COURT OF APPEAL FOR ONTARIO

CITATION: 2176693 Ontario Ltd. v. Cora Franchise Group Inc.,
    2015 ONCA 152

DATE: 20150312

DOCKET: C58420

Epstein, van Rensburg and Benotto JJ.A.

BETWEEN

2176693 Ontario Ltd. and 2130679 Ontario Inc.

Applicants (Respondents)

and

The Cora Franchise Group Inc.

Respondent (Appellant)

Geoffrey B. Shaw and Derek Ronde, for the appellant

Darren Smith, for the respondents

Heard: September 24, 2014

On appeal from the order of Justice Wendy M. Matheson of
    the Superior Court of Justice, dated January 31, 2014, with reasons reported at
    2014 ONSC 600, 119 O.R. (3d) 100.

van Rensburg J.A.:

[1]

This appeal engages the interpretation of the rights and obligations of
    franchisors and franchisees under the
Arthur Wishart Act (Franchise
    Disclosure), 2000
, S.O. 2000, c. 3 (the
AWA
), in the context of
    the franchisors consent to an assignment of a franchise agreement to a third
    party.

[2]

The appeal is from an order granted on application by the respondents,
    declaring void and unenforceable clauses in two franchise agreements requiring
    delivery of a release as a condition of the respondents assignment of their
    franchise agreements. For the reasons that follow, I would dismiss the appeal.

A.

Facts

[3]

The appellant is the franchisor of Cora restaurants. The respondents
    are two corporate franchisees with common control that operate Cora restaurants
    in Ancaster and Niagara Falls, Ontario. Each franchisee entered into a
    franchise agreement with the appellant, the Ancaster franchisee in 2007 and the
    Niagara Falls franchisee in 2008.

[4]

In 2011 and 2012 the respondents commenced legal actions in the Superior
    Court against the appellant. In their actions the respondents assert a number
    of
AWA
claims, including breach of the duty of fair dealing in the
    performance and enforcement of their franchise agreements under s. 3, as well
    as common law claims of breach of contract, negligence and misrepresentation.

[5]

In 2013, in an effort to mitigate their damages, the franchisees decided
    to sell the franchise businesses, and to assign their franchise agreements to
    third parties.

[6]

Pursuant to s. 22.4 of each franchise agreement, the franchisors
    consent is required before the franchisee is able to assign its rights under
    the franchise agreement. Sections 22.4 and 22.6 set out a number of conditions
    precedent to the franchisors consent, including the provision of detailed
    information about the proposed assignee in order to permit the franchisor to
    decide whether the assignee would be a suitable franchisee and operator and a
    requirement that the assignee complete training programs and demonstrate its
    fitness as a franchisee. Section 22.6 also requires the franchisee seeking to
    assign its rights to provide a general release of any claims against the
    franchisor. The section provides specifically that the franchisor, as a
    condition precedent to the granting of its consent, will require:

22.6.4
Franchisee and its directors, officers
    and shareholders signing and delivering in favour of Franchisor and its
    directors, officers, shareholders and employees, a general release in the form
    specified by Franchisor of any claims against Franchisor and its officers,
    directors, shareholders and employees.

[7]

The Niagara franchisee entered an agreement with a third party for the
    sale of the franchise on July 23, 2013, subject to the appellants consent.
    Communications between the parties followed, which included an exchange with
    respect to the requirement that the franchisee provide a release. The
    franchisors counsel requested that the franchisee comply with the conditions
    for consent set out in the franchise agreement. The franchisee responded that
    it would not be executing a general release pursuant to s. 22.6.4. The
    franchisor wrote back, stressing that it expected strict compliance with the
    assignment provisions, including the requirement for a general release. The
    franchisees counsel expressed its position that such a release was contrary to
    s. 11 of the
AWA.
That section provides as follows:

Any purported waiver or release by a franchisee of a right
    given under this Act or of an obligation or requirement imposed on a franchisor
    or franchisors associate by or under this Act is void.

[8]

The franchisors counsel responded that it was not seeking the release
    of claims covered by the
AWA
, and thereafter provided the Niagara
    franchisee with a draft release. The release stated explicitly that it would
    not constitute a waiver of any rights prescribed by the
AWA
or claims
    made thereunder in the pending Superior Court action.

[9]

The Niagara franchisee refused to sign the release, and the two
    respondents brought an application to the Superior Court seeking a declaration
    that s. 22.6.4 of each franchise agreement was void, unconscionable and
    unenforceable.

B.

Decision on the Application

[10]

The
    application judge identified the overarching issue in the application as
    whether s. 22.6.4 of the two franchise agreements was void by virtue of s. 11
    of the
AWA.
A related issue was whether the impugned release
    conditions could be read down to be compliant or otherwise be enforceable in
    part.

[11]

The
    application judge first interpreted s. 22.6.4. She considered the ordinary
    meaning of the requirement to provide a general release  of any claims, as
    including a release of rights under the
AWA.
The words in the form
    specified by Franchisor did not take the release provision outside of s. 11 of
    the
AWA,
as they related to form, and did not narrow the substantive
    requirement for a general release.

[12]

The
    application judge held that accepting the appellants argument that its offer
    to agree to a narrower release after

the issue was raised protected
    the clause from s. 11, would create a potential for abuse. A franchisor could
    wait and see if a complaint was raised. If not, it could obtain full releases
    from franchisees who did not assert their rights.

[13]

The application judge next considered whether the effect of
    s. 11 was to void the whole of s. 22.6.4 of the franchise agreement or whether
    that section could be read down or partially enforced to permit the franchisor
    to require, as a condition of its consent to an assignment, a release of non-
AWA
claims
.

[14]

The
    application judge held that s. 11 of the
AWA
should be interpreted
    according to the
AWAs
purpose of mitigating the inequality of
    bargaining power between franchisors and franchisees. She referred to
405341
    Ontario Ltd. v. Midas Canada Inc
., 2010 ONCA 478, 322 D.L.R. (4th) 177, where
    this court held that terms in a franchise agreement calling for a general
    release were unenforceable. She noted that the court in that case neither found
    the clauses partly enforceable nor read them down.

[15]

The
    application judge then reviewed and distinguished several cases, including
Seidel
    v. Telus Communications Inc
., 2011 SCC 15, [2011] 1 S.C.R. 531, where the Supreme
    Court concluded that a provision in a cell phone contract that required all
    claims to be arbitrated did not apply to statutory claims that could be
    litigated in court under the
Business Practices and Consumer Protection Act
,
    S.B.C. 2004, c. 2. The provision did apply to require the plaintiffs other claims
    against the defendant to be arbitrated. The application judge distinguished
Seidel
on the grounds that (i) the policy considerations in the statutes at issue
    were different, and (ii)
Seidel
involved access to justice and
    arbitration rather than the release of substantive claims.

[16]

The
    application judge preferred to analogize the case at hand to
Shafron v. KRG
    Insurance Brokers (Western) Inc.
, 2009 SCC 6, [2009] 1 S.C.R. 157, where
    the Supreme Court held that the reading down or notional severance of
    offensive employment contract provisions would invite employers to draft overly
    broad covenants in the hope that either employees would not assert their rights
    or that a court would sever or read down only the unreasonable parts of the
    covenant. She found that the policy considerations at issue in this case were
    similar.

