Canada: Ontario Court Endorses Single Forum For National Dealer Network Dispute

A recent Ontario decision, Stuart Budd & Sons Limited v. IFS Vehicle Distributors ULC, 2015 ONSC 0519 ("Stuart Budd"), provides an example of the courts of one province agreeing to hear a dispute involving franchisees from across Canada, over the objections of the franchisor.

In Stuart Budd, the underlying action was brought by eight new and used car dealers (the "Dealers") against defendants from Ontario and the United States. Three of the Dealers are based in Ontario (the "Ontario Dealers"), and the other five have their businesses in Alberta, Quebec, Nova Scotia and British Columbia (the "Non-Ontario Dealers"). Each of the Dealers entered into a dealership agreement (collectively, the "Dealership Agreements") with the defendant IFS Vehicle Distributors ULC ("IFS"), a Canadian company responsible for importing and distributing Saab motor vehicles and parts into Canada. The Dealers allege that IFS failed to perform its obligations under the Dealership Agreements, and seek various forms of relief under the Arthur Wishart Act (Franchise Disclosure), 2000 (the "Act"). The Dealership Agreements contain a clear "choice of law" clause, which provides that the Dealership Agreements are to be governed by the laws of the province of Ontario, but notably do not include a "choice of forum" clause. While section 10 of the Act prohibits the Dealership Agreements between IFS and the Ontario Dealers from selecting a forum outside of Ontario, ¹ the Defendants took the position that this obligation did not extend to the Dealership Agreements between IFS and the Non-Ontario Dealers.

The defendants brought a motion to dismiss this action in its entirety, arguing that Ontario was without jurisdiction to hear this dispute or, alternatively, that Ontario was not the convenient forum. The Ontario Superior Court of Justice rejected these arguments and dismissed the motion. It held that there was jurisdiction simpliciter in Ontario for all claims of the Dealers against all defendants; a single proceeding was the suitable and efficient way to advance these claims; and Ontario was the convenient forum for this single proceeding. The defendants have since appealed this decision. It has been over two years since the underlying action was started, and nearly a year since this motion was dismissed; however, the defendants have not yet filed a Statement of Defence.

This complicated and lengthy dispute over jurisdiction and forum demonstrates a problem that may arise if a franchise agreement does not adequately address the question of forum. The decision did not consider related issues, such as the right of franchisees to associate with one another found in s. 4 of the Act.

Footnote

1. Section 10 of the Act provides as follows: "Any provision in a franchise agreement purporting to restrict the application of the law of Ontario or to restrict jurisdiction or venue to a forum outside Ontario is void with respect to a claim otherwise enforceable under this Act in Ontario."

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