



COURT OF APPEAL FOR ONTARIO

CITATION: 2256306 Ontario Inc. v. Dakin News Systems Inc.,
    2016 ONCA 74

DATE: 20160126

DOCKET: C60050

Weiler, LaForme and Huscroft JJ.A.

BETWEEN

2256306 Ontario Inc. and Ali Reda

Plaintiffs

(Respondents)

and

Dakin News Systems Inc. and Warren Smagaren

Defendants

(Appellants)

Harjaap Mann, for the appellants

Michael Fleischmann, for the respondents

Heard:  January 15, 2016

On appeal from the orders of Justice Dale Parayeski of
    the Superior Court of Justice, dated January 27, 2015, with reasons reported at
    2015 ONSC 566, 39 B.L.R. (5th) 136.

ENDORSEMENT

[1]

The appellants appeal from an order dismissing their motion
    for summary judgment and from an order granting the respondents cross-motion
    for summary judgment and declaring that the respondents are entitled to
    statutory rescission of their franchise agreement with the appellants.

[2]

This litigation arises out of the respondents
    purchase of a business operating as International News from a franchisee of the
    appellants in November 2010. Although the respondents operated the business
    without interruption following the purchase, they did not enter into a
    franchise agreement with the appellants until October 29, 2012.

[3]

In August 2013, the respondents purported to
    rescind the franchise agreement because the appellants failed to provide
    disclosure as required under the
Arthur Wishart Act
(Franchise Disclosure)
, 2000, S.O. 2000,
    c. 3.

[4]

The appellants argued that they were exempt from the
    disclosure requirement under ss. 5(7)(a)(iv) and 5(7)(g)(ii)
.
The motion
    judge found that neither provision exempted the appellants from their
    disclosure obligation.

[5]

The appellants argue that they were denied a fair hearing
    by the motion judge because they were not heard on the respondents cross-motion.
    The motion judges remarks did create an expectation that there would be
    further argument on the respondents cross-motion if the appellants were
    unsuccessful in their motion for summary judgment. However, the issues on the
    motion and cross-motion were intrinsically connected and all of the relevant
    material was before the court when the appellants motion was argued.

[6]

It is uncontroverted that the parties entered into a franchise agreement
    at the instance of the appellants after the respondents had purchased and
    operated the business for some time.

[7]

The franchise agreement covered the period the respondents had been
    operating the business and extended into the future. It included a requirement
    that the respondents pay a $10,000 franchise fee, and some of its terms were
    slightly different than the franchise agreement that had covered the prior
    franchisee.

[8]

Having chosen to require a franchise agreement with the respondents, the
    appellants cannot now argue that a franchise agreement was already in place
    with them, such that they are exempted from the disclosure requirement by s.
    5(7)(a)(iv). Moreover, the franchise agreement obligated the respondents to pay
    a transfer fee of $10,000, and as a result the appellants are not exempt from
    disclosure by s. 5 (7)(g)(ii).

[9]

The motion judges findings of fact are supported by the record and
    there is no basis for this court to interfere with them. In the circumstances
    of this case, those findings rendered summary judgment in favour of the
    respondents inevitable. As a result, the motion judges decision to deal with
    both the motion and cross-motion resulted in no prejudice to the appellants.

[10]

The
    appeal is dismissed with costs to the respondent of $13,500, inclusive of all
    applicable taxes and disbursements.


K. M. Weiler J.A.

H.S.
    LaForme J.A.

Grant
    Huscroft J.A.


