





CITATION:
MBCO Summerhill
          Inc. v. MBCO Associates Ontario Inc., 2011 ONCA 236



DATE: 20110325



DOCKET: C52927



COURT OF APPEAL FOR ONTARIO



Armstrong, Juriansz and Watt JJ.A.



BETWEEN



MBCO Summerhill Inc.



Plaintiff (Respondent)



and



MBCO Associates Ontario Inc., MBCO Rosedale and George
          Elian



Defendants (Appellants)



M. McQuade, for the appellants



Andrea McEwan and Daniel Waldman, for the respondent



Heard & released orally:
March 22, 2011



On appeal from the order of Justice S. Chapnik of the Superior
          Court of Justice, dated October 5, 2010



ENDORSEMENT



[1]

The appellants appeal from the decision of Chapnik J.,
    dated October 5, 2010, granting summary judgment in favour of the respondent:

a)

declaring that the franchise agreement between MBCO
    Associates Ontario Inc. and the respondent was validly rescinded pursuant to s.
    6(2) of the
Arthur Wishart Act
;

b)

finding that the appellants Elian and MBCO Rosedale
    were franchisors associates within the meaning of the Act with the
    consequence that the respondents sublease from MBCO Rosedale was null and
    void; and

c)

requiring MBCO Associates Ontario Inc. and Elian to pay
    the respondent the sum of $128,226.69 pursuant to s. 6(6) of the Act.

[2]

The appellants counsel submitted that the findings of
    the motion judge that Elian owned 50% of the shares of the franchisor, ran the
    day-to-day business of the franchisor in Ontario, acted for the franchisor in negotiating
    the franchise agreement and executing the agreement on behalf of the
    franchisor, were insufficient to support a finding that he was a franchisors
    associate.  We disagree.  These facts did provide a basis for the
    finding.

[3]

In regard to MBCO Rosedale, the motion judge had a
    basis for finding that it was controlled by another person who also controlled
    the franchisor, namely, Elian.  She also
    had a basis for finding that the respondent had a continuing financial
    obligation to MBCO Rosedale in respect of the franchise, namely, the rent due
    on its sublease.  However, she did not
    cite any evidence for finding that MBCO Rosedale exercised significant
    operational control over the franchisee.  In fact, her reasons suggest that she considered that the continuing
    financial obligation amounted to significant operational control.

[4]

This case is different from
6862829 Ontario Ltd. v. Dollar It Ltd.
, [2008] O.J. No. 4687
    (S.C.J.) in which the lease clothed the landlord with the authority of the
    franchisor.  The lease in this case has
    no equivalent provision.

[5]

In the result, the appeal of MBCO Associates Ontario
    Inc. and Elian is dismissed.  The appeal
    of MBCO Rosedale is allowed and the order in respect of MBCO Rosedale is set
    aside.  The issue of whether MBCO
    Rosedale was a franchisors associate may proceed to trial.

[6]

The respondent shall have its costs of the motion in
    the Superior Court fixed at $16,000 inclusive of disbursements and applicable
    taxes.  The respondent shall also have
    its costs of the appeal fixed at $5,000 inclusive of disbursements and
    applicable taxes.

[7]

MBCO Rosedale shall have its costs of the motion in the
    Superior Court fixed in the amount of $5,300 inclusive of disbursements and
    applicable taxes.  MBCO Rosedale shall
    have its costs of the appeal fixed at $2,500 inclusive of disbursements and
    applicable taxes.

R.P. Armstrong J.A.

R.G. Juriansz J.A.

David Watt J.A.


