Friday, October 07, 2011

This Week at the Ontario Court of Appeal: 11-10-07

Each week, Wise Law Blog reviews recent decisions from the Ontario Court of Appeal. This week, commercial disputes were a theme, including a case that considered the age-old question, "who gets to keep the killer whales?"

T A & K Enterprises Inc. v. Suncor Energy Products Inc.

TA & K (TAK) appealed the trial judge's decision granting Suncor's motion for summary judgment. In their Retail Franchise Agreement (RFA) signed on November 11, 2008, Suncor was the franchisor and TAK was the franchisee.  When the agreement expired, Suncor notified TAK that there would be an extension of the RFA on a month-to-month basis. Prior to signing the RFA, TAK had not received a disclosure statement from Suncor, which is a requirement under the Arthur Wishart Act, 2000 (the Act).  TAK subsequently exercised its right of rescission provided by the Act and commenced a proposed class action alleging the right to rescind on this basis. This led to Suncor's motion to seek summary judgment to dismiss the action as they asserted that no disclosure document was required. The issue in this appeal was whether Suncor was exempted from the obligation provided in s. 5(7)(g)(ii) of the Act to provide a disclosure statement to TAK before it signed the agreement. The provision provides that the franchisor is not required to provide the franchisee with a disclosure statement if the agreement is not valid for more than one year and does not involve the payment of a non-refundable franchise fee.

The Court of Appeal upheld the dismissal of action, concluding that the RFA did fit within the exemption provided by s. 5(7)(g)(ii) of the Act. The court dismissed the appellant's claim that the RFA was valid for more than one year. The Court noted that the survival of the confidentiality and indemnity provisions in the RFA did not extend the franchise agreement itself. Moreover, an agreement that has been terminated cannot be considered valid. Additionally, the Court found that the creation of a month-to-month tenancy after the RFA expired was not an indication that the agreement was extended.  The Court briefly commented on appellant's argument that the royalties that it received under the agreement constituted a "franchise fee", which would effectively take the RFA out of the exemption under the Act. The Court rejected this argument. holding that the appellant erroneously relied on the French version of the Act to support its proposition.

A case involving a contractual dispute, where the respondent, SeaWorld agreed to loan a killer whale to the appellant, Marineland pursuant to a Breeding Loan Agreement (BLA) signed on November 16, 2006. The appellant declined to return the killer whale when the respondent gave written notice to the appellant of its intention to terminate the agreement after its expiry four years later. SeaWorld brought an application seeking a declaration that the Agreement was properly terminated and sought an order that the killer whale be returned to SeaWorld. The application judge dismissed Marineland's motion seeking a trial in order to obtain answers to unresolved questions and granted SeaWorld the relief it sought. Marineland appealed this decision.

The Court of Appeal's reasoning for rejecting the appellant's position essentially came down to the certainty and unambiguous terms of the BLA. The court found that the BLA constituted the entire agreement between the parties concerning the loan of the killer whale and should not be construed together with the Interchange Agreement between the parties made 14 months earlier. Furthermore, the Court dismissed the appellant's claim that extrinsic evidence should have been considered in preparation of the BLA and to prove that the termination of the BLA was legally permitted. They noted that the words in the termination provision were clear and unambiguous and that considering extrinsic evidence would not alter this plain meaning. Additionally, the Court discarded the appellant's claim that the application judge erred by rendering an interpretation that was commercially unreasonable.  The Court stated that the BLA was not a long-term arrangement, there was no guarantee of a lengthy arrangement and both parties had the right to terminate the agreement at any time.

Peter Clark, James Werden and John Muller were once business associates, but Clark and Werden had a falling out. When Werden needed $120,000 to purchase a property with his wife, he borrowed the funds from Muller.  They entered into a loan agreement that required Werden to make quarterly payments. When Werden defaulted on two loan payments, Muller and Clark agreed that Muller would assign the loan to Clark and Clark would collect payments from Werden.  Clark did not provide any consideration at the time of the assignment.  However, they agreed that when Clark recovered the money from Werden, he and Muller would discuss how they would share the proceeds.

The trial judge held that the assignment was valid and properly documented.  Moreover, the fact that Clark did not provide any consideration to Muller for the assignment did not detract from its validity.  On appeal, the appellant, Werden claimed that the loan agreement was not enforceable by Clark due to the law against champerty and maintenance. The Court dismissed the appeal with costs to the respondent.

The Court rejected the appellant's argument that Muller would not have pursued him on the debt and that it was Clark who sought the assignment and commencement of the lawsuit with no previous interest aside from bitterness towards him.  The Court noted that the suggestion of maintenance is negated where the assignee of a cause of action, either in tort or contract, possesses a sufficient pre-existing financial interest in the cause of action that was assigned. Furthermore, the Court held that a cause of action in debt can be validly assigned and such an assignment does not violate the rule against champerty and maintenance.
- Alim Ramji, Toronto
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