



COURT OF APPEAL FOR ONTARIO

CITATION: Trillium Motor World Ltd. v. General Motors of
    Canada Limited,

2017 ONCA 545

DATE: 20170704

DOCKET: C60838

Cronk, van Rensburg and Pardu JJ.A.

BETWEEN

Trillium Motor World
    Ltd.

Plaintiff (Appellant/

Respondent by way of
    cross-appeal)

and


General
  Motors of Canada Limited
and
Cassels
  Brock & Blackwell LLP
Defendant (Respondent/
Appellant by cross-appeal)
David Sterns, Allan D.J. Dick, Andy Seretis, Bryan
    Finlay Q.C., Marie-Andrée Vermette and Michael Statham, for the
    appellant/respondent by cross-appeal Trillium Motor World Ltd.
Kent Thomson, John McCamus, Sean R. Campbell, Sarah L.
    Weingarten, David S. Morritt and Karin Sachar, for the respondent/appellant by cross-appeal
    General Motors of Canada Limited
Heard: January 16, 17, 18 and 19, 2017
On appeal from the judgment of Justice Thomas J. McEwen
    of the Superior Court of Justice, dated July 8, 2015 and March 22, 2016, with
    reasons reported at 2015 ONSC 3824, 30 C.B.R. (6th) 1 and 2016 ONSC 666.
Pardu J.A.:
[1]

This is the first of two appeals and cross-appeals that arise out of the
    public bailout of General Motors of Canada (GMCL) in the spring of 2009. This
    decision addresses a class action against GMCL brought by franchisees whose
    dealerships were terminated as part of the bailout and a counterclaim by GMCL
    against the franchisees. The second decision addresses a class action brought
    by the terminated franchisees against the law firm Cassels, Brock &
    Blackwell LLP for its alleged mishandling of their interests. That decision is
    being released concurrently with this one:
Trillium Motor World Ltd. v. Cassels
    Brock & Blackwell LLP
, 2017 ONCA 544.
A.

introduction
(1)

The GMCL Insolvency and the Wind-Down Agreements
[2]

GMCL was insolvent in May 2009. To survive and avoid proceedings under
    the
Companies Creditors Arrangement Act
, R.S.C. 1985, c. C-26 (
CCAA
)
, it required bailout money. The
    Canadian and American governments demanded that GMCL aggressively restructure
    as a condition of providing the assistance.
[3]

GMCL accordingly had to rationalize the number of its franchisee
    automobile dealers. It had franchise agreements with far too many dealers, some
    of whose businesses were doomed by the decisions of its American parent company
    to discontinue the Saturn and Pontiac brands. Unless a sufficient number of
    dealers agreed to terminate their relationship with GMCL, GMCL would have to
    file under the
CCAA
.
[4]

On May 20, 2009, GMCL delivered Wind-Down Agreements (WDAs) to 240
    dealers. The WDAs offered payment in exchange for a release of all claims,
    including those that could be advanced under the
Arthur Wishart Act
    (Franchise Disclosure)
,
2000
, S.O. 2000 c. 3 (the Act), and
    provided for an end to the dealers business relationships with GMCL.
[5]

The WDAs also contained a promise by the signing dealer not to sue GMCL.
    They required the dealer to opt out of or disclaim any interest in any future class
    proceeding that purported to assert claims released by the WDAs. They required
    any dealer who failed to opt out to indemnify GMCL against any damages and
    legal costs GMCL might subsequently incur by defending a class proceeding.
[6]

The dealers were given six days to sign the WDAs. The agreements were
    conditional on the dealers first obtaining certificates of independent legal
    advice.
[7]

202 out of the 240 dealers who were offered WDAs signed them and
    accepted the payment offered.
(2)

The class proceeding
[8]

After GMCL made its final payments, a class proceeding was brought on
    behalf of all dealers who signed the WDAs, claiming that GMCL breached the
    rights provided to these franchisees under the Act. It was certified by Strathy
    J. (as he then was) in March 2011. The appellant Trillium Motor World Ltd.(Trillium)
    was named as the representative plaintiff.
[9]

