Canada: Feeling ‘Crabby'?: Ontario Court Of Appeal Clarifies Scope Of Expanded Fact-Finding Powers On Summary Judgment

Last Updated: August 21 2018
Article by Brendan Monahan

Under what circumstances can a motion judge decide a contested factual issue using the expanded fact-finding powers under rule 20.04(2.1) of the Rules of Civil Procedure (the “Rules”) without oral evidence? That was one of the issues before the Ontario Court of Appeal in a recent decision,2212886 Ontario Inc. et al. v. Obsidian Group Inc. et al., 2018 ONCA 670. In that case, the Court set aside a partial summary judgment, finding that it was not “in the interest of justice” to determine a key contested factual issue on the basis of a paper record alone.

Background: The dispute arose when the plaintiffs (respondents on the appeal), William and Kirsten Porteous (“William” and “Kirsten”), who had been operating a Crabby Joe’s Tap and Grill franchise in Brantford, Ontario, attempted to rescind a franchise agreement (the “Agreement”) they had entered into with the defendant franchisors, Obsidian Group Inc. and Obsidian Inc. Under the Arthur Wishart Act (“AWA”), the provincial statute that governs the relationship between franchisees and franchisors in Ontario, franchisees have the right to rescind a franchise agreement and seek damages against the franchisor in certain circumstances. One such circumstance, under s. 6(2) of the AWA, is where the franchisor never provided the required disclosure documentation to the franchisee, or where “the disclosure document provided by the franchisor… [is] so materially deficient as to constitute no disclosure at all.”1

The central question in the case was whether the omission of a chart showing anticipated weekly earnings projections for the Crabby Joe’s franchise (the “Chart”) in the disclosure document that had been provided to William and Kirsten rendered the document so materially deficient “as to constitute no disclosure at all,” thus giving rise to a right of rescission and damages under ss. 6(2) and 6(6) of the AWA. The answer to this question depended on whether the franchisor’s representative, Danny Grammenopoulos (“Danny”) had shown William and Kirsten a document containing the Chart at a meeting in May 2010. If the Chart was shown to them at that meeting, the franchisor had an obligation to include it in the disclosure document. Failure to do so would give rise to a right of rescission under s. 6(2).

The Motion Judge’s Decision: William and Kirsten moved for summary judgment, seeking rescission of the Agreement and rescission damages. Danny and William gave contradictory affidavit evidence on the summary judgment motion. William asserted that he and Kirsten were shown the Chart in the May 2010 meeting. Danny did not appear to have an independent recollection of the meeting, but “relie[d] on his practice in over 25 years in the franchise business to reach the conclusion that he did not show [William and Kirsten] an earnings projection.”2

In light of the contradictory evidence, the motion judge found that he could not make the necessary findings of fact at this stage and that there was a genuine issue that required a trial.3 However, his Honour then invoked the expanded fact-finding powers under r. 20.04(2.1) and (2.2), which include “weighing the evidence, evaluating the credibility of a deponent, and drawing any reasonable inference from the evidence.”4 In so doing, the motion judge observed that Danny’s affidavit was “heavy on speculation and general practice and light on direct knowledge” and therefore found that “notwithstanding any cross examination on Danny’s affidavit, I have great difficulty accepting his evidence.”5 The motion judge accepted William’s evidence regarding the May 2010 meeting, and granted judgment against the defendants in the amount of $964,805.33. The defendants appealed.

The Court of Appeal Allowed the Appeal: The Court of Appeal allowed the appeal in part and set aside the summary judgment. The Court was critical of the motion judge’s treatment of the evidence, including his outright rejection of Danny’s evidence6, as well as the fact that, in light of the apparent contradictions in William’s own evidence, “the motion judge did not explain why he accepted [William’s] evidence about what transpired at the May 2010 meeting, except that he had rejected Danny’s evidence.”7 The Court held that this was not a case that could be decided summarily on the basis of a written record alone:

I would set aside the summary judgment granted in this case. The key and essential finding that there was non-disclosure which amounted to a breach of s. 6(2) of the AWA and justified rescission and damages ought not to have been made in the circumstances of this case. That finding could not be made on the basis of untested evidence, and without invoking at least the powers under r. 20.04(2.2) to hear oral evidence.8

Of note, the Court did not disturb the motion judge’s finding on the separate issue of whether the limitation period for commencing a rescission claim under s. 6(2) of the AWA had expired (it had not).

The Takeaway: The Obsidian decision suggests that the Court of Appeal will not hesitate to set aside a summary judgment where the record includes contradictory evidence that has not been tested orally, particularly when such evidence relates to a key issue on which liability depends. However, the Court’s willingness to disturb the motion judge’s finding on what was essentially a pure factual matter—namely, whether William and Kirsten were shown the Chart in the May 2010 meeting—indicates that reviewing courts may show very little deference when determining whether a motion judge’s decision to use, or not use, the expanded fact-finding powers under the Rules are “in the interests of justice.” The Obsidian decision, following closely on the heels of Butera v. Chown, Cairns LLP, is yet another example of our courts’ restrictive interpretation of the Supreme Court’s decision on summary judgment in Hryniak v. Mauldin, 2014 SCC 7.

Footnotes

1 2212886 Ontario Inc. v. Obsidian Group Inc., 2018 ONCA 670 [ONCA Reasons] at para. 2.

2 2212886 Ontario Inc. v. Obsidian Group Inc., 2017 ONSC 1643 [SCJ Reasons] at para. 31.

3 SCJ Reasons at para. 19.

4 SCJ Reasons at para. 20.

5 SCJ Reasons at para. 41.

6 ONCA Reasons at para. 43.

7 ONCA Reasons at para. 48.

8 ONCA Reasons at para. 55.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions