COURT OF APPEAL FOR ONTARIO

CITATION: York
    Condominium Corporation No. 82 v. Bujold, 2013 ONCA 209

DATE: 20130403

DOCKET: C55735

Rosenberg, MacPherson and LaForme JJ.A.

BETWEEN

York Condominium Corporation No. 82

Plaintiff (Appellant)

and

Marie Lillian Bujold

Defendant (Respondent)

Derrick M. Fulton, for the appellant

Sidney Klotz, for the respondent

Heard: February 22, 2013

On appeal from the judgment of Justice Paul M. Perell of
    the Superior Court of Justice, dated June 15, 2012.

MacPherson J.A.
:

A.

INTRODUCTION

[1]

The appellant, York Condominium Corporation No. 82, appeals from the judgment
    of Perell J. of the Superior Court of Justice dismissing its motion for summary
    judgment. The motion judge held that, although the appellant had registered a
    lien against the respondents condominium unit, the lien had expired because of
    late registration.

[2]

The appeal raises issues relating to the nature of liens, notice, and
    registration under s. 85 of the
Condominium Act, 1998
, S.O. 1998, c.
    19 (the
Act
).

B.

facts

(1)

The parties and events

[3]

The respondent, Marie Bujold owns a condominium unit in the appellant
    condominium corporation. On June 22, 2007, the corporation served Ms. Bujold
    with a Notice of Lien because of her failure to pay common area expenses. The
    Notice of Lien stated that the amount of arrears owing was $2544.29.

[4]

The corporation registered a Certificate of Lien against Ms. Bujolds
    unit on September 25, 2007. The lien was registered in the amount of $2254.34.

[5]

Both of these amounts included the total amount of arrears owed by Ms. Bujold
    that had accumulated since December 31, 2006.

[6]

In early 2009, the corporation served a Notice of Sale and commenced a
    claim seeking possession of the unit. In her defence, Ms. Bujold alleged that a
    charge of $704.24 that was added on December 31, 2006 was a duplicate from
    2004.

[7]

The corporation moved for summary judgment and sought an order for
    possession of the property and an order that it was at liberty to obtain a writ
    of possession regarding the property.

(2)

The motion judges decision

[8]

The motion judge dismissed the corporations motion for summary
    judgment. He found as a fact that there were arrears when the Notice of Lien was
    served on Ms. Bujold on June 22, 2007. However, he found that, pursuant to s.
    85 of the
Act
, while the lien would have been enforceable if it had
    been registered within three months, the registration date of September 25,
    2007 was three days too late. Hence, the lien had expired.

[9]

The appellant appeals this decision.

C.

ISSUES

[10]

The
    issues on the appeal are:

(1)

Did the motion judge err by
    determining that the lien had expired?

(2)

If the answer to (1) is Yes, did
    the appellant comply with the notice requirement of the
Act
?

D.

ANALYSIS

[11]

Both
    issues require interpretation of s. 85 of the
Act
, the relevant parts
    of which are:

85
(1)  If an owner
    defaults in the obligation to contribute to the common expenses, the
    corporation has a lien against the owners unit and its appurtenant common
    interest for the unpaid amount together with all interest owing and all
    reasonable legal costs and reasonable expenses incurred by the corporation in
    connection with the collection or attempted collection of the unpaid amount.

(2)
The
    lien expires three months after the default that gave rise to the lien occurred
    unless the corporation within that time registers a certificate of lien in a
    form prescribed by the Minister.

(3)
A
    certificate of lien when registered covers,

(a) the amount owing under all of the
    corporations liens against the owners unit that have not expired at the time
    of registration of the certificate;

(b) the amount by which the owner defaults in the
    obligation to contribute to the common expenses after the registration of the
    certificate;

. . .

(4)
At
    least 10 days before the day a certificate of lien is registered, the
    corporation shall give written notice of the lien to the owner whose unit is
    affected by the lien.

(1)
The separate lien issue

[12]

I
    begin by noting that the motion judge made an error on which nothing turns for
    the purposes of this appeal. The motion judge held that the lien arose on June
    22, 2007, the date on which the corporation served its Notice of Lien on Ms.
    Bujold. However, the parties agree that, pursuant to s. 85(1) of the
Act
,
    the lien arose on the date of default giving rise to the lien. The default in
    this case was June 1, not June 22. Nothing turns on this, as both of these
    dates are outside the three month registration period prescribed by s. 85(2).

[13]

The
    appellant submits that the late registration of the lien did not cause the
    corporation to lose all of its lien rights. The appellant contends that a new
    lien arises upon each default which, in this case, was the first day of each
    month when common area expenses became due. Each lien expires three months
    after the default unless the corporation registers a certificate in that time. The
    effect of the corporation having registered its lien on September 25, 2007 is
    that it lost its liens arising more than three months earlier. However, the
    registration on September 25 meant that the liens that arose after June 25 were
    valid, namely, the liens relating to defaults on July 1, August 1 and September
    1.

[14]

I
    agree with this interpretation. The use of the plural liens in s. 85(3)(a),
    which provides that registration of a lien essentially consolidates all of the
    corporations liens against the unit that have not expired, indicates that a
    corporation can have multiple liens against the same unit. The wording of s.
    85(1) provides that an unregistered lien arises upon default automatically. In
    my view, the proper reading of s. 85 is that a corporation has a lien that
    arises upon each default. This accords with the wording of s. 85(1) and,
    otherwise, there is no explanation for the use of the plural in s. 85(3)(a). Subsection
    85(2) provides that the lien expires three months after the default that gave
    rise to it unless it is registered. It follows that registration consolidates
    only those liens that arose in the three months before registration. Delayed
    registration does not invalidate all liens, just those that arose from defaults
    that occurred more than three months before the registration.

[15]

I
    make a final observation on this issue. Although this issue does not appear to
    have been considered in prior cases, the condominium industry seems to be
    operating in accordance with the above interpretation. Audrey Loeb, in her text
The Condominium Act: A Users Manual
, 3rd ed. (Toronto: Carswell,
    2009), states at p. 255: The certificate of lien covers liens arising up to
    three months prior to its registration as well as defaults occurring after
    registration. Similarly, J. Robert Gardiner, in his text
The Condominium
    Act, 1998: A Practical Guide
(Aurora: Canada Law Book, 2001), states at p.
    211: The new wording makes it clear that a lien may be registered at any time
    and will secure payment of unpaid amounts that fell due within three months
    prior to the date of registration of a lien.

[16]

For
    these reasons, I conclude that the motion judge erred by determining that the
    lien had expired. It had expired for all the liens that might have arisen
    before June 25, 2007. It was potentially valid for any liens that arose after
    that date.

(2)
The notice issue

[17]

In
    light of his conclusion on the first issue, it was not necessary for the motion
    judge to consider the validity of the notice given in the present case.

[18]

Accepting
    the appellants submission that a separate lien arises on every default, the
    question becomes whether the notice given on June 22, 2007 was sufficient to
    cover any subsequent liens that arose between that date and registration on
    September 25. The answer to this question requires an interpretation of s.
    85(4) of the
Act
which, for ease of reference, I set out again:

At least 10 days before the day a certificate is
    registered, the corporation shall give written notice of the lien to the owner
    whose unit is affected by the lien.

[19]

The
    appellant points out that the lien is a creature of statute and submits that
    the statute does not require separate notice every time there is a default. It
    submits that the purpose of the notice is to advise the owner of the fact that
    he or she is in arrears and of the corporations intention to register a lien;
    all that is required is that notice be given at least ten days before the Certificate
    of Lien is registered, which it was in this case.

[20]

I
    do not accept this submission. First, it is conceptually inconsistent with the
    core of the appellants submission on the first issue, namely, that each default
    gives rise to a new lien. Second, s. 85(4) requires that the corporation give
    written notice of the lien; in my view, this suggests that notice needs to be
    given of each lien arising from each default. Third, in this case the lien for
    which the corporation had given notice had already expired, as discussed above.
    It strikes me as anomalous that notice of an expired lien could cover
    subsequent defaults. Fourth, I do not think that requiring condominium
    corporations to provide notice of each default before registering the lien
    creates a hardship. Once registration is achieved in a timely fashion, s. 85(3)(b)
    makes it clear that all future defaults are covered by the Certificate of Lien;
    notice will no longer be required.

[21]

For
    these reasons, I conclude that the appellant did not provide adequate notice of
    its lien. The appeal must be dismissed on this basis.

E.

DISPOSITION

[22]

I
    would dismiss the appeal. The respondent is entitled to her costs of the appeal,
    which I would fix at $6000 inclusive of disbursements and HST.

Released: April 3, 2013 (M.R.)

J.C. MacPherson J.A.

I agree. M. Rosenberg J.A.

