a disclosure document within the required time periods under s. 5 or the contents of a disclosure document did not meet the requirements of s. 5 - Section 6(2) provided for a two year rescission period in the event of a failure by the franchisor to deliver a disclosure document - The motion judge held that the rescission rights under s. 6 of the Act were not available to the franchisee - The franchisee appealed, asserting that the motion judge failed to give appropriate or sufficient weight to the "imperative" language of s. 5 of the Act that used words like "shall" and "must" to describe a franchisor's obligations - His interpretation of s. 6 effectively frustrated the purpose of s. 5 - This led to an absurd result which was not in keeping with principles of statutory interpretation - Franchisors faced no "strict penalties" for failing to comply with the disclosure imperative of s. 5, which in turn defeated the purpose of the Act - The Ontario Court of Appeal dismissed the appeal - The franchisee's proposed interpretation was inconsistent with the modern approach to statutory interpretation - See paragraphs 35 to 44.

Franchises - Topic 2063

Franchise agreement - Duties of franchisor - To provide statement of material facts (disclosure) - [See Franchises - Topic 5 ].

Franchises - Topic 2207

Franchise agreement - Termination - Rescission - In June 2005, the franchisee paid the franchisor $15,000 relating to a franchise - In August 2005, prior to the execution of any franchise agreement, the franchisee received a document entitled "Ontario Franchise disclosure document" (disclosure document) - In February 2006, the franchisee executed a franchise agreement with the franchisor - In February 2008, the franchisee served a notice of rescission on the franchisor - The franchisee asserted that it had a right of rescission under s. 6 of the Arthur Wishart Act (Franchise Disclosure) - The motion judge held that the rescission rights under s. 6 of the Act were not available to the franchisee - The franchisee appealed - The Ontario Court of Appeal dismissed the appeal - Section 6(1) provided for a 60 day rescission period if either a franchisor failed to deliver a disclosure document within the required time periods under s. 5 or the contents of a disclosure document did not meet the requirements of s. 5 - Not only did the franchisee not provide a notice of rescission within 60 days of receiving the disclosure document, but it also had six months to consider the disclosure document before entering to the agreement - Accordingly, s. 6(1) had no application - Section 6(2) provided for a two year rescission period in the event of a failure by the franchisor to deliver a disclosure document - There was disclosure in this case - Section 6(2) had no application - See paragraphs 19 to 34.

Statutes - Topic 2418

Interpretation - Interpretation of words and phrases - General principles - "Should" and "shall" - [See Franchises - Topic 5 ].

Statutes - Topic 2420

Interpretation - Interpretation of words and phrases - General principles - "Must" - [See Franchises - Topic 5 ].

Statutes - Topic 2601

Interpretation - Interpretation of words and phrases - Modern rule (incl. interpretation by context) - General principles - [See Franchises - Topic 5 ].

Statutes - Topic 5132

Operation and effect - Enabling acts - Obligatory, mandatory, imperative and absolute Acts - What constitutes an imperative power - [See Franchises - Topic 5 ].

Cases Noticed:

Law Society of Upper Canada et al. v. Ernst & Young et al. (2003), 174 O.A.C. 49; 65 O.R.(3d) 577; 227 D.L.R.(4th) 577 (C.A.), leave to appeal dismissed [2004] 1 S.C.R. viii; 329 N.R. 200; 195 O.A.C. 400, dist. [para. 14].

1490664 Ontario Ltd. et al. v. Dig This Garden Retailers Ltd. et al. (2005), 201 O.A.C. 95; 256 D.L.R.(4th) 451 (C.A.), refd to. [para. 20].

Personal Service Coffee Corp. v. Beer et al. (2005), 200 O.A.C. 282; 256 D.L.R.(4th) 466 (C.A.), refd to. [para. 20].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1, refd to. [para. 36].

Sovereignty Investment Holdings Inc. v. 9127-6907 Quebec Inc. et al., [2008] O.T.C. Uned. N18; 2008 CanLII 57450 (Sup. Ct.), dist. [para. 42].

6862829 Canada Ltd. et al. v. Dollar It Ltd. et al., [2008] O.T.C. Uned. O23; 2008 CanLII 60699 (Sup. Ct.), dist. [para. 42].

Statutes Noticed:

Arthur Wishart Act (Franchise Disclosure), S.O. 2000, c. 3, sect. 5(1), sect. 5(4) [para. 5]; sect. 6 [para. 6].

Counsel:

Ian N. Roher and David S. Altshuller, for the appellant;

Randy C. Sutton and Christine Kilby for the respondents, Imvescor Inc., Imvescor Restaurants Inc., and Jim Ragas;

Timothy J. Hill for the respondents, Baton Rouge Restaurants Company Ltd., Baton Rouge Restaurants Company, and Sara-Mammas Corporation Inc.

This appeal was heard on February 18, 2009, by Borins, Cronk and LaForme, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by LaForme, J.A., on April 16, 2009.