At trial, GMCL argued that it had complied with the Act and that, in any
    event, the proceedings were barred by the releases in the WDAs. It also brought
    a counterclaim for damages, arguing that the dealers breached the covenants not
    to sue in the WDAs by commencing their class proceeding or by not opting out of
    it.
[10]

Following
    a long trial in 2014, the trial judge held that GMCL acted honestly and fairly
    and did not breach the dealers rights under the Act. He further held that the
    releases barred the dealers class proceeding. Trillium appeals these rulings
    to this court.
[11]

The
    trial judge also concluded that the dealers promises not to sue GMCL, and to
    indemnify GMCL should a dealer fail to opt out of class proceedings, were void
    on public policy grounds. He found that the covenant not to sue and the
    indemnity were severable from the rest of the WDA, and dismissed GMCLs action
    for damages arising from the dealers breach of those provisions. GMCL
    cross-appeals these rulings.
[12]

The
    dealers raise a number of grounds of appeal impugning the trial judges ruling
    that the manner in which GMCL secured the dealers agreement to the WDAs did
    not breach the duty of fair dealing under the Act. Specifically, they maintain
    that the six-day window given by GMCL to sign the WDAs breached the Act.
[13]

However,
    I agree with the trial judges observation, at para. 295 of his reasons, that
    the issue whether the releases in the WDAs are valid and enforceable is a
    threshold question. If the releases are valid, the dealers other claims
    under the Act are barred.
[14]

I
    agree with the trial judge that the releases are valid, and on that ground I
    would dismiss Trilliums appeal.
[15]

I
    would also uphold the trial judges decision that the covenant not to sue and
    the indemnity in the WDAs were unenforceable against the dealers. I would
    therefore dismiss the cross-appeal by GMCL.
B.

The common issue
[16]

The
    certification judge certified the following common issue regarding the release
    in the WDAs:
(f) Are the waiver and release
    contained in s. 5 of the Wind-Down Agreement null, void and unenforceable in
    respect of the Class Members rights under ss. 4 and 11 of the
Wishart Act
?
[17]

Section
    4(1) of the
Act
guarantees to
    franchisees the right to associate with each other, and s. 4(4) stipulates that
    any provision in a franchise agreement or other agreement relating to a
    franchise which purports to interfere with, prohibit or restrict a franchisee
    from exercising any right under this section is void.
[18]

Section
    11 of the Act provides that any purported waiver or release by a franchisee of
    a right given under this Act or of an obligation or requirement imposed on a
    franchisor or franchisors associate by or under this Act is void.
[19]

The
    releases in the WDAs were comprehensive. They barred any and all claims,
    including claims under the Act for the following:
·

Breach of the duty of fair dealing in the performance, enforcement
    or exercise of any right under the parties franchise agreements (s. 3);
·

Interference with the dealers rights to associate with each
    other (s. 4);
·

Misrepresentation in a disclosure document or statement of
    material change (s. 5);
·

Rescission for failure to provide a disclosure document (s. 5);
    and
·

Rescission for providing a deficient disclosure document (s. 5).
[20]

On
    their face, the WDAs provided for a release of claims under the Act. At trial,
    the arguments turned on whether the WDAs were settlement agreements and therefore
    fell within the judicially-developed exception to the application of s. 11
    of the Act articulated in
1518628 Ontario Inc. v. Tutor Time Learning
    Centres, LLC
, 2006 CanLII 25276 (S.C.), and approved by this court in
405341
    Ontario Limited v.

Midas Canada Inc.
,
2010 ONCA 478, 264 O.A.C. 111.
[21]

As
    I have said, GMCL required that any dealer signing a WDA obtain independent
    legal advice in order to qualify for the payment. Trillium concedes that there
    is no issue as to the fact or adequacy of that advice.
[22]

The
    trial judge found that the WDA was a settlement of known and existing claims,
    stating at paras. 308, 315 and 328 of his reasons:
The factual matrix surrounding the WDA and the Release
    demonstrates the intention and understanding of the parties: that the WDA was
    to be a full and final settlement of any claims the dealers might have had from
    the non-renewal of their [franchise agreements], including any claims,
    statutory or otherwise, in connection with the Notice of Non-Renewal or the
    WDA.