[17]

The
    application judge determined that the wording of s. 11 is broad and does not
    contemplate that a provision of an agreement can be struck down only in part.
    Section 22.6.4 explicitly contemplates a general release, and partial enforcement
    would raise the same potential for abuse as discussed above. Also, since many
AWA
rights are codifications of the common law, reading down offending
    provisions to exclude non-statutory rights would create debate and confusion
    about the status of overlapping claims. A purposive interpretation supported
    rendering the provision void rather than allowing the appellant to essentially
    rewrite it.

[18]

The
    application judge accordingly issued a declaration that s. 22.6.4 of the two
    franchise agreements is void and unenforceable.

C.

Issues on Appeal

[19]

The
    appellant contends that the application judge erred:

·

by failing to give effect to the ability of the franchisor to
    choose the form of release and therefore to tender an
AWA-
compliant
    release;

·

by disregarding the fact that the release sought as a condition
    of the proposed transfer did not in any way affect the respondents
AWA
rights;

·

in failing to follow the authority of
Seidel v. TELUS
    Communications Inc.
, and refusing to sever the illegal parts of the
    impugned clause; and

·

in applying incorrect policy considerations.

D.

Analysis

[20]

The
    main issue on this appeal is whether the impugned clause in the franchise
    agreements, while unenforceable with respect to
AWA
claims, should
    nonetheless be enforced in part. In my view, in the circumstances here, the
    clause cannot be severed to require only a release of non-
AWA
claims
    as a condition of consent to the proposed assignment. I will deal briefly first
    with the standard of review and the appellants preliminary arguments
    respecting the interpretation of the contract and its actions in seeking only an
AWA
-compliant release. I will then consider the effect of s. 11 of the
AWA
on s. 22.6.4 of the franchise agreements and whether this court
    should sever or read down this provision. I will also address the
Seidel
decision,
    which in my view does not provide the appropriate analytical framework for the
    resolution of the issues engaged in this appeal.

(1)

Standard of Review

[21]

This
    appeal involves the interpretation of a contract in light of a statutory
    provision. Unless there is an extricable question of law, the interpretation of
    a contract is a question of mixed fact and law:
Sattva Capital Corp. v.
    Creston Moly Corp.
, 2014 SCC 53, 373 D.L.R. (4th) 393, at paras. 50-53.
    The correctness standard applies if the legal aspect of the issue is readily
    extricable, otherwise deference is warranted.

[22]

In
    my view, both the interpretation of s. 22.6.4 and the issue of whether that
    section of the contract is entirely unenforceable or can be severed, raise
    questions of mixed fact and law. They involve an assessment of the words of the
    contract, considered in light of the context and the broader policy objectives
    of the
AWA
. The decision of the application judge is therefore
    reviewable on the standard of palpable and overriding error. That said, the
    result of this appeal does not turn on the standard of review. The decision
    below, in my view, was correct and devoid of any palpable and overriding error.

(2)

The Appellants Preliminary Arguments: Whether Section 22.6.4 Engages Section
    11 of the
AWA

[23]

The
    appellant asserts that the application judge erred in concluding that s. 22.6.4
    of the franchise agreements contravenes s. 11 of the
AWA
, and is
    therefore unenforceable.

[24]

First,
    the appellant argues the application judge ignored language in the clause
    permitting it to require the respondents to provide a release in the form
    specified by the Franchisor. Second, the appellant submits that, because the
    draft release it provided in fact required only a release of common law claims,
    s. 11 was not engaged at all.

[25]

I
    would reject the appellants argument that the words in the form specified by
    the Franchisor expressly allow the franchisor to determine the scope of the release,
    including to make it compliant with the
AWA
, and therefore save the
    clause from being contrary to s. 11 of the
AWA
. As the application
    judge stated, based upon an ordinary interpretation of those words, they
    relate to form, not substance. The clause requires a general release of any
    claims against [the] Franchisor, and not a release of whatever claims the
    franchisor might specify. The section does not call for a release of claims to
    the extent that applicable law would permit (which would import flexibility
    into the substance of the obligation to provide a release); the only
    flexibility is with respect to form, which does not detract from or qualify the
    obligation to provide a general release of all claims.

[26]

I
    would similarly reject the appellants argument that, as it required only a
    release of common law claims from the respondents, s. 11 was not engaged. The
    clause clearly anticipates that, as a condition of the franchisors consent to
    an assignment, the franchisee will provide a general release of all claims.
    Such a release would include
AWA
claims, and that would violate s. 11.

[27]

Accordingly,
    the impugned clause, by its terms, requires the franchisee, as a condition of
    transfer, to provide a general release, which would include
AWA
claims.
    The appellant, by its conduct, could not alter the contractual obligation by
    seeking to obtain something less, something that would be compliant with the
AWA.
Section 11 of the
AWA
is clearly engaged.

(3)

Section 22.6.4 Is Not Void; It Is Unenforceable

[28]

The
    application judge concluded that the requirement to provide a general release
    was both void and unenforceable. As I explain below, s. 11 of the
AWA
does not render the impugned clause of the franchise agreement void; rather the
    obligation imposed by the clause, and that the appellant seeks to enforce, is unenforceable
    as enforcement would be contrary to statute.

[29]

Section
    11 of the
AWA
provides that [a]ny purported waiver or release by a
    franchisee of a right given under this Act  is void. On its plain language,
    this provision operates to void
the release or waiver itself
,
and not the provisions of a contract requiring such a release to be provided.
    Section 22.6.4 of the franchise agreement is not itself a release of a right
    under the
AWA
 it simply requires that such a release be provided in
    the event of an assignment of the franchise by the franchisee. Section 11
    therefore does not operate so as to void the impugned clause from the outset. A
    void provision would result where, as in
Seidel
, for example, the
    contract contains an explicit waiver of rights where the waiver is prohibited
    by statute.

[30]

The
    issue here, then, is whether the clause of the franchise agreement that
    requires the provision of a general release of all claims is unenforceable as
    contrary to statute.

[31]

Once
    it is recognized that s. 22.6.4 requires the franchisee, in order to exercise
    certain rights under the franchise agreement, to provide a general release of
    all claims (and not just such claims as the franchisor may specify), then it is
    unenforceable as requiring the performance of something that would contravene
    s. 11 of the
AWA
. It is acknowledged that the clause cannot not be
    enforced to require a release of
AWA
claims. The question is then whether
    the court should read down the requirement to compel only the performance of
    something that would be legal, i.e.: a release, but not of
AWA
claims.
    This engages the doctrine of severance.

(4)

Section 22.6.4 Cannot Be Severed and Enforced to the Extent It Is Not in
    Conflict with Section 11 of the
AWA

[32]

The
    appellant argues that if s. 11 of the
AWA
is engaged by s. 22.6.4, the
    application judge erred by failing to sever or read down the clause to require
    a release of non-
AWA
claims only, and that she relied on inappropriate
    policy considerations in doing so. The appellant submits that this court should
    find the clause unenforceable only in part, and require the respondents to
    provide a release of non-
AWA
claims.

[33]

The
    appellant asserts that the practical effect of the application judges decision
    is that the appellant will be deprived of its contractual right, bargained for
    in good faith, to obtain a release as a condition of providing its consent to
    an assignment. The appellant argues that it is not necessary in order to
    promote the policy behind the
AWA
to find the section of the contract completely
    unenforceable; rather, it should be read down to permit the franchisor to
    tender a release that does not purport to release
AWA
claims.

[34]

I
    conclude that the application judge did not err when she held that the clause
    could not be severed or read down and enforced only to the extent it was not in
    conflict with s. 11 of the
AWA
.

(a)

General Principles of Severance

[35]

Where
    part of a contract is unenforceable because enforcement would be contrary to
    statute or the common law, rather than setting aside the entire contract,
    courts may sever the offending provisions while leaving the remainder of the
    contract intact. Severance lies along a spectrum of remedies available when a
    provision of a contract is illegal, including voiding the contract in whole or
    in part. The appropriate remedy will depend on the particular context:
Transport
    North American Express Inc. v. New Solutions Financial Corp.
, 2004 SCC 7,
    [2004] 1 S.C.R. 249, at para. 6. Courts are generally reluctant to sever
    contractual provisions because severance alters the terms of the original
    agreement between the parties:
Shafron
, at para. 32.

[36]

Severance
    takes two forms: blue-pencil and notional. Blue-pencil severance involves
    removing part of a contract, as if by drawing a line through it. Notional
    severance involves reading down a contractual provision so as to make it legal
    and enforceable:
Shafron
, at para. 2. Where severance is appropriate,
    courts choose the technique that in light of the particular contractual
    context involved, would most appropriately cure the illegality while remaining
    otherwise as close as possible to the intentions of the parties expressed in
    the agreement:
Transport North American Express Inc.
, at para. 32.

[37]

Courts
    will consider the context of the contract at issue and any relevant policy
    considerations when assessing whether and how to sever provisions: see, for
    example,
Shafron
. Severance engages policy concerns to a certain
    degree beyond protecting the parties intentions, because the court is being
    asked to assist one party to enforce an otherwise unenforceable provision.

[38]

The
    context here is a business relationship carried out through the vehicle of a
    franchise. Franchise agreements are contracts of adhesion, frequently in
    standard form with the main provisions  presented on a take it or leave it
    basis:
Shelanu Inc. v. Print Three Franchising Corp.
(2003), 64 O.R.
    (3d) 533 (C.A.), at para. 58. These contracts often give the franchisor a
    significant degree of control over the franchisees business. In interpreting
    franchise agreements, courts have applied policy goals in addition to accuracy
    in giving effect to the parties intentions and have expressed concern about
    inequality of power within the contractual relationship, and the resultant need
    to protect the more vulnerable contracting party from abuse at the hands of the
    more powerful party: Geoff R. Hall,
Canadian Contractual Interpretation
    Law
, 2nd ed. (Markham: LexisNexis Canada, 2012), at p. 194.

[39]

For
    the reasons outlined below, in my view, s. 22.6.4 should not be read down to
    permit the appellant to require a release of only non-
AWA
claims. The blue
    pencil approach does not apply in the circumstances, because there is no phrase
    in s. 22.6.4 that could be struck to enable the clause to require a release of
    only non-
AWA
claims. The clause should not be notionally severed given
    that severance would undermine the purposes of the
AWA
.

(b)

The Clauses Should Not Be Notionally Severed

[40]

In
    my view, notional severance is not an appropriate remedy in the circumstances,
    as it could undermine the purpose of s. 11 of the
AWA
. This courts
    decision in
Midas Canada Inc.
is not determinative of whether clauses
    in a franchise agreement purporting to require a release can be severed.
    However, the reasoning in that decision informs the analysis and supports the
    view that notionally severing or reading down clauses calling for a broad
    release would not be in line with the purposes of the
AWA
. Before
    continuing with the severance analysis, I pause to consider the
Midas
decision.

(i)

The
Midas
Case Is Helpful But Not Determinative

[41]

In
    the
Midas
case, this court considered whether a franchisor could
    require a general release of claims by a franchisee as a condition of the renewal
    or assignment of a franchise agreement.

[42]

The
    case arose in the context of a class proceeding. The claims were asserted under
    both the common law and the
AWA
. While the class proceeding was
    pending, the representative plaintiffs franchise agreement expired. As a
    condition of renewal, the standard form agreement included a provision requiring
    a general release of any and all claims and causes of action against the
    franchisor.

[43]

The
    franchisor tendered a draft general release in its proposed renewal agreement that
    purported to release all claims of any nature. The franchisee moved for an order
    preventing the franchisor from requiring it to execute a release from the
    claims certified in the class action as a condition of the renewal or transfer
    of its rights under the franchise agreement. It sought a declaration that any
    provision requiring class members to release the franchisor from liability as a
    condition of the renewal or transfer of their rights under the agreement was unenforceable
    to the extent of some or all of the common issues in the proceeding.

[44]

This
    court concluded that the renewal and assignment provisions of the franchise
    agreement requiring a general release were unenforceable and that a release in
    accordance with those provisions would be void.

[45]

MacFarland
    J.A. stated at para. 26, [t]he language of s. 11 could not be clearer. If you
    include a term in your franchise agreement that purports to be a waiver or
    release of any rights a franchisee has under the Act, it will be void. After
    observing that the claims by the franchisees in the class proceedings were both
    under the
AWA
and common law, she noted at paras. 29 and 30:

To permit the appellant to require the class members to release
    any claims they might have against the appellant in order to take advantage of
    any other rights they might have under the Agreement, in my view, is simply
    contrary to the spirit, intent and letter of the Act. Where a franchisor
    insists upon such waiver or release, s. 11 makes it clear that any such waiver
    or release will be void.

The purpose of the Act is to protect franchisees. The
    provisions of the Act are to be interpreted in that light. Requiring
    franchisees to give up any claims they might have against a franchisor for
    purported breaches of the Act in order to renew their franchise agreement,
    unequivocally runs afoul of the Act.

[46]

Here,
    the application judge relied on
Midas
to conclude that s. 22.6.4 of
    the franchise agreement could not be enforced in part. She noted that
    MacFarland J.A. did not find the clauses in
Midas
enforceable in part.
    However,
Midas
does not establish that clauses requiring a release can
    never be severed or read down. The court concluded that the relevant provisions
    were unenforceable. The issue of severance was not considered in
Midas
,
    as there was no indication that the franchisor had offered or was prepared to
    accept anything less than a full release of claims.

[47]

While
    the
Midas
decision is therefore not determinative, the views expressed
    in that case can nevertheless inform this courts consideration of the
    severance issue, as noted later in these reasons.

(ii)

Relevant Factors for Notional Severance

[48]

In
Transport North American Express Inc.
, at para. 42, a case dealing
    with a contract providing for an illegal rate of interest, the Supreme Court
    adopted several factors to assess the appropriateness of notional severance or
    partial enforcement as a remedy in the face of an illegal provision in a
    contract. When re-worded to apply to the franchise context, the factors would
    read as follows: (1) whether the purpose or the policy of s. 11 of the
AWA
would be subverted by severance, (2) whether the parties entered into the
    agreement for an illegal purpose, (3) the relative bargaining positions of the
    parties and their conduct in reaching the agreement, and (4) the potential for
    the franchisee to enjoy an unjustified windfall. Although not in a statutory
    context, the Supreme Court relied on similar considerations in
Shafron
to conclude that, as a general rule, notional severance should not be available
    in the case of restrictive covenants in employment contracts (at paras. 37-41).

[49]

While
    the context is different, some of the factors identified are useful in this case.
    Indeed, in
Midas
, MacFarland J.A. considered the first factor  the
    policies of the
AWA
 in concluding that the clauses at issue there
    were unenforceable. Here, the application judge considered similar factors as
    well. Considering these factors is also consistent with the courts general
    approach to the interpretation of franchise agreements as discussed above,
    which takes into account policy goals and is concerned with the inequality of
    bargaining power between franchisors and franchisees.

[50]

In
    my view, the illegal purpose factor, while appropriate in the illegal interest
    rate context, is not helpful when considering the terms of a franchise agreement.
    Franchise agreements are entered into for legal and legitimate business
    purposes, as was the case here. Even when considering a particular problematic
    clause, it will be rare that parties have an illegal purpose.

[51]

Similarly,
    the factor looking at the positions of the parties and their conduct in
    reaching the agreement may be of limited assistance in the franchise context.
    Unlike a loan on which an illegal rate of interest is charged, a franchise
    agreement covers a wide range of subjects and is often in standard form. As
    such, the parties conduct in reaching the agreement may not provide much insight
    into whether severance of a particular clause would be appropriate. However, I
    note that the relative bargaining positions of the parties may be relevant,
    especially given the concern about inequality of bargaining power in the
    franchise context.

[52]

In
    the circumstances of this case, there are limited factual findings on which to
    assess the parties positions and conduct in forming the agreement, so this
    factor is of little assistance.

[53]

Accordingly,
    I consider only the first and fourth factors: whether the purpose or policy of
    s. 11 of the
AWA
would be subverted by the mode of severance suggested
    by the appellant, and whether the franchisee would receive an unjustified
    windfall if the clause is held to be unenforceable in its entirety.

(iii)

The Purpose and Policy of Section 11 of the
AWA
Would Be
    Subverted by Severance

[54]

As
    MacFarland J.A. held in
Midas
, the purpose of the
AWA
is to
    protect franchisees (at para. 30). Section 11, in particular, aims to protect
    franchisees against more sophisticated franchisors who might seek to have
    franchisees contract out of their
AWA
rights. As the application judge
    noted, enforcing in part a clause calling for a general release raises the
    potential for abuse by franchisors.

[55]

In
    the context of restrictive covenants in employment contracts, the Supreme Court
    cited similar concerns about abuse in holding that notional severance was not
    available as a remedy. The Court in
Shafron
concluded that, permitting
    notional severance would [invite] employers to draft overly broad restrictive
    covenants with the prospect that the courts will only sever the unreasonable
    parts or read down the covenant to what the courts consider reasonable (at
    para. 33). Applying the doctrine of notional severance would also [provide] no
    inducement to an employer to ensure the reasonableness of the covenant and
    inappropriately [increase] the risk that the employee will be forced to abide
    by an unreasonable covenant (at para. 41).

[56]

As
    this court said in
Shelanu Inc. v. Print Three Franchising Corp.
, at
    para. 66, the franchise context is similar to the employment context. Like
    employees, franchisees generally do not have equal bargaining power to the
    franchisor and are unable to negotiate more favourable terms (because franchise
    agreements are contracts of adhesion). Their relationship with the franchisor
    continues to be affected by a power imbalance because the franchisee must
    submit to inspections and audits and is often required to purchase items from
    the franchisor (
Shelanu
, at para. 66).

[57]

Applying
    notional severance to clauses otherwise unenforceable under the
AWA
would similarly invite franchisors to draft overly broad [provisions] with the
    prospect that the courts will only sever  or read [those provisions] down. It
    would provide no incentive to franchisors to ensure their franchise agreements
    are in compliance with the
AWA
. It would also increase the risk that a
    franchisee  having signed a waiver or release of all claims  would
    erroneously believe it is not entitled to pursue any claims against the
    franchisor, including its
AWA
claims. Reading down contractual
    requirements that overreach would have a chilling effect on the exercise of
    franchisees rights. Each of these possibilities suggests that notional
    severance would diminish the protection offered by s. 11 of the
AWA
against franchisors who might seek to have franchisees contract out of their
AWA
rights.

[58]

In
    my view, therefore, permitting notional severance of the overbroad clause in
    this case could subvert the policy and purpose of s. 11 of the
AWA.

(iv)

The Franchisees Would Receive a Windfall to Some Degree

[59]

The issue here is whether there is a potential for the
    respondents to receive an unjustified windfall if the clause is struck in its
    entirety rather than read down to require a release of non-
AWA
claims
    alone. The appellant argues in effect that the respondents would receive a
    windfall: they bargained to provide a release of all claims in exchange for the
    appellants consent to a transfer of their rights under the franchise
    agreement, and if the clauses are severed in their entirety, they will not have
    to provide any release at all. The appellant contends that the application
    judges decision has the effect of giving franchisees more than they are
    entitled to and eroding the franchisors contractual rights beyond what is required
    to give effect to the protections under the
AWA.

[60]

To
    the extent that the respondents would no longer be required to release their
    common law claims, the appellant is correct that the respondents receive a
    greater protection than what they would have been entitled to. However, the
    extent of the windfall is difficult to assess, since there is significant
    overlap between the common law and
AWA
claims of a franchisee alleging
    misrepresentation. Of course, there is no windfall to the respondents by not
    requiring them to release their
AWA
claims as such a release would not
    be enforceable.

[61]

In
    any event, the legitimate interests of the franchisor, in the context of an
    assignment, are protected even without the requirement of providing a release.
    As the appellant notes in its factum, the purpose of Coras assignment
    provision is to ensure that the franchise agreement is assigned to a party that
    will be a competent franchisee able to operate the franchise in accordance with
    Coras standards. All of the other conditions precedent to the franchisors approval
    of an assignment remain in place. In particular, the appellant does not lose
    its ability to approve the assignee as a franchisee.

(v)

Conclusion on Notional Severance

[62]

The
    potential for some windfall to the respondents in this particular case does not
    outweigh the potential for abuse and subversion of the purposes of s. 11 of the
AWA
if severance were permitted. Having regard to the relevant
    considerations, I conclude that the clause should not be notionally severed or
    read down to require only a release of non-
AWA
claims. Allowing
    franchisors to include such clauses in franchise agreements, knowing courts would
    only find them unenforceable in part, could serve to undermine the purposes of
    the
AWA
.

(c)

Seidel
Is Distinguishable

[63]

The
    appellant contends that the application judge ought to have applied the
    analysis from the Supreme Courts decision in
Seidel v. TELUS
    Communications Inc.
, to conclude that the requirement to provide a release
    would be void only to the extent that the franchisor seeks the release of
AWA
claims. The application judge distinguished
Seidel
on the basis that
    it involved different policy considerations and dealt with access to justice
    and arbitration rather than the release of substantive claims. I would
    distinguish
Seidel
but for different reasons that have to do with how
    the question in each case came before the court. As I will explain, the
    analytical framework in
Seidel
simply does not apply here.

[64]

It
    is apparent that the court in
Seidel
did not use the enforceability
    and severance analysis that I have followed in this decision. The issue arose
    in a different way and required a different framework of analysis. As I have
    indicated, the question in this case is the enforceability of a contractual
    provision that would require an act to be performed that is contrary to
    statute. The question in
Seidel
was whether (or to what extent) an impugned
    provision in the contract itself was void.

[65]

In
Seidel
, the representative plaintiff commenced a court action in
    relation to a cell phone contract, asserting both common law rights and claims
    under the British Columbia
Business Practices and Consumer Protection Act
(the
BPCPA
). The defendant sought to stay the court proceedings,
    relying on a clause in the contract providing for any claims to be referred to
    mediation and thereafter, if unresolved, to private, confidential and binding
    arbitration (the arbitration clause). Under s. 172 of the
BPCPA
, persons
    affected by a consumer transaction were entitled to bring actions under the
BPCPA
in the Supreme Court to enforce the statutes consumer protection standards. Section
    3 of the
BPCPA
(like s. 11 here) stated that any agreement that waived
    statutory rights was void.

[66]

The
    question was, then, the effect of the statutory provision on the arbitration
    clause. The contractual term itself purported to waive rights, including those
    under the
BPCPA
. The arbitration clause was not
unenforceable
as requiring an act contrary to the
BPCPA
; rather, the Supreme Court
    applied s. 3 so as to
void
the arbitration clause to the extent it
    would require
BPCPA
claims to be arbitrated. In other words, the
    arbitration clause was void to the extent that it would restrict the exercise
    of the
BPCPA
rights.

[67]

Section
    11 of the
AWA
, like s. 3 of the
BPCPA
, provides that any
    agreement that would waive or release rights under the
AWA
is void.
    However, as we have seen, the franchise agreement requires the delivery
of
    a general release
that would include
AWA
claims. It is not the
    franchise agreement itself that waives or releases rights; accordingly, unlike
    in
Seidel
, the question is not whether the contractual term itself is already
    void, or void in part by virtue of a statutory provision (as would be the case
    if the franchise agreement, for example, contained a release of rights).

[68]

This
    distinction is more than merely technical.

[69]

The
    enforceability and severance analysis requires an extra step. The appellant is
    seeking to enforce a contractual obligation, an obligation that by its terms is
    too broad and incapable of being enforced without violating s. 11 of the
AWA.
The appellant needs the assistance of the court to permit it to call for
    something less, something that will be in accordance with the statute.

[70]

This
    extra dimension invokes policy concerns that do not arise where the court is
    asked to interpret a statutory provision to determine whether and to what
    extent it renders provisions in an agreement void. In the latter case, the
    legislature has spoken. In the former, while the holding that a provision is
    unenforceable results from statute, the degree to which the court is willing to
    sever the impugned clause requires a different analytical framework. Taking
Seidel
as an example, the only assistance the plaintiff could reasonably expect of the
    court was to be given the benefits of the rights under the
BPCPA
. The
    court in that case was asked only to extend the applicable statutory
    protections. Here, the appellant requires the courts assistance to render its
    overbroad provision compliant with statute. And it follows that, as in
Midas
,
Shafron
, and
Transport North American Express Inc.
, the court
    must consider the broader implications of providing that assistance.

E.

Conclusion

[71]

Accordingly,
    I would conclude that the impugned clause in the franchise agreement is not
    voided by s. 11 of the
AWA
, but rather it is unenforceable, as
    enforcement would result in a release which would be void by virtue of s. 11. In
    all the circumstances of this case and in light of the purpose of s. 11 and the
    other provisions of the
AWA,
the impugned clause should not be
    notionally severed and enforced in part to require the delivery of a release of
    non-
AWA
claims by the franchisee as a condition of the franchisors
    consent to an assignment. I would therefore dismiss the appeal.

[72]

I
    would award the respondent its costs of this appeal in the agreed-upon amount of
    $12,500, inclusive of disbursements and applicable taxes.

Released: KMvR March 12, 2015

K. van Rensburg
    J.A.

I agree Gloria
    Epstein J.A.

I agree M.L. Benotto
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 465519 Ontario Limited v. Sacks, 2015 ONCA 175

DATE: 20150316

DOCKET: C59330

Cronk, Gillese and Brown JJ.A.

BETWEEN

465519 Ontario Limited,

Winston Village Partnership,

Meyer Isenberg and Miriam Isenberg

Plaintiffs/

Appellants

and

David
    Sacks, Gary Pollock,

Cecil
    Schwartz, Hutchinson Cowling LLP,

Neil
    Cowling, Deighton Hutchinson,

Robert
    Milne, Silpit Industries Co. Ltd.,

Lesmill
    Consulting Inc.,
Cliffwood Plaza Corp.
,

Michael
    Klein, ABC Corporation and John Doe

Defendant/

Respondent

F. Scott Turton, for the appellants

Oscar Strawczynski, for the respondent

Heard: March 9, 2015

On appeal from the order of Justice Mary E. Vallee of the
    Superior Court of Justice, dated August 28, 2014.

By the Court:

[1]

The appellants appeal from the motion judges order dated August 28,
    2014 striking the claim of 465519 Ontario Limited (465 Ltd.) and the entire
    action as against the respondent, Cliffwood Plaza Corp. (Cliffwood).

Background in Brief

[2]

Cliffwood moved under rule 21.01(b) of the
Rules of Civil Procedure
to
    strike the appellants entire pleading as against it on the basis that it
    disclosed no reasonable cause of action.  Cliffwood argued that although the
    appellants action was commenced prior to the expiry of the applicable two-year
    limitation period, 465 Ltd.s claim was a nullity because its corporate charter
    had been revoked and it was a dissolved corporation when the action was
    initiated.  Since 465 Ltd.s corporate status was not revived until after the
    running of the limitation period, Cliffwood argued that 465 Ltd.s claim, as
    well as the proposed derivative claims of the remaining appellants (the
    Individual Appellants), could not succeed.  Cliffwood also maintained, in any
    event, that the appellants pleading of the only claim against Cliffwood, that
    of civil conspiracy, was fatally deficient and incapable of success.

[3]

The motion judge accepted Cliffwoods limitation period argument and
    struck 465 Ltd.s claim against Cliffwood on the ground that it was
    statute-barred. In light of that ruling, she found it unnecessary to address
    Cliffwoods argument that the appellants conspiracy pleading was fundamentally
    flawed.  As we will discuss, at the request of Cliffwoods counsel, the motion
    judge subsequently amended her ruling to also strike the entire action
    including, therefore, the claims of the Individual Appellants, as against
    Cliffwood.

Issues

[4]

There are two issues on appeal:

(1)

Did the motion judge err by holding that 465 Ltd.s claim against
    Cliffwood was statute-barred due to the expiry of the applicable limitation
    period and, hence, that it could not succeed?

(2)

Did the motion judge err by striking the entire action against
    Cliffwood, including the claims of the Individual Appellants?

Discussion

(1)

465 Ltd.s Claim Against Cliffwood

[5]

We do not accept the appellants contention that the motion judge erred
    by holding that 465 Ltd.s claim against Cliffwood was statute-barred by reason
    of the expiry of the relevant limitation period.

[6]

The claims sought to be advanced by the appellants arise from the sale of
    a property registered in 465 Ltd.s name to Cliffwood under a third party
    mortgagees power of sale.  The sale closed on June 29, 2010.  However, on June
    28, 2010, one day earlier, 465 Ltd.s corporate charter was revoked and the
    corporation was dissolved.  The appellants action was commenced on February 8,
    2012.
[1]
465 Ltd.s corporate status was reinstated on June 6, 2014, more than two years
    later.

[7]

465 Ltd. had no legal status to commence an action while it was
    dissolved.  Accordingly, we agree with the motion judge that the action
    commenced in its name on February 8, 2012 was a nullity:
602533 Ontario
    Inc. v. Shell Canada Ltd.
, 1998 CanLII 1775, 155 D.L.R. (4th) 562.

[8]

Since 465 Ltd. must be taken to have known the material facts supporting
    its claim against Cliffwood by the date of issuance of its statement of claim, at
    the latest, the two-year limitation period in this case began to run on February
    8, 2012 when the action was commenced and expired  again, at the latest  on February
    9, 2014.  Thus, the limitation period ran its course prior to the date of 465
    Ltd.s revival.

[9]

That, however, does not end the matter.  The Individual Appellants have
    moved before the Superior Court of Justice for leave under s. 246 of the
Business
    Corporations Act
, R.S.O. 1990, c. B.16 to pursue a derivative action on
    465 Ltd.s behalf as against Cliffwood.  Their leave motion is pending in the
    Superior Court.  Should leave to proceed with a derivative action be granted on
    a
nunc pro tunc
basis, thus regularizing the action commenced in 465
    Ltd.s name, the Individual Appellants submit that, as a matter of law, the
    action must be viewed as having been commenced on a timely basis, that is, prior
    to the expiry of the limitation period.

[10]

We
    reject the suggestion that this would dictate a different result regarding 465
    Ltd.s claim against Cliffwood.  The outcome of the leave motion, of course, is
    not yet known.  However, even assuming that leave is granted on a
nunc pro
    tunc
basis, the leave order would not operate to deprive Cliffwood of its
    entitlement to rely on a post-dissolution legal right accruing to it while 465
    Ltd. was a dissolved corporation and prior to the granting of the leave order.
    As this court held in
Shell Canada
, the expiry of an applicable
    statutory prescription period is such a right.

[11]

Contrary
    to the appellants argument,
Shell

Canada
has direct
    application here.  It is dispositive of 465 Ltd.s claim against Cliffwood.  The
    motion judge correctly held that Cliffwood was entitled to rely on the expiry
    of the limitation period, as a right that accrued to it while 465 Ltd. was
    dissolved, to defeat 465 Ltd.s claim against it.

[12]

This
    ground of appeal therefore fails.

(2)

The Individual Appellants Claims Against Cliffwood

[13]

The
    appellants next submit that the motion judge erred, in any event, by striking
    the Individual Appellants claims against Cliffwood.  In the particular circumstances
    of this case, we agree.

[14]

In
    her original reasons, the motion judge struck only 465 Ltd.s claim against
    Cliffwood.  As we have said, as framed in the appellants amended pleading,
    that claim is a claim for damages arising from an alleged conspiracy among
    Cliffwood, as the purchaser of the property in question, and others (including
    the mortgagee/vendor) to effect the transfer of the property at less than fair
    market value.

[15]

Following
    the release of the motion judges reasons, Cliffwoods counsel proposed to
    write to the motion judge, seeking confirmation that the entire action as
    against Cliffwood, in addition to 465 Ltd.s claim, had been struck under the
    motion judges ruling.  The appellants counsel declined to consent to this
    out-of-court communication.  Indeed, he actively opposed the delivery of the
    proposed letter to the motion judge.

[16]

Nevertheless,
    the letter was sent to the motion judge.  Shortly thereafter, she revised her
    reasons to provide that both 465 Ltd.s claim and the entire action against
    Cliffwood were struck.  The effect of this revision was to strike the claims of
    the Individual Appellants against Cliffwood, as well as that of 465 Ltd.

[17]

The
    appellants submit that the post-hearing communication with the motion judge was
    improper, contrary to rule 1.09, and prejudicial to the Individual Appellants.

[18]

In
    our view, the delivery of the letter in question, without the consent of the
    appellants counsel and in the face of his opposition to its delivery to the
    motion judge, was inadvisable and contrary to rule 1.09.  That rule authorizes
    out-of-court communications with judges in respect of proceedings before the
    court only where all parties consent, in advance, to the communication or the
    court otherwise authorizes the communication.  Neither circumstance applied
    here.  In our view, on the facts here, the appropriate procedure was for
    Cliffwoods counsel to seek an appointment with the motion judge, on notice to
    the appellants, to settle the terms of her order.

[19]

Cliffwood
    submits that the change to the motion judges ruling prompted by the letter was
    inconsequential since it reflected merely a clarification of the motion judges
    original ruling.

[20]

We
    are unable to accede to this submission.

[21]

If
    the Individual Appellants pleaded claims against Cliffwood were unequivocally
    and exclusively derivative of 465 Ltd.s claim against Cliffwood, it may well
    be that the change to the motion judges ruling would be of no moment.  In
    those circumstances, if 465 Ltd.s claim was statute-barred, the derivative
    claims of the Individual Appellants would fall on the same basis.

[22]

But
    the motion judge made no finding that the Individual Appellants claims were
    solely derivative of 465 Ltd.s claim against Cliffwood.  Further, the reasons
     both in their original and amended form  contain no analysis of the material
    facts pleaded with respect to the Individual Appellants including, especially,
    in relation to their alleged status as trust beneficiaries of the property
    conveyed to Cliffwood.  Consequently, this court cannot be satisfied as to the
    basis on which the motion judge struck the entire action as against Cliffwood.

[23]

In
    the result, in our opinion, the letter in question precipitated a significant
    amendment to the motion judges ruling, whereby the Individual Appellants
    claims as against Cliffwood were struck without explanation and without the
    motion judge having had the benefit of submissions from counsel for the
    Individual Appellants on the change to her ruling sought by Cliffwoods
    counsel.  In the circumstances confronting the motion judge, the change to her
    ruling sought by Cliffwood should not have been made without providing the
    appellants counsel with an opportunity to challenge the requested change and to
    make further submissions if so advised.

[24]

The
    motion judges ruling striking the entire action as against Cliffwood,
    therefore, cannot stand.  Fundamental fairness requires that this part of the
    motion judges decision be set aside.

Disposition

[25]

For
    the reasons given, the appeal is allowed in part, by striking the words and
    the entire action from paragraph one of the motion judges order without
    prejudice to Cliffwood renewing its motion to strike the Individual Appellants
    claims against Cliffwood.  In all other respects, the appeal is dismissed.  As
    success on the appeal has been divided, we make no order as to the costs of the
    appeal.

Released:

MAR 16 2015                                   E.A.
    Cronk J.A.

EAC                                                 E.E.
    Gillese J.A.

David
    Brown J.A.

[1]
Throughout her reasons, the motion judge refers to February 28, 2012 as the
    date when the appellants claim was issued.  There is no dispute that this is
    an error and the correct date is February 8, 2012.


COURT OF APPEAL FOR ONTARIO

CITATION:
Abdulle (Re), 2015 ONCA 209

DATE: 20150327

DOCKET: C59218

Simmons, Juriansz and van Rensburg JJ.A.

IN THE MATTER OF: Abdirahaman Abdulle

AN APPEAL UNDER PART XX.1 OF THE
CODE

Dean F. Embry, for the appellant

Michael Medeiros, for the respondent Ministry of the
    Attorney General

Michele Warner, for the respondent Centre for Addiction
    and Mental Health

Heard and released orally: March 13, 2015

On appeal against the disposition of the Ontario Review
    Board dated August 14, 2014.

ENDORSEMENT

[1]

It was open
to the Ontario Review Board to
    accept Dr. McDonald's opinion that further violence was inevitable if the
    appellant remained in a medium secure facility. Dr. McDonald's report addressed
    the issue of risk as well as the issue of criminal responsibility. His letter
    of opinion was placed before the Board on consent. Even Dr. Cohen acknowledged
    that in the absence of a medication change, the appellant's presence in the
    medium secure facility was a very risky situation for the hospital staff.

[2]

As for the question of whether there would be
    enhanced security and the potential for more privileges at Waypoint, there was
    some evidence on both these issues before the Board. It was not unreasonable
    for the Board to rely on that evidence.

[3]

The appeal is dismissed.

Janet Simmons J.A.

Russell Juriansz J.A.

K.
    van Rensburg J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: AMV Leasing Limited v. De Palma, 2015 ONCA 200

DATE: 20150325

DOCKET: C59232

Simmons, Tulloch and Pardu JJ.A.

BETWEEN

AMV Leasing Limited and

Lawlor Enterprises Inc.

Plaintiff/Respondents

and

Claudia De Palma
, Vittoria De Palma,

Castellini
    Homes Inc., Amlap Development Corp.,

and Antoinetta De Palma

Defendants

(Claudia
    De Palma  Appellant)

Eddy J. Battiston and Harold Rosenberg, for the
    appellants

Robert K. Brown, for the respondents

Heard: March 18, 2015

On appeal from the judgment of Justice David Price of the
    Superior Court of Justice, dated July 14, 2014.

APPEAL BOOK ENDORSEMENT

[1]

The motion judges decision refusing to set aside the noting of default
    is a discretionary order.  In reaching his decision, he considered all relevant
    circumstances including the fact that the appellant has not complied with an
    outstanding order for production  a factor that the motion judge concluded
    could prejudice the respondents.  The appellant has not demonstrated any basis
    for setting aside the motion judges findings or his exercise of discretion.

[2]

Since the respondents obtained an order to proceed under s. 69 of the
Bankruptcy
    and Insolvency Act
, we are not satisfied that rule 11 of the
Rules of
    Civil Procedure
is applicable in these circumstances. See
Micallef v.
    Dodig
, [2009] O.J. No. 5564 (Div. Ct.).

[3]

The appeal is therefore dismissed.  Costs of the appeal are awarded to
    the respondents on a partial indemnity basis, fixed in the amount of $5,500
    inclusive of all applicable taxes and disbursements.


COURT OF APPEAL FOR ONTARIO

CITATION: Arora Commercial Corporation v.
    975922 Ontario Inc., 2015 ONCA 146

DATE: 20150305

DOCKET: C58761

Laskin, Rouleau and Huscroft JJ.A.

BETWEEN

Arora Commercial Corporation

Plaintiff (Respondent)

and

975922 Ontario Inc. and
    975922 Ontario Limited both operating as Orangeville Womens Health Club, Susan
    Dyment
and Karen Dyment

Defendants (
Appellants
)

P. Kennedy, for the appellants

George Gligoric, for the respondent

Heard and released orally: February 25, 2015

On appeal from the judgment of Justice James A. Ramsay of
    the Superior Court of Justice, dated April 10, 2014.

ENDORSEMENT

[1]

975922 Ontario Inc., 975922 Ontario Limited and Susan Dyment appeal the
    summary judgment dismissing their counter-claim, and the costs of $32,000
    awarded against them.

[2]

The appellants main ground of appeal is that they were denied
    procedural fairness because they were not given notice that Arora was seeking a
    dismissal of the counter-claim. In this court counsel for Arora candidly
    acknowledged that his notice of motion did not ask that the counter-claim be
    dismissed, and in response to a question from the motion judge, advised the
    court he was not seeking that relief.

[3]

Nonetheless, in this court, the respondent attempts to defend the
    judgment dismissing the counter-claim by pointing out that the appellants
    defence and their counterclaim are mirror images of each other in the sense
    that they rest on the same allegation  the alleged misrepresentation made by
    Aroras lawyer.

[4]

Aroras position has some merit, but we think that the absence of fair
    notice is fatal to upholding the dismissal of the counter-claim.  Had the
    appellants known that their counter-claim was in issue on the motion, the
    evidentiary record may well have been different. For that reason, the judgment
    dismissing the counter-claim cannot stand.

[5]

The appellants also ask that enforcement of the judgment against them be
    stayed pending the disposition of their counter-claim. They are not entitled to
    that relief because of the provisions of the lease in which the appellants
    waive any right to set-off.

[6]

Accordingly, the appeal is allowed and para. 2 of the judgment under
    appeal is set aside. We decline to interfere with the $32,000 in costs ordered
    by the motion judge on the ground that those costs reflected the motion for
    summary judgment on which Arora succeeded. In this court the appellants were
    successful and they are entitled to their costs of the appeal, which we fix in
    the agreed on amount of $10,000 inclusive of disbursements and applicable
    taxes.

John
    Laskin J.A.

Paul
    Rouleau J.A.

Grant
    Huscroft J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Auciello v. Canadian Imperial Bank of Commerce
    (CIBC), 2015 ONCA 178

DATE: 20150316

DOCKET: C56266

Epstein, Pepall and Benotto JJ.A.

BETWEEN

Vito Auciello

Appellant

and

Canadian Imperial
    Bank of Canada (CIBC)
,
CIBC Mortgages Inc.
,

Home Loans Canada
    (HLC)
, Home Trust Company and Sun Life

Assurance Company of Canada

Respondents

Vito Auciello, acting in person

Ron Aisenberg, for the respondents

Heard: March 13, 2015

On appeal from the order of Justice Sidney N. Lederman of
    the Superior Court of Justice, dated October 9, 2012.

APPEAL BOOK ENDORSEMENT

[1]

We see no error in the motion judges decision to strike the pleadings
    against CIBC on the basis that they fail to disclose a reasonable cause of
    action.

[2]

The appeal is therefore dismissed.

[3]

The respondents are entitled to their costs fixed at $2,000, inclusive
    of disbursements and taxes.


COURT OF APPEAL FOR ONTARIO

CITATION: Bennett v. J.K. (Jim) Moore Ltd. (Jim Moore
    Petroleum), 2015 ONCA 217

DATE: 20150331

DOCKET: C58912

LaForme, Watt and Epstein JJ.A.

BETWEEN

Eliza Bennett

Plaintiff (Appellant)

and

J.K. (Jim) Moore Ltd. (c.o.b. Jim Moore
    Petroleum), Steve Haglund, John Doe, John Doe Incorporated, Aultman's Heating
    Ltd., Chris Heasman, Bechtel's Home Heat and Terry Allan Bechtel

Defendants

and

David McComiskey and Monika McComiskey

Respondents on Motion

(Respondents)

Sean Dewart and Rebecca Liu, for the appellant

Martin P. Forget, for the respondents David McComiskey
    and Monika McComiskey

Heard and released orally: March 24, 2015

On appeal from the order of Justice James A. S. Wilcox of
    the Superior Court of Justice, dated May 12, 2014.

ENDORSEMENT

[1]

The oil spill that forms the basis of this action took place on March
    30, 2009. The action was commenced against several other defendants on March 7,
    2011. The record demonstrates that in the two years following the triggering
    event, the appellant took no steps to pursue the possibility of a potential
    claim against the proposed defendants, the McComiskeys.

[2]

This inactivity is surprising. The background facts suggested a possible
    claim against the McComiskeys. The Flynn report potentially implicated them.
    But of particular significance, is the communication between Ms. Sinclair, a
    claims representative for the McComiskeys insurer and Ms. Smith, a claims
    representative for the appellants insurer. According to the unchallenged
    evidence of Ms. Sinclair, on June 5, 2010, Mr. McComiskey received a letter
    from Ms. Smith putting him on notice that the appellants insurer held him
    responsible for the loss attributable to the spill. In a telephone conversation
    on July 29, 2010, Ms. Smith advised Ms. Sinclair that the claim against the
    McComiskeys was based on the fact that they previously owned the property and
    had performed renovations that may have resulted in the ruptured fuel lines
    that caused the spill. The McComiskeys insurer followed up this conversation
    with a letter to Ms. Smith dated March 21, 2011 noting that the limitation
    period was about to expire on March 30, 2011.

[3]

The appellant failed to act on this information until April, 2014, when she
    moved to add the McComiskeys as defendants in the action commenced over three
    years earlier.

[4]

The appellant submits that the precise claim she seeks to advance
    against the McComiskeys, as pleaded in the proposed amended statement of claim,
    arises out of conduct that only came to her attention during an examination for
    discovery in May, 2013; namely, that renovations the McComiskeys made to their
    property in 2007 involved the relocation of the oil tank.

[5]

While the respondents claim that this particular argument was not
    advanced before the motion judge, we are prepared to consider it. And we cannot
    accept it.

[6]

As noted above, the unchallenged evidence of Ms. Sinclair is that as
    early as July, 2010, the appellant was aware that she had a claim against the
    McComiskeys, a claim that, at least in part, related to renovations the
    McComiskeys had done to their property that involved the fuel line. According
    to s. 5(1)(b) of the
Limitations Act
, the limitation period starts to
    run when a reasonable person with the abilities and in the circumstances of the
    appellant, knew or ought to have known enough facts upon which to base an
    allegation of negligence.

[7]

On this record, the limitation period started to run at least in July,
    2010, if not earlier.

[8]

The appellants motion to add the McComiskeys as defendants is statute-barred.
    We agree with the motion judges conclusion to this effect and therefore
    dismiss the appeal.

[9]

As agreed, costs are fixed at $15,000 inclusive of disbursements and all
    applicable taxes.

H.S. LaForme J.A.

David
    Watt J.A.

Gloria
    Epstein J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Bilich v.
    Toronto Police Services Board, 2015 ONCA 149

DATE: 20150306

DOCKET: M44643  C59697

Laskin, Rouleau and Huscroft JJ.A.

BETWEEN

Robert Bilich

Respondent to Motion/Appellant in Appeal/Plaintiff

and

Toronto
    Police Services Board, William Blair,

Mark
    Pugash, Reuben Stroble, Blake Shreve,

Suzanne
    Pinto, Stephen Ruffino, Ian Sapsford,

Candy
    Graham, Victoria Balice, and Wendy Drummond

Moving Parties/Respondents in Appeal/Defendants

Robert Bilich, acting in person

Michael Smith, for the Moving Parties, respondents in
    appeal

Heard and released orally:  February 27, 2015

Motion for an order quashing the appeal from the order of
    Justice Frederick L. Myers dated November 20, 2014.

ENDORSEMENT

[1]

Robert Bilich appeals from the order of Myers J. staying his action to
    allow time for him to pay costs awards and to rethink his litigation strategy.
    The respondents move to quash the appeal on the basis that Myers J.s order is
    interlocutory, not final.

[2]

The appellant sued the defendants for $10 million in damages arising out
    of his having been arrested and charged with criminal harassment in 2008. Most
    of the appellants claims were struck by Frank J. In the course of various
    proceedings appealing the order of Frank J., over $6,000 in costs have been
    awarded against the appellant.

[3]

The appellant amended his statement of claim and the respondents moved
    to strike. Justice Myers adjourned the motion and ordered that the appeal be
    stayed until the appellant paid the outstanding costs orders (including the
    costs of the motion) and set a final payment date of May 23, 2015, after which
    the respondents could move to dismiss the action with notice if the costs were
    not paid, or move to strike the claim if the costs were paid. In addition,
    Myers J. struck the appellants affidavit subject to a motion for leave to re-file
    it and ordered that the record be sealed and not form part of the public
    record, pending further order of a Master or Judge.

[4]

The appellant appeals Myers J.s order and the respondents seek to quash
    the appeal on the basis that the order is interlocutory rather than final in
    nature.

[5]

It is clear that the decision under appeal did not finally determine any
    substantive matter in the litigation. Justice Myers decision merely stayed the
    action while costs awarded to the respondents remained outstanding. Justice Myers
    provided a fixed date by which the appellant could pursue the action by paying
    the costs and made clear that the respondents could neither move to dismiss the
    action nor have it struck until that date has passed.

[6]

The appellant may seek leave to re-file the affidavit if the stay is
    lifted. Likewise, the sealing order may be lifted if the appellant is able to
    demonstrate that the transcript and affidavit are admissible and are complete
    and certified, in compliance with legal requirements.

[7]

Given that it remains open to the appellant to pursue the action, it
    follows that the decision under appeal is interlocutory rather than final in
    nature and the appeal must be brought before the Divisional Court with leave.

[8]

Accordingly, the appeal is quashed.

[9]

Costs to the respondent fixed at $2,000, inclusive of disbursements and
    applicable taxes.

John
    Laskin J.A.

Paul
    Rouleau J.A.

Grant
    Huscroft J.A.