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| Personal Service Coffee Corp. vs. Beer (c.o.b. Elite Coffee Newcastle) |
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Between
Personal Service Coffee Corp., applicant (appellant), and Stanley Beer operating under the firm name and style as Elite Coffee Service Newcastle, Elite Coffee Service Newcastle and Personal Service Coffee of Durham, respondents (respondents in appeal) |
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[2005] O.J. No. 3043
Docket: C43153 |
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Ontario Court of Appeal
Toronto, Ontario
E.A. Cronk, E.E. Gillese and J. MacFarland JJ.A. |
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Heard: May 5, 2005.
Judgment: July 18, 2005.
(43 paras.) |
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James F. Diamond for the appellant
Ian A. Johncox for the respondent |
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Civil procedure — Appeals — Appeal by applicant from application judge's
decision allowed.
Civil procedure — Applications and motions — Where material facts in dispute, application should be converted to action.
Commercial law — Franchises — Duties of franchisor — Franchisee's absolute right to rescission for lack of disclosure not precluding franchisor from bringing action for damages arising from franchisee setting up competing business. |
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| Appeal by the Personal Service Coffee from an application judge's decision dismissing its application against the respondent franchisee, Beer, for accounting and injunctive relief preventing Beer from setting up a competing business. Beer received incomplete disclosure before entering into the franchise agreement to supply and distribute coffee and related services to offices and businesses. Days before the expiration of the limitation period in the Arthur Wishart Act (Franchise Disclosure), Beer served notice to the franchisor that he sought rescission of the agreement on the basis of lack of disclosure. On the same day, he sent a letter to his clients informing them that he would no longer be servicing them through the franchise but would continue to service them through a new business of his own. Beer used equipment provided by the franchisor. The application judge found that there were material facts in dispute about the franchisor's application but dismissed it on the basis that the application was ill conceived. The application judge allowed a separate application by Beer for rescission of the agreement on the basis of the franchisor's lack of disclosure. The application judge ordered the franchisor to pay Beer $23,627. |
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| Held, Appeal allowed. |
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| The franchisor's application was converted to an action. Having found the purported material facts in dispute, the application judge was not entitled to dismiss the franchisor's application rather than converting it to an action. Beer had an absolute right to rescission and payment which was not conditional on his conduct as a franchisee. However, the franchisor had a separate right to pursue an action against him under s. 9 of the Act. The Act imposed a duty of fair dealing on both parties to a franchise agreement. Section 3 of the Act dealt with conduct while the agreement was still in force. In situations such as this where the agreement was rescinded, the franchisor had a right under s. 9 of the Act to bring an action based on its common law right to damages. Beer's right to rescission without penalty or obligation did not prevent the franchisor's action. |
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