First, the [certificate of independent legal advice] is not the
    only indication that the dealers knew about their potential claims. An
    inference can be drawn, from the abundance of clear facts facing the dealers at
    the time, that they had a variety of contractual and statutory claims. Upon
    entering into the WDAs, the dealers knew everything they needed to know to
    assert the claims they now bring. They knew that they only had six days to
    consider the WDA, obtain independent legal advice, and make their decision. They
    also knew they had not received, and would not be receiving, a disclosure
    document in relation to the WDA.

The WDA and Release were designed to bring the franchise
    relationship to an end. Thus, for the reasons above, this case falls within
    the
Tutor Time
exception. The dealers reviewed the WDA and
    Release, received legal advice, and decided whether or not to sign the
    agreement. In short, the Release was clearly entered into with legal advice and
    in settlement of existing and fully known claims. Notwithstanding its important
    remedial purpose, the
Wishart Act
does not permit
    franchisees to resile from their settlement agreements in the circumstances of
    this case. Unlike
[
Midas
]
, the claims that the franchisees seek
    to bring against the franchisor were fully known when the Release was given. The,
    not unsophisticated, franchisees received independent legal advice regarding
    the Release which was carefully drafted to address the specific dispute in
    question  namely, any breach of the [dealership agreements] and any breach
    relating to the
Wishart Act
. In this case, the importance of
    ensuring that full and final settlements are indeed, full and final, requires
    the court to answer no to Common Issue (f).
[23]

On
    appeal, Trillium reiterates the arguments made to the trial judge and submits
    that he erred in concluding that the
Tutor Time
exception applied.
C.

Standard of Review
[24]

The
    validity of the releases in the WDAs involves issues of mixed fact and law,
    where principles of contractual interpretation are applied to the words of the
    written contract, considered in light of the factual matrix:
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at
    para. 50.
[25]

There
    may be rare instances where a question of law can be extricated from the
    interpretive exercise:
Ledcor Construction Ltd. v. Northbridge Indemnity
    Insurance Co
., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 21. These are
    reviewed on a standard of correctness. Otherwise, an appellate court owes
    deference to the trial judges interpretation of the contract:
Sattva
,
    at paras. 51-53.
[26]

The
    trial judges findings of fact or conclusions of mixed fact and law are also
    owed deference. Intervention on appeal is not justified absent palpable and
    overriding error. A finding contains a palpable error if the error is obvious
    or if the finding is clearly wrong, unreasonable or unsupported by the evidence:
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras.
    10-15; and
Waxman v. Waxman
(2004), 185 O.A.C. 201 (C.A.), at paras.
    296, 297 and 299. The error must be significant enough to vitiate the
    challenged finding of fact:
Waxman
, at para. 297.
D.

The Appellants position
[27]

Trillium
    argues that the trial judge erred in concluding that the release bars the class
    members claims under the Act. It makes four arguments.
[28]

First,
    Trillium says that the trial judge made an overarching error by failing to
    consider the purpose of the Act in finding that the releases are operative. The
    purpose of the Act is to protect franchisees, and that purpose should trump
    commercial certainty and the promotion of settlements. Trillium submits that a
    hard times defence by a franchisor should not be allowed to overwhelm the
    protective purposes of the Act.
[29]

Second,
    and related, Trillium submits that the
Tutor Time
exception to the
    application of s. 11 of the Act should be construed narrowly. It says that the exception
    is limited to cases where a franchisee has: (a) given a release with the advice
    of counsel; (b) in settlement of a dispute; and (c) in relation to existing and
    fully known breaches of the Act. Trillium argues that these conditions were not
    met in this case.
[30]

Third,
    Trillium submits that the manner in which GMCL obtained the releases breached GMCLs
    duty of fair dealing with its franchisees. This makes the releases
    unenforceable.
[31]

Finally,
    Trillium submits that the trial judges conclusion that the covenant not to sue
    and the indemnity were void for public policy reasons means that the whole
    release should be void. Mere severance of this clause is incompatible with the protective
    purpose underlying the Act. GMCL cross-appeals the finding that these provisions
    were void and severable in the first place.
[32]