I agree. H.S. LaForme J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Zwaniga v. Johnvince Foods Distribution
    L.P., 2013 ONCA 271

DATE: 20130426

DOCKET: C56119

Laskin, Cronk and Hoy JJ.A.

BETWEEN

David Zwaniga and Jennifer Zwaniga

Plaintiffs (Appellants)

and

Johnvince Foods
    Distribution L.P.
and Revolution
    Food Technologies Inc.

Defendants (
Respondent
)

Alan A. Farrer, for the appellants

Jill M. Knudsen, for the respondent, Johnvince Foods
    Distribution L.P.

Sonu Dhanju-Dhillon, for Revolution Food Technologies
    Inc.

Heard: April 24, 2013

On appeal from the judgment of Justice Paul Perell of the
    Superior Court of Justice, dated September 19, 2012.

By the Court:

[1]

The appellants, David and Jennifer Zwaniga, appeal the September 19,
    2012 summary judgment of Perell J., dismissing their claims against the
    respondent, Johnvince Foods Distribution L.P.

[2]

The appellants argue that:

(1) the respondents motion was not properly the subject of a
    Rule 20 motion;

(2) the motion judge erred in concluding that the respondent
    was not a franchisors associate within the meaning of s. 1(1) of the
Arthur
    Wishart Act
, S.O. 2000, c. 3 (the AWA); and

(3) the motion judge failed to consider the legal impact of the
    representations made by the respondent in conjunction with Revolution Food
    Technologies Inc.s marketing of machines intended to vend products supplied by
    the respondent.

[3]

Briefly, the background is as follows.

[4]

The respondent distributes Planters® peanuts in Canada. Revolution Food
    Technologies Inc., an unrelated third party, approached the respondent with the
    idea of a vending machine program.  Revolution wished to sell vending machines
    to individual distributors who would become members of a buying group that
    would buy through Revolution the products dispensed by the vending machines.

[5]

The respondent and Revolution entered into a supply agreement, which
    provided that the respondent would supply Planters® products and granted
    Revolution a non-exclusive licence to display Planters® trademarks and logos.
    The respondent could terminate the supply agreement for cause or upon notice.

[6]

Revolution was responsible for developing and running the distribution
    program and made all the day-to-day and long term decisions with respect to the
    distributors. The respondent did not lead, regulate, direct, oversee or govern
    Revolution or its distributorship program.

[7]

Revolution represented to prospective vending machine owners/
    distributors that they were free to stock their machines with any products they
    wished, and were not restricted to Planters® products.

[8]

The program was not a success.

[9]

The appellants commenced a proposed class action against both the respondent
    and Revolution claiming that class members were induced to purchase vending
    machines by material misrepresentations.  Before the proposed class proceeding
    had been certified, the respondent brought a motion for summary judgment under
    Rule 20, seeking to have the action dismissed against it.  The motion judge
    granted summary judgment dismissing the action against the respondent.

[10]

With
    respect to the first argument raised by the appellants, the motion judge
    correctly applied this courts decision in
Combined Air Mechanical Services
    v. Flesch
, 2011 ONCA 764 in determining that it was an appropriate case
    for summary judgment. We see no basis for disturbing the motion judges
    conclusion that he could achieve a full appreciation of the evidence and the issues
    and there were no genuine issues requiring a trial. As the motion judge noted,
    the record was largely documentary and there were few, if any, contested
    factual issues.

[11]

As
    to the appellants second argument, we note that, only for the purposes of the
    summary judgment motion, it was conceded that the distribution program was a
    franchise.  This placed the appellants case at its highest, and permitted the
    motion judge to narrow his analysis with respect to the AWA to a single
    dispositive issue, namely whether or not the respondent was a franchisors
    associate within the meaning of that term in the AWA.

[12]

We
    agree with the motion judge, for the reasons he provided, that the respondent
    did not, directly or indirectly, control Revolution for the purposes of the definition
    of franchisors associate in the AWA and, therefore, was not a franchisors
    associate. The provisions in the supply agreement that the appellants point to
    on appeal as indicative of
de facto
control  for example, the
    requirement that Revolution meet annual targets and the provision that
    Revolutions marketing materials were subject to approval by the respondent
    with respect to the use of the Planters trademark  are, in our view,
    provisions reasonably included to protect the licensed trademarks and ensure
    that they were not licensed to enterprises that did not generate a meaningful
    return.  They do not establish direct or indirect control of Revolution by the
    respondent.

[13]

There
    is no merit in the appellants third ground of appeal. Before the motion judge,
    the appellants unsuccessfully argued that the respondent was liable for
    misrepresentations made by Revolution because it was Revolutions partner or a
    franchisors associate.

[14]

On
    the record before the motion judge, the only independent statements by the
    respondent to the appellants were those in a Letter of Introduction from the
    respondent that Revolution included in the marketing materials that Revolution
    provided to the appellants. In that letter, the respondent invited prospective distributors
    to seriously consider the opportunity to acquire a vending machine. The
    appellants concede that they abandoned their pleaded claims of independent
    fraudulent and negligent misrepresentations against the respondent.

[15]

The
    appellants cannot argue their abandoned claims on this appeal. Indeed, in the
    course of oral submissions, counsel for the appellants acknowledged as much and
    made clear that, in raising this third argument, the appellants only wished to
    assert their position that a judicial determination binding on other purchasers
    of vending machines as to whether the respondent is liable for independent
    fraudulent or negligent misrepresentations in relation to the marketing of
    Revolutions vending machines had not been made.

[16]

In
    the result, this appeal is dismissed.

[17]

The
    respondent is entitled to its costs of the appeal on a partial indemnity scale
    fixed at $8,250, inclusive of disbursements and applicable taxes.

Released: Apr 26, 2013                                                   John
    Laskin J.A.

E.A.
    Cronk J.A.

Alexandra
    Hoy J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 1250264
    Ontario Inc. v. Pet Valu Canada Inc., 2013 ONCA 279

DATE: 20130503

DOCKET: C55949

Winkler C.J.O., Armstrong and Hoy JJ.A.

BETWEEN

1250264 Ontario Inc.

Plaintiff (Respondent)

and

Pet Valu Canada Inc.

Defendant (Appellant)

Geoffrey B. Shaw and Derek Ronde, for the appellant Pet
    Valu Canada Inc.

Lawrence G. Theall and Bevan Brooksbank, for the
    appellant franchisees

David Sterns and Jean-Marc Leclerc, for the respondent

Heard:  February 26, 2013

On appeal from the order of Justice George R. Strathy of
    the Ontario Superior Court of Justice, dated July 27, 2012, with reasons
    reported at 2012 ONSC 4317, 112 O.R. (3d) 294, and on appeal from his costs
    order, dated September 11, 2012, with reasons reported at 2012 ONSC 5029.

Winkler
    C.J.O.
:

A.

overview

[1]

This is an appeal from an order made by a motion judge concerning the
    validity of the opt-out process in a class proceeding certified under the
Class
    Proceedings Act, 1992,
S.O. 1992, c. 6 (
CPA
).

[2]

Section 9 of the
CPA
provides class members with the right to
    opt out of a class proceeding. The right to opt out must be exercised during a
    finite period which is set out in the certification order and spelled out in
    the court-approved notice to class members of the certification of the action.
    Critical to the integrity of the opt-out process is the right of individual
    class members to make a fully informed and voluntary decision about whether to
    remain as a member of the class or to exercise the right to opt out.

[3]

The disputed opt-out process in this case followed the certification of
    a class proceeding brought on behalf of franchisees against the appellant
    franchisor, Pet Valu Canada Inc. Towards the end of the opt-out period, a group
    of Pet Valu franchisees who opposed the class action and who called themselves
    Concerned Pet Valu Franchisees (CPVF)
[1]
waged a concerted campaign to try to persuade class members to opt out. After
    the CPVFs campaign began, the number of returned opt-out notices increased
    dramatically. By the end of the opt-out period, more than half of the class had
    submitted opt-out notices.

[4]

A considerable time after the opt-out period ended, Robert Rodger, the
    principal of the representative plaintiff, 1250264 Ontario Inc., moved for an
    order setting aside the received opt-out notices. The motion judge granted the
    motion in part and invalidated any opt-out notices received on or after the
    beginning of the CPVFs opt-out campaign. The motion judge provided for a new
    opt-out period to take place after the final disposition of the action on its
    merits.

[5]

The motion judges remedial order followed from his conclusion that
    there was a reasonable probability that many franchisees decided to opt out
    due to misleading information and unfair pressure amounting to intimidation
    resulting from the CPVFs campaign. The motion judge found there was no
    evidence that the defendant Pet Valu was responsible for, or connected to, this
    misleading information or unfair pressure. Rather, he exclusively attributed
    the impugned conduct to activities of the members of the CPVF.

[6]

Both the defendant Pet Valu and 12 non-party franchisees who were
    members of the CPVF (appellant franchisees) appeal from the motion judges
    order. The motion judge based his decision that the conduct of the CPVF
    undermined the opt-out process on the following considerations:  his analysis
    of the content of the CPVFs web site and its telephone campaign; his inference
    that class members were coerced or intimidated by the conduct of the campaign;
    and his finding that the campaign resulted in misinformation due to its lack of
    objectivity.

[7]

In my view, the motion judge erred in two material respects: drawing the
    inference in the absence of any direct evidence and holding the CPVF to a
    standard of objectivity. The information disseminated amounted to no more than opinion
    as to the advisability of the lawsuit from a business perspective.  It did not
    purport to comment on the legal merits of the action. Information relating to the
    action was already available through neutral court approved notices. The
    communications here were simply acceptable intra-class debate. Therefore, the
    motion judge misapplied the fully informed and voluntary test enunciated in the
    jurisprudence. I would allow the appeal and set aside the order invalidating
    the opt-out notices. My reasons follow.

B.

factual background

[8]

The factual background is well-stated by the motion judge at paras.
    5-55, and, for the most part, I simply repeat the relevant details from his
    reasons.

[9]

The Pet Valu chain consists of specialty stores selling pet food and
    supplies. The certified class consists of 256 Pet Valu franchisees who operated
    stores in Ontario and Manitoba between December 31, 2003 and March 28, 2011. At
    the time of certification, there were 155 Pet Valu franchised stores, with 145
    in Ontario and 10 in Manitoba. Pet Valu also operated a total of 214 corporate
    stores, about 144 of which were under the Pet Valu banner, with the remainder
    operating under other trade names.

[10]

The
    motion judge presided over a number of case conferences and several motions.
    Pet Valu has vigorously defended the action and the motion judge characterized
    the atmosphere on motions and case conferences as highly adversarial. The
    plaintiff has a pending motion for partial summary judgment. Pet Valu has
    indicated that it proposes to bring a motion to de-certify the class
    proceeding. It has also filed a competing motion for summary judgment.

[11]

The
    motion judge certified the action in January 2011: see reasons reported at 2011
    ONSC 287, 16 C.P.C. (7th) 52. The central common issue that was certified is
    whether Pet Valu breached its contractual duty to class members by failing to
    share with its franchisees certain volume discounts and rebates that it
    received from suppliers and manufacturers during the class period.

[12]

Following
    certification, communication with class members was an extremely contentious
    subject. A case conference was held in February 2011, which included a
    discussion of communications with class members. The minutes of the conference
    state:

His Honour expressed his general concern about communications
    to the class and advised that there was to be no communications to the class
    without court approval.

[13]

The
    formal certification order issued on June 29, 2011 incorporated a Plan of Proceeding.
    The Plan of Proceeding includes provisions dealing with communications with
    class members. There was a concern on both sides, which the motion judge
    shared, that communications with the class between certification and the end of
    the opt-out period should be carefully supervised.

[14]

Pet
    Valu had to be able to communicate with franchisees due to their ongoing
    commercial relationship. However, each party was extremely distrustful of the
    other and neither wanted the other to be able to sway class members freedom to
    make their own decision about whether to opt out. The Plan of Proceeding
    therefore provided:

Communications with the Class Members before the expiry of the
    opt-out period are subject to the direction of the class proceedings judge.

[15]

The
    certification order and the Plan of Proceeding did not purport to curtail the
    right of other franchisees  including Pet Valus franchisee association known
    as the Canadian Franchise Council (CFC)  from communicating about the class
    action.

[16]

Section
    17(6)(b) of the
CPA
provides that the right to opt out of a class
    proceeding must be exercised during a finite period which is set out in the
    certification order and spelled out in the court-approved notice to class
    members of the certification of the action. In the present case, the
    certification notice approved by the case management judge was distributed to
    class members on July 15, 2011.  The notice specified that the opt-out period
    would be a 60-day opt-out period, expiring on September 15, 2011.

(1)

The Opt-Out Process

[17]

At
    an annual general meeting of the CFC held in August 2011 (during the opt-out
    period), there was considerable discussion amongst franchisees about the merits
    of the class action. Some class members, including Mr. Rodger, spoke in favour
    of the action while others, including members of the Executive Committee of the
    CFC, voiced opposition.

[18]

The
    Executive made a motion to authorize it to present its view of the class action
    to those attending the annual general meeting. The motion carried and the
    Executive read a statement indicating in strong terms its opposition to the
    lawsuit as being harmful to franchisees businesses and profitability, and
    their financial futures. A motion to have the entire membership of the CFC vote
    on a resolution to support the Executives unanimous statement was withdrawn.

[19]

In
    early September 2011, 10 of the 11 members of the Executive Committee of the
    CFC, as well as a spouse of an Executive member and two other franchisees,
    became founding members of the CPVF. The sole purpose of the CPVF was to
    encourage other Pet Valu franchisees to opt out of the class action.

[20]

The
    campaign mounted by the CPVF had two major fronts. First, beginning on the
    Labour Day weekend, the founding members did a telephone blitz, calling every
    franchisee to encourage them to opt out of the class action. The calls followed
    a standard script. CPVF members identified themselves and explained that they
    were calling to encourage the franchisee to opt out. The caller asked whether
    the franchisee had already opted out and also asked whether, if the franchisee
    was opting out, the CPVF could publish his/her name. The caller also directed
    the franchisee to the CPVFs website.

[21]

Second,
    in conjunction with the telephone campaign, in early September 2011, the CPVF
    launched a website. The motion judge set out much of the content of the website
    at para. 53 of his reasons.

[22]

The
    website included a tally of the number of franchisees who had opted out of the
    action and a list of the names and store locations of the franchisees who had
    declared their intention to opt out. In addition, it contained statements
    voicing strong opposition to the class action based on beliefs that it would:
    hurt profitability; damage the brand; divert time and resources away from
    building a stronger franchise; place walls between franchisees and the new
    management who were described as being committed to improving the brand; and would
    reduce growth by deterring prospective purchasers of the franchise: see motion
    judges reasons, at para. 53. The website also stated that class members who
    opt out still have the right to individually or collectively pursue [their]
    rights. It continued: This will not waive your rights or stop you from
    pressing forward with issues individually or through the CFC, although statutory
    time limits can prevent how far a court can look back.

[23]

By
    September 4, 2011, only 37 opt-out forms had been received from class members.
    After the start of the CPVFs campaign, there was a noticeable spike in the
    delivery of opt-out forms. By the end of the opt-out period on September 15,
    2011, a total of 140 forms were received, which amounted to about 65 percent of
    current franchisees and 10 percent of former franchisees.

(2)

The Plaintiffs Motion

[24]

On
    November 16, 2011, two months after the end of the opt-out period, the
    plaintiff served a notice of motion, without any supporting affidavit or other material,
    requesting an order setting aside all the opt-out notices. On February 13,
    2012, the plaintiff served a further notice of motion with the supporting
    affidavit of Mr. Rodger. The plaintiff filed an amended notice of motion in
    June 2012, almost a year after the certification order was made. The motion was
    heard on July 4, 2012.

[25]

In
    cross-examination on his affidavit, Mr. Rodger acknowledged that he knew that
    the CPVFs campaign was going on during the opt-out period, but he did not seek
    direction from the motion judge during the opt-out period.

C.

Reasons of the motion judge

[26]

The
    motion judge observed that the question before him was whether the opt-out
    process was so irreparably impaired as to justify the extraordinary measure of
    judicial intervention (at para. 2).

[27]

He
    attributed the dramatic increase in the number of opt-out notices that were
    received in the last two weeks of the opt-out period to a well-organized,
    systematic and highly effective campaign by the CPVF to deal a death blow to
    the class action by persuading other franchisees to opt out (at para. 24).

[28]

The
    motion judge found that the CPVFs website contained statements that had no
    factual basis and that were exaggerated or misleading. He expressed nine
    specific concerns about the content of the CPVFs website, at para. 54, which
    are set out below, at para. 53 of my reasons. He concluded, at para. 55, that
    the CPVFs telephone campaign and website were an unabashed attempt to destroy
    the class action, made no attempt to provide [franchisees] with any
    information concerning the positive aspects of the class action, and gave
    franchisees more misinformation and added to the confusion.

[29]

Based
    on the conduct of the CPVF and the content of its website, the motion judge
    concluded that there was a reasonable probability  that many franchisees
    decided to opt out as a result of misleading information and unfair pressure
    amounting to intimidation (at para. 75). He was not swayed by the affidavit
    evidence of some class members that they did not experience pressure.

[30]

Significantly,
    however, the motion judge found there was no evidence indicating that Pet Valu
    was somehow controlling the members of the CFC or the CPVF, or that Pet Valu
    had exerted any form of pressure on class members to opt out: see paras. 27,
    31, 65-66.

[31]

Turning
    to the issue of remedy, the motion judge concluded that an extraordinary remedy
    was warranted by the need to protect the integrity of the court process and the
    rights of all class members to make an informed and voluntary choice about
    whether to opt out (at paras. 80-81). He declared invalid any opt-out notice
    received on or after September 5, 2011. He further declared that opt-out
    notices received prior to that date were presumptively valid, but were subject
    to the right of a franchisee to move to set aside his or her opt-out. Finally, he
    made an order for a new opt-out process that would occur following the release
    of the courts decision on the summary judgment motion, or other final
    disposition of the action on its merits.

[32]

In
    fashioning this remedy, the motion judge dismissed the concern that his order
    would undo the
res judicata
effect of the
CPA
by permitting
    class members to wait and see if the action is successful before deciding
    whether to opt out, thereby giving them a second kick at the can either
    individually or collectively. In his view, if the class action were dismissed
    on the merits, it would be highly unlikely that any subsequent action,
    individual or collective, would succeed (at para. 86).

[33]

The
    motion judge acknowledged that the plaintiff may have delayed in bringing the motion
    and that Mr. Rodger may have engaged in unsanctioned communication. However, he
    did not find these concerns determinative, noting that this did not detract
    from his conclusion that the appellant franchisees actions had impaired the
    opt-out process (at para. 87).

[34]

Finally,
    the motion judge dismissed concerns that had been raised about franchisees
    rights of association pursuant to s. 4(1) of the
Arthur Wishart Act
    (Franchise Disclosure), 2000
,
S.O. 2000, c. 3 (
Franchise
    Disclosure Act
). He found that in the unique circumstances of this case
    the exercise of these rights had interfered with the rights conferred by the
CPA

such that relief was necessary (at para. 88).

[35]

In
    separate reasons prepared after receiving written submissions on costs, the
    motion judge awarded $60,000 in costs to the plaintiff, payable jointly and
    severally by Pet Valu and the appellant franchisees: see reasons reported at
    2012 ONSC 5029.

D.

Issues

[36]

The
    appellants allege that the motion judge made the following errors of law:

1)

He failed to hold the
    plaintiff to the civil standard of proof.

2)

He erred in requiring
    that communications by the appellant franchisees satisfy a legal standard of
    objectivity and impartiality, which applies to court-approved notices under ss.
    17-20 of the
CPA
.

3)

He erred in failing to
    accept the uncontroverted evidence of the appellant franchisees and independent
    affiants that franchisees were not intimidated or coerced by the CPVFs
    campaign.

4)

He erred in
    disregarding the association rights of the appellant franchisees provided by s.
    4(1) of the
Franchise Disclosure Act
and he failed to exercise his
    statutory authority in conformity with the right of association provided by s.
    2(d) of the
Charter
.

5)

He erred in granting
    equitable relief without giving any weight to the plaintiffs failure to pursue
    the motion expeditiously or the misconduct of the plaintiff in engaging in
    unsanctioned communication with class members during the opt-out period.

6)

He erred in deferring
    the opt-out period until after the final determination of the case on its
    merits, thereby eviscerating the
res judicata
principles of the
CPA
.

7)

He erred by ordering
    an extraordinary remedy where more appropriate alternative measures were
    available, such as the holding of a new opt-out period without delay.

[37]

The
    appellants further argue that the motion judge committed palpable and
    overriding error in finding that class members were misled and pressured into
    opting out when there was no evidentiary basis capable of supporting this
    finding.

[38]

No
    issue was taken with the appellant franchisees standing on the motion or the
    appeal. As former class members who have opted out of the class proceeding, the
    appellant franchisees are not parties as of right. There was no judicial order
    conferring intervener status on them. The only order against them was the
    motion judges costs order, which the appellant franchisees have not appealed
    and which, in any event, I would set aside. Accordingly, in my view, the
    appellant franchisees were not proper parties on the motion and are not proper
    appellants. However, nothing turns on this lack of standing for purposes of
    dealing with the merits of the appeal. In oral argument before this court, the
    appellant Pet Valu adopted the submissions of the appellant franchisees in their
    entirety.

[39]

Only
    Pet Valu seeks leave to appeal the costs award. It argues that the plaintiffs
    notice of motion contained serious allegations of misconduct on the part of Pet
    Valu that were unsubstantiated and that deserved the sanction of costs.

E.

analysis

(1)

Section
    12 of the
CPA
and the
A&P

Test

[40]

The
    motion judges order was an exercise of his broad, discretionary jurisdiction
    under s. 12 of the
CPA: Fantl v. Transamerica Life Canada
, 2009 ONCA
    377, 95 O.R. (3d) 767, at para. 42. A discretionary decision to safeguard the
    fairness of a class proceeding is entitled to receive significant deference
    from this court. It may only be set aside if it is based on an error of law, a
    palpable and overriding error of fact, the consideration of irrelevant factors
    or the omission of factors that ought to have been considered, or if the
    decision was unreasonable:
Aventis Pharma S.A. v. Novopharm Ltd
.,
    2005 FCA 390, 44 C.P.R. (4th) 326, at para. 4.

[41]

In
    making his remedial order, the motion judge properly recognized the need to
    protect the interests of the absent class members in the opt-out process. He
    stated, correctly, that class members ought to be free to exercise their right
    to participate in or abstain from the class action on an
informed
,
voluntary basis
,
free from
    undue influence
, citing
176560 Ontario Ltd. v. Great Atlantic &
    Pacific Co. of Canada Ltd.
(2002), 62 O.R. (3d) 535 (S.C.J.), affirmed
    (2004), 70 O.R. (3d) 182 (Div. Ct.), leave to appeal refused (May 11, 2004),
    Court File No. M31109 (Ont. C.A.), at para. 74

(emphasis added by the
    motion judge). As explained in
A&P
, at paras. 75-76:

The primary protection for the absent class members in the
    class proceeding process is the right to opt out of the class action. It is
    axiomatic that no class member need participate in a class action against his
    or her will. However, to ensure the integrity of the opt out process, absent
    class members must be fully informed of the issues in the proceeding and the
    impact on them as individuals.

Where  a communication constitutes misinformation, a threat,
    intimidation, coercion or is made for some other improper purpose aimed at
    undermining the process, the court must intervene.

[42]

The
    reason why the opt-out decision must be informed and voluntary is that the
    choice to opt out of a class proceeding involves a serious access to justice
    issue. Once a class member opts out of a class proceeding, that person is
    either left to pursue his or her rights individually, which may be an
    unrealistic possibility depending on the nature of the claim, or the class
    member must relinquish the right to participate in any remedy that may be
    obtained for the underlying conduct of the defendant.

[43]

Where
    class members engage in conduct that amounts to misinformation, threats,
    intimidation, coercion or that reveals some other improper purpose in an
    attempt to undermine the opt-out process, the court may intervene to restrain
    and remediate the effect of such conduct. The court may do so based on the
    jurisdiction under s. 12 of the
CPA

to
    protect the fair determination of the proceeding
.

[44]

Where
    the parties become aware that class members or former class members are
    engaging in tactics that may demand judicial scrutiny during the opt-out
    period, the representative plaintiff should promptly seek the intervention of
    the supervising judge. As well, the defendant may not sit idly by in the face
    of such conduct without running the risk that a court will invalidate opt-outs
    based on the application of the informed and voluntary test established in
A&P
.

(2)

Application
    to the Present Case

[45]

The
    purpose of the opt-out process is to provide class members with the opportunity
    to make an informed and voluntary decision as to whether they wish to remain as
    participants in the class action.

[46]

The
    motion judge was rightly motivated by a concern for protecting the fairness of
    the opt-out process and by the goal of ensuring that opt-out decisions were not
    the product of misinformation or intimidation. He was deeply troubled that the
    CPVF telephone campaign and website were an unabashed attempt to destroy the
    class action (at para. 55). In his decision awarding the plaintiff its costs
    of the opt-out motion, the motion judge stated, at para. 20, that the survival
    of the class action depended on the outcome of the [opt-out] motion.

[47]

These
    comments reveal that the motion judge was proceeding on an erroneous principle,
    at least to the extent that his analysis was premised on the view that the
    survival of the class action depended on the outcome of the opt-out motion. The
    motion judge believed that because slightly more than half the class had opted
    out, the very survival of the class action was at stake on the plaintiffs
    motion. He did not explain exactly what he meant by the survival of the class
    action. In his reasons on the opt-out motion, he mentioned, at para. 6, that
    the defendant had raised the prospect of bringing a decertification motion.

[48]

If
    by the survival of the class action the motion judge was referring to the
    prospect of decertification, he did not explain why the number of class
    opt-outs could undermine the evidence satisfying the certification criteria.
    Indeed, other than perhaps in the most extreme cases, I fail to see any reason
    why the number of opt-outs would be a basis for decertification. Alternatively,
    if he meant the viability of the class action somehow depends on the number of
    remaining class members, there is no basis for this concern. A certified class
    proceeding will continue regardless of the diminished size of the class and the
    correspondingly diminished damages award or settlement amount that might follow
    therefrom.

[49]

The
    motion judge evaluated the fairness of the opt-out process based on an
    incorrect belief that the viability of the class action was in peril. From that
    viewpoint, the CPVFs actions would have appeared more troubling than they
    actually were.

[50]

The
    motion judges view that the survival of the class action was at stake on the
    opt-out motion  although incorrect  reflected the CPVFs motivation for
    waging the opt-out campaign. They were at least in part trying to end the class
    action by encouraging class members to opt out.

[51]

Given
    these misconceptions about the nature of the opt-out process, I think it is
    important to emphasize that the
CPA
does not contemplate the
    politicization of the opt-out process. The opt-out process is not analogous to
    the labour context where majority support or opposition is required to certify
    or decertify a union. Within the statutory framework of the
CPA
, there
    is no legitimate purpose that can be achieved by politicizing the opt-out
    process. As explained in
A&P
, at para. 32, certification motions
    are not determined through a referendum of the class members. Nor is the
    viability of the class action dependant on majority support. Just as the
    percentage of support amongst class members is not an element of certification,
    opting out cannot stop a class action. The number of opt-outs does not in
    itself provide a basis for decertifying a class action.

[52]

In
    a class proceeding, a representative plaintiff seeks to obtain court approval
    through certification of the action to pursue a remedy for a group  the class
     who have suffered a common wrong. Once the action is certified, as it was
    here, the representative plaintiff is obliged to pursue the action on behalf of
    the class, subject to receiving court approval to withdraw. The opt-out process
    is not a vote on whether the class action should go forward. It is simply a
    process by which members of the class can individually elect not to have the
    representative plaintiff continue to act and pursue the claim on their behalf
    and in so doing, forego any right to share in the success of the lawsuit. Once
    a class member has opted out of the class proceeding, he or she is a stranger to
    the lawsuit and has no standing before the court. Thus, the person who has
    opted out has no say about how the action is conducted or whether or not it
    will continue to go forward.

[53]

The
    motion judge was right to be attuned to the possibility that the CPVF was attempting
    to undermine the opt-out process by politicizing it. He was also right to
    analyze this possibility by applying the
A&P
test. However, he
    erred in his portrayal of the impact of the opt-out process. He also erred in
    imposing on the class members the obligation to communicate in an objective
    manner and in his interpretation of the campaign as a whole.

[54]

The
    motion judge identified the following nine specific concerns about the
    misleading and intimidating nature of the language of the CPVFs website, at
    para. 54:

(a) The identification of the names of opt-outs was
    clearly designed to put pressure on those who had not opted out  the message
    was, get on the bandwagon, because almost everyone else has and you dont want
    to be one of the few left standing at the end.

(b)  The message of the website was that the CPVF had
    determined that the class action was bad for franchisees and the implication
    was that anyone who did not opt out (and who would be readily identifiable as a
    non-conformist) was damaging the business, harming other franchisees, and
    undermining the efforts of the CFC.

(c)  The message that the class action would create
    walls between the franchisees and the franchisor was designed to enhance the
    position of the Executive as the sole voice of Pet Valu franchisees and to
    exploit franchisees concerns about the power imbalance between themselves and
    the franchisor. It in fact runs contrary to McNeelys evidence that Pet Valu
    intended to treat all its franchisees fairly and equally, regardless of their
    participation in the class action.

(d) There was no attempt to provide any form of
    informational balance or to discuss the issues in the class action  the fact
    that, if the action was successful, every class member might have a right to
    substantial damages, was not even mentioned.

(e) The website disparaged class counsel  references were
    made to lawyers creating walls, receiving 25% if not more out of any
    settlement or judgment and referred to them as lawyers who seek to assert
    claims focused upon allegations of past misconduct. The message was: This is
    all driven by class action lawyers trying to make money.

(f) The suggestion that the lawsuit was motivated by a
    desire to punish the former owners has no factual basis. The liability of Pet
    Valu in this action is a corporate liability, which is obviously distinct from
    the ownership of the corporation.

(g) The suggestion that the issue of volume rebates could be
    addressed by the CFC is contrary to the evidence on certification that the CFC
    had been either unable or unwilling to do so. There is no evidence at all that
    Pet Valu as a corporation, under new management or otherwise, is prepared to
    address this issue voluntarily and without being required to do so as a result
    of this action.

(h) The alleged consequences of the class action,
    including its impact on franchisee profitability, its effect on Pet Valu, and
    its effect on the brand, were exaggerated and lacked any factual or evidentiary
    foundation.

(i) The statement that opting out would not prevent
    franchisees from individually or collectively pursuing their rights was
    misleading. It failed to address the reality, to which I averted in my decision
    on certification at para. 111, that individual claims by franchisees would be
    impractical. Collective pursuit would almost certainly be ineffective without
    the clout of a class action, given that Pet Valu continues to vigorously
    contest the franchisees rights to share in volume rebates.

[55]

He
    went on to make the following findings about the CPVFs campaign, at para. 55:

The CPVF telephone campaign and website were an unabashed
    attempt to destroy the class action. The campaign made no pretence of giving
    franchisees an opportunity to make a private, considered and informed decision.
    It made no attempt to provide them with any information concerning the positive
    aspects of the class action. While expressing concern about franchisees being
    confused or misinformed, the CPVF gave them more misinformation and added to
    the confusion. In an environment in which communications to the class by the
    parties had been strictly curtailed at the request of the parties and with the
    courts approval, the CPVF was able to use its influence and its opinions to
    advance what it perceived to be the interests of franchisees, which it aligned
    with the interests of the franchisor.

[56]

In
    the Plan of Proceeding, the motion judge had restricted communications by the
    plaintiff and the defendant. He did not impose restrictions on members of the
    class. I agree that in the present case there was a real risk that the CPVFs
    opt-out campaign could cross the line of pressuring or intimidating class
    members into opting out on an uninformed or involuntary basis.

[57]

Despite
    this risk, however, a finding that the CPVFs campaign crossed the line
    described in
A&P
was unavailable to the motion judge on the record
    before him. It is instructive to describe the nature of the evidence of the
    defendants conduct in
A&P
and the representative plaintiffs
    response to it, and to compare these circumstances to the present case.

[58]

In
A&P
, the plaintiff franchisees brought a certification motion as
    well as a motion seeking an order restricting communications by the defendant
    franchisor with class members during the opt-out period. After granting the
    certification order, the court considered whether it was appropriate to grant
    the extraordinary relief requested by the plaintiffs on their additional
    motion.

[59]

The
    plaintiffs in
A&P
introduced affidavit and
viva voce
evidence indicating that, prior to the certification motion, the defendant
    franchisor had engaged in a course of conduct that is intimidating,
    threatening, and coercive, and in consideration of the information vacuum,
    sufficiently misleading to vitiate any notion that the franchisees executing
    releases are doing so on an informed basis (at para. 80). The evidence showed
    that the defendant had monitored franchisees legal services, imposed unlawful
    and unilateral rent increases on non-cooperative franchisees, and had arranged
    for franchisor executives to personally visit franchisees to solicit releases
    of their claims. Based on this evidence, the court made an order restricting the
    franchisors communications with franchisees and prohibiting it from
    circulating its new franchise agreements to, or entering into releases with,
    class members during the opt-out period.

[60]

In
    the present case, both parties became well-aware of the CPVFs opt-out campaign
    soon after it began. Either party could have sought the motion judges
    intervention to determine if the CPVFs telephone campaign and website were
    misleading, or if its tactics were threatening, intimidating or coercive. The
    motion judge had given the parties an open invitation to seek his direction
    regarding communications with class members. Yet neither side acted on this
    invitation during the opt-out period.

[61]

Here,
    unlike the pre-emptive approach of the moving party in
A&P
, the
    plaintiff waited for two months after the expiry of the opt-out period to file
    a notice of motion questioning the fairness of the opt-out process. Supporting
    material for the motion was not delivered until three months later, in February
    2012. The motion was not made returnable until July 4, 2012, almost ten months
    after the opt-out period had expired and more than a year after the
    certification of the action.

[62]

This
    dilatory conduct by the representative plaintiff is very troubling.
    Post-certification, the representative plaintiff represented all class members up
    until the time that they chose to opt out of the proceeding. Prior to that
    point, the representative plaintiff had a duty to protect their interests. In
    the present circumstances, this duty included a responsibility to alert the
    motion judge to any communications that appeared to coerce, intimidate or
    mislead class members into opting out. The purpose behind ensuring that the
    opt-out decision is made voluntarily and with full information is not to
    protect the size of the class for the benefit of the representative plaintiff
    or his counsel. If the representative plaintiff had concerns about the nature
    of the CPVFs communications during the opt-out period, it was incumbent upon the
    representative plaintiff to bring the issue to the attention of the motion judge
    as soon as possible.

[63]

Also
    distinguishing this case from
A&P
is the lack of evidence adduced
    by the plaintiff capable of establishing that class members had been misled or
    intimidated. The plaintiff filed no direct evidence from any class member going
    to the issue of whether their opt-out decisions were voluntary and informed.
    Considering that the only issue on the plaintiffs motion was whether the
    opt-outs were involuntary or misinformed because of the CPVFs campaign, it is
    strange indeed that no evidence was adduced from a single opt-out to the effect
    that any one of them felt intimidated or misled into opting out.

[64]

The
    only affidavit evidence filed in support of the motion consisted of Mr.
    Rodgers affidavit, which refers to unnamed franchisees allegedly having
    experienced pressure from members of the CPVF to opt out. The motion judge did
    not rely on this evidence in coming to his conclusions (at para. 89). Thus, the
    motion judges finding that the telephone campaign and the public disclosure on
    the CPVFs website of the names and store locations of opt-outs had a coercive
    effect on the rest of the class was not based on direct evidence from any class
    member.

[65]

Instead,
    the motion judges conclusion was based on an inference that class members were
    misled or pressured into opting out by the CPVFs campaign. His reasons, at
    paras. 68 and 70, illustrate this:

The CPVF exploited this [vulnerability of the relationship
    between franchisor/franchisee] by asking for an electronic show of hands on the
    website  asking, in effect, are you with us and your fellow franchisees or
    against us?

The CFC, wearing the hat of the CPVF, mounted a campaign
    designed to kill the class action. It did so by putting subtle and
    not-so-subtle pressure on hold-outs by prominently listing the growing list
    of names of opt-outs. A franchisee who did not pledge allegiance to the CPVF
    and promise to opt out could reasonably conclude that he or she would be outed
    as part of an identified minority who were pursuing their own selfish
    interests, who were not team players and who were indifferent to the concerns
    of the majority.

[66]

There
    can be no doubt that there was evidence that the CPVF were attempting to
    persuade and pressure the class members to opt out of the proceeding. The issue
    is whether this evidence is capable of supporting an inference that the
    campaign was coercive. In relying on the posting of names of opt-outs as
    supporting the inference of coercion, the motion judge did not take into
    account the following evidence: that
the CPVFs
    telephone callers asked class members for permission to publish their names;
    that the website listed the number of franchisees who had opted out but who
    preferred to remain anonymous; and
that the certification order, posted
    on class counsels website, required class counsel to serve on Pet Valu a list of
    the names of opt-outs. In short, the CPVFs website explicitly respected class
    members anonymity and did not divulge any information about class members that
    Pet Valu was not otherwise entitled to receive pursuant to the certification
    order.

[67]

There
    was no evidence that any class member perceived a threat that Pet Valu might
    take retaliatory action against them for remaining in the class.  To the extent
    that the motion judges inference that pressure to opt out took advantage of
    the vulnerability inherent in the franchisor/franchisee relationship, this is
    inconsistent with his finding that Pet Valu was not linked to the impugned
    conduct of the CPVF. The motion judge made multiple findings to this effect:

I did not accept the plaintiffs submission that the CFC or the
    Executive is somehow under the control of Pet Valu. It receives some modest
    operational funding from Pet Valu, but it is otherwise independent (at para.
    27).

There is no evidence that Pet Valu has taken any repercussions
    against any franchisee as a result of the class action. Indeed, Pet Valus
    evidence is that it treated its franchisees equally and impartially, regardless
    of their support of the class action (at para. 31).

I also accept Pet Valus assurances that it was not party to
    the activities of the CPVF. An extensive affidavit was sworn by McNeely [the
    Chief Executive Officer] of Pet Valu. On the basis of that affidavit, which is
    largely unchallenged, I conclude that Pet Valu itself did not interfere with
    the integrity of the opt-out process or attempt to influence franchisees to opt
    out of the class action. I also conclude that Pet Valu did not
directly
encourage the CFC or the CPVF to do so. That said, McNeely was clearly aware of
    what CPVF was up to and was content to let it continue unabated (at para. 65).
    [Emphasis in original.]

[68]

The
    motion judges inference that class members were intimidated into opting out by
    the public disclosure of the names of opt-outs is also inconsistent with his
    acceptance of the evidence of Mr. McNeely, the CEO of Pet Valu,  that: Pet Valu
    had not taken and would not take repercussions against a franchisee as a
    result of his or her or its participation in the class action; and he
    consistently told franchisees that whatever their decision on the class
    action, it would not affect their relationship with him or Pet Valu (at para.
    66). The motion judge commented that while this attitude was commendable, it
    is inconsistent with the message delivered to franchisees by the CFC and the
    CPVF. However, the CPVF could not, and did not, speak on behalf of Pet Valu.
    Any inference to the effect that it did is inconsistent with the motion judges
    findings concerning the absence of involvement by Pet Valu in the campaign.

[69]

Appellate
    intervention is warranted where an inference of fact is not supported by any
    evidence and where an improper inference has a material effect on the outcome:
    see
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras.
    22-23. The conclusion reached by the motion judge, at para. 75, that there is
    a reasonable probability that many franchisees decided to opt out due to
    unfair pressure amounting to intimidation is based on the inferences he drew.
    In my view, these inferences lack a valid evidentiary basis and, given their
    significance to the outcome of the motion, must be set aside.

[70]

The
    motion judge also erred in law in holding the CPVF to a standard of objectivity
    in the circumstances. He concluded, at para. 54(d), that the CPVFs campaign
    rendered the opt-out process unfair because there was no attempt on the website
    to provide any form of informational balance or to discuss the issues in the
    class action. He noted: the fact that, if the action was successful, every
    class member might have a right to substantial damages, was not even
    mentioned.

[71]

However,
    unlike the situation in
A&P
, the CPVFs campaign took place
    following certification. At the start of the opt-out period, the class members
    received a court-approved notice of certification describing the nature of the
    proceeding and indicating that damages were being sought on their behalf. The
    notice describes the opt-out process and the consequences of opting out. In
    addition, the notice has a link to class counsels website and advises class
    members that a copy of the statement of claim and the rulings by the court in
    the action are available on that site. Thus, the class members had
    readily-available information about the possible benefits of the class
    proceeding through the court-approved notice of certification and class
    counsels website.

[72]

Indeed,
    had the representative plaintiff brought his concerns before the motion judge
    in a timely fashion, the motion judge could have dealt with any problem of
    improper communications whether by relieving the plaintiff from the terms of
    the gag order, by giving some form of direction to the parties, or by
    reminding the parties and the class members that objective information
    regarding the lawsuit was available through the sources just discussed. The
    motion judge was not afforded the opportunity to do so.

[73]

When
    the motion judge was eventually asked to deal with the plaintiffs concerns, he
    should not have held the CPVFs communications to a standard of objectivity.
    These former class members had an unassailable right to speak out in opposition
    to the class proceeding in an attempt to convince other class members to opt
    out, subject only to the overriding principles set out in
A&P
.

[74]

The
    CPVFs website to which the motion judge took exception, at para. 54, contains
    assertions of belief that the class action is not in the best interests of
    franchisees and that it is driven by lawyers with a large financial stake in
    the outcome. The comments amount to no more than the CPVF members expressing
    their opinion on the undesirability from a business perspective of pursuing the
    lawsuit, as opposed to denigrating the technical merits of the action. The
    opt-out provision is the appropriate mechanism for class members to voice these
    types of objections to the wisdom of a class action: see
Fairview Donut
    Inc. v. TDL Group Corp.
, (2008) CanLII 60983 (On. S.C.), at para. 11.
    Class members are able to consider such objections in the context of the other
    information made available to them in the notice of certification and on class
    counsels website. Apart from attempting to persuade other class members to
    forego their legal recourse against a defendant in a class proceeding, this
    interaction has no effect on the lawsuit other than reducing the number of
    persons in the class.

[75]

The
    motion judges application of the fully informed and voluntary test from
A&P
was flawed in these circumstances where there was no evidence linking the
    defendant to the impugned conduct and where the communications amounted to the
    type of intra-class debate that is acceptable during the opt-out period.

F.

CONCLUSION AND DISPOSITION

[76]

For
    these reasons, despite the deference that is owed to a discretionary decision
    by the motion judge, I would allow the appeal and set aside the order at issue.

[77]

It
    was within the purview of the motion judge to scrutinize the CPVFs campaign
    according to the fully informed and voluntary test as enunciated in
A&P
.
    In so doing, the motion judge found that the appellant Pet Valu was not
    implicated in the CPVFs campaign. Given the evidentiary record on the motion,
    the power imbalance inherent in the franchisor/franchisee relationship was not
    properly considered in assessing the effect of the CPVFs communications on
    class members.

[78]

At
    the start of the opt-out period, the class members were provided with a
    court-approved notice of certification and had access to class counsels
    website with full particulars regarding the action. In this manner and in
    accordance with the statutory scheme, they were afforded access to objective
    information regarding the legal proceeding.

[79]

The
    CPVFs campaign only dealt with the opinion as to the advisability of the legal
    proceeding from the business perspective of the franchisees. The campaign had
    as its central theme the suggestion that the class members should give the
    franchisors new management team a chance to deal with the complaint underlying
    the primary common issue certified in the proceeding. The CPVFs campaign
    advocated as a matter of opinion that it was not in the interests of the class
    members to have an outstanding lawsuit between them and the franchisor because
    it would distract the franchisor from running the business, would harm the Pet
    Valu trademark and would devalue their assets. In other words, the campaign did
    not attempt to address the technical merits of the lawsuit.

[80]

The
    motion judge ought not to have held the CPVFs campaign to a standard of
    objectivity but should only have considered if the conduct of the campaign
    constituted misinformation, threats, coercion, intimidation or was otherwise
    unlawful. As explained, there is no evidence to support a finding that the opt-outs
    by individual class members were not voluntary or fully informed.

[81]

The
    representative plaintiff was aware of the campaign by the CPVF to encourage
    class members to opt out of the action during the opt-out period. Nonetheless,
    he took no action to bring the campaign to the motion judges attention until
    months after the opt-out period had expired. When he finally argued his motion
    to invalidate the opt-out decisions, he was unable to tender evidence from a
    single other class member indicating that the CPVFs campaign improperly
    influenced the decision to opt out of the proceeding in the sense contemplated
    by the test established in
A&P
.

[82]

I
    would therefore allow Pet Valus appeal and set aside the order invalidating
    the opt-out notices. I would also set aside the motion judges cost award
    against Pet Valu and the members of the CPVF.

[83]

The
    appellant Pet Valu shall have its costs of the appeal fixed in the amount of
    $10,000, inclusive of disbursements and HST.

[84]

As
    noted, the appellant franchisees had no standing on the motion or the appeal.
    As such, they are not entitled to their costs of the motion or the appeal.

Released: WKW May 3, 2013

W.K.
    Winkler C.J.O.

I
    agree Robert P. Armstrong J.A.

I
    agree Alexandra Hoy J.A.

[1]
Twelve franchisees who were founding members of the CPVF were named as
    respondents in the plaintiffs amended notice of motion, dated February 13,
    2012 (amended June 19, 2012).


COURT OF APPEAL FOR ONTARIO

CITATION:

2211266 Ontario Inc. (Gentlemen's Club) v. Brantford
    (City), 2013 ONCA 300
DATE: 20130508
DOCKET: C56299

Doherty, Cronk and Lauwers JJ.A.

BETWEEN

2211266 Ontario Inc. O/A Gentlemens Club

Applicant (Appellant)

and

The Corporation of the City of Brantford

Respondent (Respondent in appeal)

Myron W. Shulgan, for the appellant

Kimberly A. Farrington, for the respondent

Heard: April 29, 2013

On appeal from the judgment of Justice D. Chappel of the
    Superior Court of Justice, dated October 16, 2012.

By the Court:

I.        Introduction

[1]

This appeal concerns a municipalitys powers under the
Municipal
    Act, 2001
, S.O. 2001, c. 25 (the Act) to impose licensing requirements
    on the owners and operators of adult entertainment parlours and those persons
    who perform live performances of an adult nature within those facilities.

[2]

The appellant, 2211266 Ontario Inc., operates a facility in the City of
    Brantford under the name of the Gentlemens Club. In February 2012, it
    applied to the Superior Court of Justice for orders declaring invalid various
    parts of the Citys adult live entertainment licensing by-law, enacted under
    the Act as Chapter 329 of the Citys Municipal Code (the By-law).

[3]

As relevant to this appeal, the appellant attacked the validity of ss.
    329.4.1 and 329.4.2 of the By-law, which require the owners and operators of
    adult live entertainment parlours to be licensed, and ss. 329.4.7 and 329.4.9
    of the By-law, which require entertainers who perform live performances of a
    specified nature in such facilities to be licensed (collectively, the
    Licensing Provisions).  The appellant argued that the Licensing Provisions
    exceed the Citys statutory licensing and by-law making authority.

[4]

The Licensing Provisions read as follows:

329.4.1        Licence
     required

No person shall operate, engage in or carry on the occupation
    or business of an adult live entertainment parlour unless he or she first
    obtains a licence under this Chapter to do so.

329.4.2        Operator
     licence  required

In the event that an owner does not personally operate the
    adult live entertainment parlour, the owner shall not permit any person other
    than an operator licensed under this Chapter to operate the adult live
    entertainment parlour.

....

329.4.7        Entertainer
     not to perform in unlicensed facility

No

entertainer

shall

perform

in

an adult live entertainment parlour which
    has not been licensed under the provisions of this Chapter.

...

329.4.9        Entertainer
     licence  required

No person shall perform as an entertainer unless he or she
    obtains a licence under this Chapter to do so.

[5]

The application judge dismissed the appellants application concerning
    the Licensing Provisions on two bases. She held: (1) that the Licensing Provisions
    are a valid exercise of the Citys authority under the Act to implement a licensing
    system in connection with matters relating to health, safety and the well-being
    of persons in the municipality; and (2) in any event, the Licensing Provisions
    fall within the Citys statutory authority under the Act to license businesses.

[6]

Accordingly, by judgment dated October 16, 2012, the application judge
    dismissed the appellants application regarding the validity of the Licensing Provisions.

[7]

The appellant appeals. For the reasons that follow, we conclude that the
    appeal must be dismissed.

II.       General Licensing
    Authority of Municipalities

[8]

Section 8(3)(c) of the Act grants municipalities the power to create a
    system of licenses respecting any matter over which a municipality has by-law
    making authority under ss. 10 and 11 of the Act. Section 8(1) of the Act
    directs an expansive interpretation of the scope of this power, so as to
    confer broad authority on the municipality to enable the municipality to govern
    its affairs as it considers appropriate and to enhance the municipalitys
    ability to respond to municipal issues.

[9]

Section 10(2) of the Act specifies those matters in respect of which a
    municipality like the City may pass by-laws.  These include, among other
    matters: (1) the health, safety and well-being of persons (s. 10(2).6); (2)
    protection of persons and property, including consumer protection (s. 10(2).8);
    and (3) business licensing (s. 10(2).11).

[10]

In
    addition, s. 151(5) of the Act provides:

Subsections

(1)

to

(4)
    [concerning business licensing systems] apply with necessary modifications
to
    a system of licences with respect to any activity, matter or thing
for
    which a by-law may be passed under sections 9, 10 and 11
as if it were a
    system of licences with respect to a business
. [Emphasis added.]

[11]

Thus,
    municipalities enjoy a broad licensing authority under the Act.  Contrary to
    the appellants submission in its factum, this authority is not confined to
    licensing businesses, trades and occupations. Sections 8(3) and 10(2) of the
    Act contain no such restriction. Instead, the power to pass by-laws respecting
    business licensing is but one of the matters identified in s. 10(2) as a
    legitimate subject matter for the discretionary exercise of a municipalitys
    by-law making authority.  Moreover, by the combined operation of ss. 10(2) and
    151(5) of the Act, by-laws may be passed creating a system of licenses with
    respect to any activity, matter or thing under s. 10(2) as if it were a
    system of licences with respect to a business.

[12]

In
    this case, the application judge held that the By-law is a valid exercise of
    the respondent municipalitys jurisdiction under ss. 8(3) and 10(2)(6) of the
    Act to implement a system of licensing in connection with matters relating to
    health, safety and the well-being of persons in the municipality.

[13]

We
    agree.  As noted by the application judge, both the preamble and the content of
    the By-law reveal that it is aimed at the promotion of these legitimate
    municipal purposes.  In addition, in our view, the authority to pass the By-law
    could also be anchored in the objectives of s. 10(2).8 of the Act  protection
    of persons and property, including consumer protection  and s. 10(2).11
    business licensing.

[14]

On
    this ground alone, the appellants attack on the validity of the Licensing Provisions
    fails.  As the By-law reflects the valid exercise by the City of its licensing
    authority under ss. 8(3) and 10(2) of the Act, it follows that the Licensing
    Provisions, which form part of the overall licensing system established by the
    By-law, are similarly valid.

III.      Specific Business Licensing Authority of
    Municipalities

[15]

In
    addition to the general authority of municipalities under s. 8(3) of the Act to
    pass by-laws pertaining to any matter delineated in s. 10(2) of the Act, s.
    151(1) of the Act furnishes municipalities with express statutory authority to provide
    for a system of licences with respect to a business.  The word business is
    defined expansively under s. 150 of the Act, and includes: (a) trades and
    occupations; (b) exhibitions, concerts, festivals and other organized public
    amusements held for profit or otherwise, among other things.

IV.     Licensing Provisions

[16]

In
    this case, the application judge held that, apart from its by-law making
    authority under ss. 8(3) and 10(2) of the Act, the City is also empowered to
    license adult live entertainment parlours and entertainers under the business
    licensing provisions of the Act.  We agree.

[17]

Section
    154 of the Act contemplates that, without limiting a municipalitys by-law
    making authority under ss. 9, 10 and 11 of the Act, a local municipality may
    implement a licensing system concerning adult entertainment establishments
    under the authority of s. 151 of the Act.  Under s. 154(2)(a), the term adult
    entertainment establishment is defined as including any premises or any part
    of them ... if, in the pursuance of a business,  (a) goods, entertainment or
    services that are designed to appeal to erotic or sexual appetites or
    inclinations are provided in the premises or part of the premises.

[18]

The
    appellant accepts that the City had the authority to pass the By-law under its
    s. 151 business licensing authority.  However, the appellant argues in its
    factum, in effect, that the By-law is invalid because, in respect of adult live
    entertainment parlours, it fails to define a class of business, calling, trade
    or occupation by reference to a commercial activity or work, instead imposing a
    licensing requirement on any premises within which individuals engage
in
    any activity
, a principal feature or characteristic of which is nudity or
    partial nudity (emphasis added).  This, the appellant contends, is tantamount
    to impermissibly imposing a licensing requirement based on a dress code.

[19]

In
    our view, this argument fails.  As the application judge observed, the current
    Act does not require that a municipal licensing system apply to a specific
    type, category or class of business, trade or occupation.

[20]

Under
    s. 8(4) of the Act, a municipal by-law passed under s. 10(2) may be general or
    specific in its application and may differentiate in any way and on any basis a
    municipality considers appropriate.  In contrast, under s. 10(2) of the
    predecessor version of the Act, a municipality was empowered to differentiate
    in its by-laws concerning different persons or businesses only if the persons
    or businesses constitute different classes of persons or businesses defined in
    the by-law:
Municipal Act, 2001
, S.O. 2001, c. 25, am. to 2004.
    Section 10(2) of the former statute was replaced in 2007 by s. 8(4) of the
    current Act.  For this reason, as the application judge noted, the appellant`s
    reliance on this courts decision in
679619 Ontario Limited v. Windsor
    (City)
(2006), 210 O.A.C. 37 is misplaced  that case concerned the former
    version of the Act.

[21]

As
    a result, as the application judge observed, the relevant question under the
    current Act regarding a municipalitys business licensing authority is whether
    the licensing system in question applies to a business in general or in a
    general sense to trades and occupations.

[22]

In
    the case of the Citys By-law, there can be no doubt that this requirement is
    met.  The By-laws operator licensing requirements under ss. 329.4.1 and
    329.4.2 apply only to those who operate premises for a commercial purpose.  For
    example:

(1)

the
    operator Licensing Provisions (ss. 329.4.1 and 329.4.2 of the By-law) apply
    only to the occupation or business of an adult live entertainment parlour;
    and

(2)

the phrase adult
    live entertainment parlour is defined under s. 329.1.1 of the By-law as any
    premises in which or in part of which,
in pursuance of a trade, calling,
    business or occupation
, a live performance of an adult nature is provided
    [Emphasis added.]

[23]

This
    focus on commercial activity is consistent with the Citys statutory business
    licensing authority.  Section 154(2)(a) of the Act defines the term adult
    entertainment establishment as premises in which specified activities are
    undertaken in pursuance of a business.  Further, as the application judge
    noted, the definition of business under s. 150 of the Act is focused on
    various types of commercial activities, methods by which those activities are
    pursued, and entities or enterprises that pursue them.

[24]

Thus,
    as the application judge indicated, in order to trigger the operator licensing
    requirements of the By-law, the activity in question must therefore constitute
    part of a commercial activity occurring at the enterprise.

[25]

The
    appellant contends, however, that the definition of the phrase live
    performance of an adult nature under the By-law, which forms part of the
    definition of an adult live entertainment parlour, casts an overly broad and
    vague net, so as to capture any persons who engage in a live performance,
    exhibition or activity while nude or partially nude, even if no commercial
    purpose attaches to the performance, exhibition or activity.  We disagree.

[26]

The
    relevant definitions under the By-law read as follows:

329.1.1
          Adult live entertainment parlour  defined

adult live entertainment parlour means any premises in which
    or in part of which,
in pursuance of a trade, calling, business or
    occupation
, a live performance of an adult nature is provided.

329.1.2
          Live performance of an adult nature  defined

live performance of an adult nature means any performance;
    exhibition or activity designed to appeal to erotic or sexual appetites or
    inclinations.  For purposes of this definition: performance, exhibition, or
    activity designed to appeal to erotic or sexual appetites or inclinations
    means a live performance, exhibition, or activity of which a principal feature
    or characteristic is the nudity or partial nudity of any person.

....

329.1.6        Entertainer
     defined

entertainer means a person who performs a live performance of
    an adult nature within an adult entertainment parlour.  [Emphasis added.]

[27]

The
    application judge adopted the appropriate interpretive approach to these
    provisions.  She held that the By-law definitions of adult live entertainment
    parlour, entertainer and live performance of an adult nature are linked
    and must be considered together in order to properly interpret and understand
    the scope of the licensing requirements.

[28]

Having
    considered the relationship between these defined terms and their significance
    under the Licensing Provisions, the application judge rejected the appellants
    claim that the Licensing Provisions are overly broad or vague.  She stated, at
    para. 32:

The question that must be determined is whether they apply in
    more general terms to individuals engaged in business,

trades

or

occupations

within

adult
    entertainment parlours.  I conclude that they do.  The definition of
    entertainer in by-law 329.1.6 specifically refers to a person who performs a
    live performance of an adult nature
within an adult entertainment parlour

    (emphasis added).  This definition is therefore directly linked with the
    definition of adult live entertainment parlour in by-law 329.1.1, which as
    noted above includes as a key element that the live performance of an adult
    nature be provided
in pursuance of a trade, calling or occupation
.
    When these two definitions are read together, the logical conclusion which
    emerges is that the term entertainer does not extend to
anyone
who
    performs a live performance of an adult nature at an adult live entertainment
    parlour, but only to those individuals who do so in pursuance of a trade,
    calling, business or occupation.  [Emphasis in original.]

[29]

We
    agree with this interpretive conclusion, substantially for the quoted reasons
    of the application judge.

[30]

It
    follows that, contrary to the appellants submission, persons who perform or
    participate in a performance at a facility while nude or partially nude other
    than in the course of a commercial activity related to adult live entertainment
    are not entertainers for the purpose of the Licensing Provisions.  Although
    advanced by it in its factum, the City appeared to resile from this position
    during oral argument.  In our view, this change in position was misconceived.
    We agree with the Citys original submission that the provisions of the By-law
    distinguish between entertainers who perform live performances of an adult
    nature in an adult live entertainment parlour for a commercial purpose, and
    those who do not.  Only entertainers in the former category are subject to the
    Licensing Provisions of the By-law.

V.      Conclusion and Disposition

[31]

In summary, we agree with the application judge that the Licensing Provisions
    were validly passed by the City in the exercise of its general licensing and
    by-law making powers under the Act (ss. 8(3) and (10).  We also agree that the
    Citys specific statutory business licensing power (ss. 150-154 of the Act),
    afforded further authority for the Citys passage of the Licensing Provisions
    and that this authority was validly exercised in the circumstances.

[32]

Accordingly,
    the appeal is dismissed.  The respondent is entitled to its costs of the appeal
    fixed, as agreed by counsel, in the total amount of $5,000, inclusive of
    disbursements and all applicable taxes.

Released:

MAY -8 2013                                    Doherty
    J.A.

DD                                                  E.A.
    Cronk J.A.

P.
    Lauwers J.A.