On August 31st 2012, in the case of Butera et al. v.
Mitsubishi Motors et al., the Ontario Superior Court of
Justice granted a motion for summary judgment brought the
defendants, Mitsubishi Motor Sales of Canada Inc. (MMSCAN) and
various other Mitsubishi entities, and dismissed the action brought
by the plaintiffs, Luciano Butera and two of his companies. In the
context of alleged misrepresentations, the Court made some
interesting comments regarding the distinction between expressions
of opinion and ascertainable facts, and also discussed the utility
of entire agreement clauses and releases. Also notable was the
Court's finding that the dealer agreement in this case did not
give rise to a franchise relationship and that the Arthur
Wishart Act (Franchise Disclosure), 2000 (the "Act")
was not applicable under the circumstances.
Background
In 2002, Butera submitted an application to MMSCAN to
acquire a Mitsubishi dealership. Included as part of his
application were various pro forma sales forecasts, which
were prepared by Butera based on figures from the United States and
the predictions of the defendants of expanded sales in both the
United States and Canada. Later that year, Butera, on behalf of
1515404 Ontario Inc. (operating as Niagara Mitsubishi) entered into
a Dealer Agreement with MMSCAN. At that time, Mitsubishi cars were
not being sold in Canada.
In 2007, the plaintiffs sued various Mitsubishi entities for
damages for breach of contract, fraudulent, negligent and reckless
misrepresentation and breach of collateral warranty. Butera claimed
that the defendants' alleged misrepresentations had persuaded
him to enter into the Dealer Agreement, and resulted in significant
losses. Butera also alleged that the Dealer Agreement was a
franchise agreement, and that MMSCAN failed to comply with the Act.
MMSCAN counterclaimed for the amount owing under the Dealer
Agreement and the defendants moved for summary judgment dismissing
the plaintiffs' action.
Decision
Justice Hambly of the Ontario Superior Court of Justice
found that the action was statute-barred as it had been commenced
after the expiration of the limitation period, but nevertheless
went on to assess the arguments of the defendants, ultimately
dismissing the plaintiffs' action and allowing MMSCAN's
counterclaim. The crux of the plaintiffs' claim was that the
defendants misrepresented the future prospects of sales of
Mitsubishi cars in Canada based on their past performance in the
United States. However, the Court found (and Butera conceded) that
there was no evidence that the figures presented to him of sales in
the United States were not accurate, nor any evidence to suggest
that the agents of the defendants did not honestly believe their
predictions of success.
In finding that no misrepresentations had been made, the Court
emphasized that Butera had experience in the motor vehicle sales
industry and could have made further inquiries where required.
Significantly, the Court pointed out that the forecasts at issue in
the case were an expression of opinion about the future based on
the past, which ultimately proved to be inaccurate. Such inaccuracy
did not give the plaintiffs a cause of action against the defendant
based on misrepresentation. The Court stressed that in order to
succeed on a claim for negligent misrepresentation, the statement
or representation at issue must relate to an ascertainable or
existing fact, as opposed to an opinion or expectation. The
Court's comments on this point highlight that the provision of
a forecast or projection will not automatically give rise to
liability in the event that such forecasts are not met. That said,
the result in this case may well have been different if the
information provided by the defendants had been false.
The Court also focused on the existence of an exclusive agreement
clause and a release clause in the Dealer Agreement, both of which
operated in these circumstances to help shield the defendants from
a finding of misrepresentation. The entire agreement clause
explicitly stated that the Dealer Agreement superseded all prior
written or oral agreements and understandings between the parties.
Pursuant to the release, Butera agreed to release MMSCAN from any
and all claims and liabilities of any kind. The Court stated that
as a lawyer, Butera understood these clauses when he entered into
the Dealer Agreement. In addition, the pro forma
statements that Butera had submitted to MMSCAN contained a
disclaimer statement that provided that MMSCAN made no
representations and assumed no liability regarding the objectives
and assumptions involved or any figures shown in the pro
forma materials. The Court pointed out that the terms of the
Dealer Agreement and the disclaimers cannot be ignored simply
because the plaintiffs' business failed. Accordingly, the
entire agreement clause and the release clause in the Dealer
Agreement were found to be a complete defence to the
plaintiffs' claim.
Finally, while the Court did not provide a comprehensive analysis
of the applicability of the Act, it did consider the
plaintiffs' assertion that the Act applied. Looking at the
definition of "franchise" under the Act, the Court
briefly noted that the Dealer Agreement did not require that
Niagara Mitsubishi make a payment or continuing payments to MMSCAN,
and did not, therefore, give rise to a franchise. In any event, the
Court held that even if the Act did apply, it would not assist the
plaintiffs as most of the relevant sections do nothing more than
codify the common law, pursuant to which the Court had already
found in favour of the defendants. Even section 7(2), which
provides for deemed reliance on misrepresentations, did not assist
the plaintiffs given the finding that no misrepresentations had
been made. The Court also noted that the time period in which
rescission might have been available to the plaintiffs had
expired.
Comment
While the Court was careful to point out that more generally, the
Act is not to be narrowly construed, the Court's conclusion on
its inapplicability in this case is a reminder that dealerships and
similarly structured businesses will not automatically be
considered franchises, and that the definition of
"franchise" in the legislation is important and must be
carefully examined on a case-by-case basis.
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