I
    now turn to consider these arguments. I will proceed by considering Trilliums
    first, second and third submissions when addressing its appeal and by
    considering its fourth submission when addressing GMCLs cross-appeal.
E.

the appeal
(1)

Overarching error
[33]

I
    do not accept Trilliums argument that the trial judge erred by failing to take
    into account the remedial purposes of the Act. He explicitly stated that the overarching
    purpose of the Act is to mitigate and alleviate the power imbalance that
    exists between franchisors and franchisees: at para. 276.
[34]

The
    perilous financial circumstances GMCL faced at the time were an important part
    of the factual context. Section 3(3) of the Act makes it clear that the duty of
    fair dealing includes the duty to act in good faith and in accordance with
reasonable commercial standards
 (emphasis added).
[35]

In
    addition, GMCL also owed duties to the dealers who did not sign WDAs.
    Insolvency proceedings could have been catastrophic for them. To use the
    language of Strathy J., as he then was, in
Fairview Donut Inc. v. The TDL
    Group Corp
, 2012 ONSC 1252, affd, 2012 ONCA 867, leave to appeal refused,
    [2013] S.C.C.A. No. 47, the decision to reduce the size of the dealer network
    was a rational business decision made for valid economic and strategic
    reasons, having regard to both GMCLs own interests and the interests of its
    franchisees: at para. 674. The time pressures to deal with the bloated dealer
    network were neither artificial nor arbitrary. They were imposed by the
    Canadian and American governments as a condition to the provision of bailout
    funds.
(2)

The
Tutor Time
exception
(a)

Interpretation of
Tutor Time
[36]

I
    accept the trial judges finding that the
Tutor Time
exception applied
    in this case.
[37]

In
Tutor Time
,

the
    franchisor failed to provide a disclosure document required under the Act when
    the franchisee acquired the business from a predecessor franchisee. The
    franchisee, represented by counsel, participated in settlement discussions that
    culminated in a settlement agreement with the franchisor. The agreement
    provided certain benefits to the franchisee and released the franchisor from
    any claims. The franchisee attempted to repudiate the settlement, arguing that
    it was void under s. 11 of the Act.
[38]

The
    motion judge in
Tutor Time
held at paras. 106 and 108-109:
Parties who reach a settlement are to be held to their bargain.
    The policy reasons for enforcing a valid release mirror the policy principles
    underlying the doctrines of
res judicata
and issue estoppel.

In my view, s. 11 does not have application to a release given
    (with the advice of counsel) by a franchisee in the settlement of a dispute for
    existing, known breaches of the
Act
by the franchisor in
    respect of its disclosure obligations, which would otherwise entitle the
    franchisee to a statutory rescission.
The settlement of a claim arising
    from and consequential to an existing statutory right of rescission is not in
    itself a waiver or a release of that statutory right to rescission. It is a
    release of the claim arising from having exercised the right of rescission or
    being in the position to exercise the right of rescission. In my view, if a
    franchisee, as in the instant situation, with full knowledge of a breach of the
    franchisors obligations to disclose as required by the
Act
and
    regulations, and with the benefit of independent legal advice, chooses to
    affirm the franchise agreement as a term of a settlement of the claims that
    arise from the franchisors breach, then the franchisee can no longer rescind
    and make a claim to the remedies afforded by s. 6(6) of the
Act
. [Citations
    omitted.]
[39]

Tutor
    Time
was endorsed by this court in
Midas
.
[40]

In
Midas
,
the release was
    prospective in operation, and it was invalid. Upon entering into the franchise
    agreement, the franchisee was required to agree that it would, in the future,
    release all potential claims against the franchisor as a condition of renewal
    of the franchise agreement. At the beginning of the franchise relationship,
    there were no known claims or disputes. The franchise came up for renewal after
    the franchisee had sued the franchisor for breach of its duties under the Act.
    The franchisor tried to extract a release as a condition of renewal while the
    lawsuit was pending with a view to ending the lawsuit.
[41]

This
    court held that
Tutor Time
had no application but in so doing
    implicitly affirmed its validity. MacFarland J.A. wrote, at paras. 24 and 30:
Tutor Time
simply has no application to the facts of
    this case. In
Tutor

Time
, the motion judge concluded that s.
    11 did not apply to a release given by a franchisee, with the advice of
    counsel, in settlement of a dispute for existing and fully known breaches of
    the Act that would otherwise have entitled the franchisee to a claim.

The purpose of the Act is to
    protect franchisees. The provisions of the Act are to be interpreted in that
    light.  Requiring franchisees to give up any claims they might have against a
    franchisor for purported breaches of the Act in order to renew their franchise
    agreement, unequivocally runs afoul of the Act. To suggest that by accepting
    the terms of the Agreement, the respondents have in effect settled their
    claims within the meaning of
Tutor Time
, in my view, misapprehends and
    misstates the ratio of that case. Here there has been no settlement of the
    respondents rights; the respondent is merely trying to assert its rights
    through its claims. The assertion that it has waived or released those rights
    contravenes s. 11 of the Act.
[42]

According to
Tutor Time
, a
    voluntarily-negotiated settlement of existing statutory claims, entered into
    with the benefit of legal advice, in settlement of a dispute for existing and
    known breaches of the Act is not caught by s. 11 of the
Act
.
[43]

In
    the present case, the trial judge found that these requirements were met. As I
    will explain, these conclusions were reasonable and not affected by any
    palpable and overriding error.
(b)

Application of the
Tutor Time
exception
(i)

Advice of counsel
[44]

Each
    dealer who signed a WDA obtained legal advice. The certificate of independent legal
    advice accompanying each WDA explicitly addressed all the claims advanced in
    this action. The trial judge stated at paras. 317 and 319 of his reasons:
Regardless of what the ILA Certificate could have said, it
    clearly stated that the advising lawyer (1) had read the WDA; (2) had explained
    the nature and effect of the WDA, including the dealers waivers, releases and
    indemnification obligations; and (3) had verified that the dealer had carefully
    read the WDA and was fully advised and informed with regard to all of the
    foregoing matters. Simply put, the ILA Certificate, as drafted, adequately
    supports an inference that the dealers who signed the WDAs knew they were
    giving up any legal claims they might have against GMCL.

Trillium asserts that GMCL failed to examine Hurdman and Turpin
    on the legal advice they received regarding any claims against GMCL arising out
    of the Notice of Non-Renewal. I agree with GMCL that nothing can be inferred
    from this. Trillium expressly agreed that no challenge has been or would have
    been made to the accuracy or sufficiency of the legal advice that it and other
    Class Members received from their lawyers. Each lawyer for each Class Member
    expressly confirmed, in writing, that he or she explained the nature and
    effect of the Wind-Down Agreement, including the Dealers and the Dealer
    Operators waivers, releases and obligations contained therein.
[45]

At
    trial, counsel for Trillium conceded that there was no challenge to the
    accuracy or sufficiency of the legal advice and that it did not challenge in
    any way the contents or accuracy of the ILA Certificates. As he wrote in the
    passage quoted above, the trial judge concluded that the dealers who signed
    the WDA knew they were giving up any legal claims they might have against GMCL.
(ii)

Settlement of a dispute
[46]

The
    trial judge concluded that each WDA constituted a settlement of claims arising
    out of GMCLs decision not to renew the franchise agreements of the terminated dealers.
    He explained, at para. 312:
Given the factual matrix leading up to the signing of the WDAs
     notably, the looming
CCAA
filing and the known
    restructuring of GMCLs dealer network  the parties must have understood that
    the central purpose of the WDA was a full and final settlement of any legal
    claims arising from non-renewal of the [franchise agreements] and the WDA
    itself. Indeed, Hurdman and Turpin, both dealers who received WDAs, testified
    that they were aware that GMCL intended to rely on their acceptance of the WDA
    to determine whether a
CCAA
filing could be avoided. Anything
    less than a full settlement would have undermined the purpose of this
    out-of-court restructuring.
[47]

A
    settlement is a voluntary arrangement that brings a dispute or potential
    dispute to an end:
Data General Canada Ltd. v. The Molnar Systems Group Inc
.
    (1991), 6 O.R. (3d) 409 (C.A.), at p. 415.
[48]

I
    agree with the trial judges conclusion. The release in this case characterized
    the WDA document as a settlement:
Release; Covenant Not to Sue; Indemnity
(a)     Each of Dealer and Dealer Operator  hereby absolutely
    and irrevocably  releases,
settles
, cancels,
    discharges and acknowledges to be fully satisfied any and all claims, demands,
    complaints  and causes of action of every kind and nature whatsoever  which any
    of the Dealer parties may have  against GM  arising out of or relating to:
(i) the Dealer Agreement, or this Agreement or any
    predecessor agreement(s);

(iv) any and all applicable statute  including Ontario's
    Arthur Wishart Act (Franchise Disclosure), 2000  Dealer and Dealer Operator
    specifically acknowledge that it and they are hereby waiving any and all rights
    given to it or them under the Acts  and further acknowledge that they are
    doing so with full awareness of such rights, obligations and requirements, and
    intend to waive its and their rights to: (1) any Claim for a breach of the duty
    of fair dealing in the performance or enforcement of or exercise of any right
    under the Dealer Agreement; (2) any claim for GM and/or any of the other GM
    Entities penalizing, attempting to penalize or threatening to penalize the
    Dealer and/or the Dealer Operator for associating with other GM Dealers or
    retailers; (3) any claim for damages for a misrepresentation contained in a
    disclosure document or a statement of material change as required by the Acts;
    (4) any Claim for rescission for failure to provide a disclosure document or a
    statement of material change within the time required by the Acts; (f) any
    Claim for rescission for providing a deficient disclosure document or statement
    of material change as required by the Acts; and (g) any other Claims arising
    under one or more or all of the Acts  [Emphasis added.]
(iii)

Existing claims
[49]

The
    trial judge held that, when Trillium and the other dealers signed the WDAs,
    they knew everything they needed to know to assert their statutory claims. They
    knew that they had only six days to consider the WDA, obtain independent legal
    advice and make their decision. They knew that they did not and would not
    receive a disclosure document in relation to the WDA.
[50]

The
    dealers knew that GMCL was purporting to terminate the dealership agreements
    and that, arguably, it did not have the right to do so. At trial, Trillium argued
    that the WDA was a franchise agreement under the Act and that the failure to
    provide a disclosure document 14 days in advance made the WDA void under s. 5
    of the Act. It argued that GMCLs obligation to provide the disclosure document
    was triggered only when the WDAs were signed, and so the fact that the releases
    were contained in the WDAs made it impossible to say that signing the WDAs
    released an existing claim.
[51]

The
    trial judge held otherwise, concluding that Trillium knew it would not be
    receiving a disclosure document. He held, at para. 327:
In my view, given the factual matrix in this case  including
    the fact that Trillium received independent legal advice regarding the Release
     there is nothing inherently wrong with a Release fixing breaches relating
    to its own procurement. Trillium and the other dealers were sophisticated
    commercial actors, with experience of entering into contracts, and signed the
    WDA with the benefit of independent legal advice.
[52]

The
    release specifically included any Claim for rescission for failure to provide
    a disclosure document. The trial judges conclusion that the release was for
    existing and known claims was reasonable.
(3)

Breach of the duty of fair dealing
[53]

The
    question of whether the release in the WDA was contrary to GMCLs duty of fair
    dealing under s. 3 of the Act was not certified as a common issue. Rather, the
    common issue certified for trial vis-à-vis the release was whether the waiver
    and release in the WDA were void and unenforceable in respect of the Class
    Members rights under ss. 4 and 11 of the Act.
[54]

In
    any event, the trial judge held that GMCL did not breach the duty of dealing
    fairly with the terminated dealers when presenting them with the WDAs. That conclusion
    was reasonably open to him and there is no basis for this court to intervene.
F.

the cross-appeal: The Covenant not to sue and severance
[55]

Section
    5(c) of the WDA contained a covenant by the dealer not to sue GMCL, and it required
    the signing dealer to opt out of or disclaim any interest in any class
    proceeding that purported to assert claims released in the WDA. Section 5(d)
    required any dealer who failed to opt out to indemnify GMCL against any damages
    and legal costs incurred by defending the class proceeding.
[56]

GMCL
    brought a counterclaim against each of the dealers who were part of the class.
    The following issue was certified on the counterclaim:
(a) Did each member of the Dealer Subclass breach section 5(c)
    of their respective Wind-Down Agreements by commencing the Class Action and/or
    failing to opt out of the class action?
[57]

Although
    the trial judge found that the release was generally enforceable, he accepted Trilliums
    argument that s. 5(c) of the WDAs offended the right of association under s. 4
    of the Act. He held that s. 4 guaranteed the franchisees rights to protect
    their legal interests through collective action.
[58]

He
    also concluded that s. 5(c) was void for public policy reasons. He explained,
    at para. 355:
The class action lawsuit plays an important role in Canadian
    society and has fundamental advantages over a multiplicity of individualized
    suits. In my view, the public policy principles articulated by the Supreme
    Court of Canada in
Western Canadian Shopping Centres Inc. v. Dutton
, 2001
    SCC 46, [2001] 2 S.C.R. 534, render s. 5(c) of the WDA void to the
    extent that it denies the affected dealers the right to bring an action against
    GMCL collectively. I do not believe this to be inconsistent with my finding
    that the Release bars Trilliums claims against GMCL. The result is that the
    WDAs cannot preclude a class action, but the Release provides GMCL with a
    defence to that class action.
[59]

GMCL
    argues that the trial judge erred in concluding that the covenant not to sue
    and the indemnity for defence costs are void for public policy reasons and
    because they constrain the franchisees right of association provided by
    s. 4 of the Act. It submits that these provisions are the twin mechanisms necessary
    to give force to the release validly given of all claims. It submits that the
    decision that these provisions are void is inconsistent with the conclusion
    that the
Tutor Time
exception applies to the release. Public policy, GMCL
    submits, favours both settlement agreements and provisions that enforce them.
[60]

GMCL
    further argues that the trial judges conclusion leads to an absurd outcome. As
    it states in its factum:
[A]n individual dealer who unsuccessfully sued GMCL in
    violation of the terms of the Covenant Not to Sue would be legally obligated to
    indemnify GMCL for its costs and expenses associated with defending the action;
    however  that same individual, as a willing participant in an unsuccessful
    class proceeding, would face no such obligation.
[61]

However,
    in my view, this difference in treatment between individual litigants and
    members of a class is expressly contemplated by s. 31(2) of the
Class
    Proceedings Act, 1992
, S.O. 1992 c. 6, which provides:
Class members, other than the representative party, are not
    liable for costs except with respect to the determination of their own
    individual claims.
Section 31(2) insulates class members from costs
    awards where, as in the usual course, they do not actively participate in the
    proceedings: see
Dabbs v. Sun Life Assurance Co. of Canada
, [1998]
    O.J. No. 1598 (S.C.), at para. 29; and
Silver v. Imax Corp
., 2012 ONSC
    4064, 40 C.P.C. (7th) 60, at paras. 10-12.
[62]

GMCLs
    counterclaim is, in essence, a claim for reimbursement of its costs in
    defending the class proceeding. Whether that claim is advanced as a claim for
    damages for breach of the covenant not to sue or as a claim for costs in the class
    proceeding is a matter of form rather than substance. Given that the legislature
    has adopted a policy that class members are not liable for costs, I see no
    error in the trial judges conclusion that public policy barred enforcement of
    the covenant not to sue.
[63]

Trillium
    argues that, having decided that s. 5(c) of the WDAs offends the statutory
    right of association, the trial judge should have declared the entire document
    void, rather than blue-penciling the offending covenant.
[64]

In
    response, GMCL relies on
2176693 Ontario Ltd. v. Cora Franchise Group Inc
.,
    2015 ONCA 152, 124 O.R. (3d) 776.
[65]

In
Cora,
two franchisees sued the franchisor, alleging breaches of the
    Act. In an effort to mitigate their losses, they decided to sell their
    businesses. The franchisor insisted that they sign a release of all claims
    against it before consenting to an assignment to a successor franchisee. The
    franchise agreement explicitly provided for such a release as a condition of
    giving consent to the assignment:
22.6.4 Franchisee and its directors, officers and shareholders
    signing and delivering in favour of Franchisor and its directors, officers,
    shareholders and employees, a general release in the form specified by the
    Franchisor or any claims against Franchisor and its officers, directors,
    shareholders and employees.
[66]

In
    so far as it purported to release future unknown claims under the
Act
,
    the release was void. The issue in
Cora
was whether the release could
    be read down to limit it to claims other than those asserted under the Act, or
    whether the entire clause was void.
[67]

Justice
    van Rensburg held, at para. 21, that the decision whether the clause was
    entirely unenforceable or whether it could be read down raised issues of mixed
    fact and law, reviewable on a deferential basis.
[68]

She
    reviewed the general principles governing severance and stated, at paras.
    35-37:
Where part of a contract is unenforceable because enforcement
    would be contrary to statute or the common law, rather than setting aside the
    entire contract, courts may sever the offending provisions while leaving the
    remainder of the contract intact. Severance lies along a spectrum of remedies
    available when a provision of a contract is illegal, including voiding the
    contract in whole or in part. The appropriate remedy will depend on the
    particular context. Courts are generally reluctant to sever contractual
    provisions because severance alters the terms of the original agreement between
    the parties.
Severance takes two forms: blue-pencil and notional.
    Blue-pencil severance involves removing part of a contract, as if by drawing a
    line through it. Notional severance involves reading down a contractual
    provision so as to make it legal and enforceable. Where severance is
    appropriate, courts choose the technique that in light of the particular
    contractual context involved, would most appropriately cure the illegality
    while remaining otherwise as close as possible to the intentions of the parties
    expressed in the agreement.
Courts will consider the context of the contract at issue and
    any relevant policy considerations when assessing whether and how to sever
    provisions. Severance engages policy concerns to a certain degree beyond
    protecting the parties intentions, because the court is being asked to assist
    one party to enforce an otherwise unenforceable provision. [Citations omitted.]
[69]

Applying
    these principles to the franchise context, at para. 48, van Rensburg J. A. identified
    three factors which could affect the decision whether to sever the offending
    provision: (1) whether the purpose or the policy of s. 11 of the Act would be
    subverted by severance; (2) the relative bargaining positions of the parties
    and their conduct in reaching the agreement; and (3) the potential for the
    franchisee to enjoy an unjustified windfall.
[70]

In
Cora
,
modification of
    the contractual clause would have required insertion of additional contractual
    terms. It was not a matter of simply striking out the offending provision.
[71]

In
    this case, the trial judge held that the
Tutor Time
exception applied,
    and he favoured the public policy of giving effect to settlements of known and
    existing claims reached with the benefit of legal advice. He also held that
    GMCL acted fairly and honestly in difficult circumstances. In light of these
    rulings, I cannot identify any palpable and overriding error in his conclusion
    that, although the release was valid, the covenant not to sue was void but was
    severable. In contrast to
Cora
, the WDAs were negotiated to put an end
    to a contractual relationship. They were not negotiated to release the
    franchisor from unknown future claims at the outset of the relationship. The
    dealers who signed the WDAs were enriched by execution of the agreements; they
    received payments to which they would not have been otherwise entitled. They
    knew that GMCL would rely on their decisions in deciding whether or not to file
    under the
CCAA
. Had a filing been undertaken, there is a strong
    likelihood the terminated dealers would have received very little, if anything.
G.

Conclusion
[72]

For
    these reasons, I would dismiss Trilliums appeal on the basis that the class
    members were bound by the releases contained in the WDAs. I would dismiss GMCLs
    cross-appeal from the trial judges decision refusing to award damages for
    breach of the covenant not to sue.
[73]

Counsel
    may make brief written submissions as to costs, due from GMCL within 30 days of
    the date of release of these reasons, and from Trillium within 15 days after
    receipt of GMCLs submissions.
G. Pardu J.A.
I agree E.A. Cronk
    J.A.
I agree K. van
    Rensburg J.A.
Released: July 4, 2017