Mark Twain once made a comment about how reports of his death were highly exaggerated.

Perhaps the same can be said about the chances of a corporate plaintiff obtaining specific performance of an agreement of purchase and sale for commercial property, given the recent decision of the Superior Court of Ontario in 2329131 Ontario Inc. v. Carlyle Development Corporation.

This case involved an agreement of purchase and sale for 3 adjacent buildings in Espanola, Ontario which contained a gas bar, a convenience store, several quick service restaurants, and some smaller tenants.

There was no question that the plaintiff purchaser was trying to buy this property to own and maintain for the profit to be derived from the leases to the various tenants.

The agreement of purchase and sale was amended by the parties on a number of occasions. The last written amending agreement provided for a specific closing date, which passed without either side attempting to close. Both sides continued to behave as if the transaction was still valid but neither party identified a new closing date.

Ultimately, and after the parties encountered difficulty obtaining estoppel certificates from the tenants and confirmation from the plaintiff’s bank that the bank would finance the purchase, the plaintiff purchaser announced that it was ready to close. The defendant vendor took the position that the transaction was no longer alive and refused to complete the transaction.

The purchaser sued and moved for summary judgment, alleging that the vendor had breached the agreement of purchase and sale for a number of reasons and asking the Court to order specific performance by requiring the defendant to hand over a deed to the property.

After reviewing the facts, the Court was satisfied that it was in a position to render a summary judgment simply because the documents were sufficiently clear as to illustrate what had actually happened.

The interesting aspect of the case has to do with the issue of remedy.

The Court observed that the plaintiff had explained why the property was special to the principals of the plaintiff company, using the language “it provides a good opportunity for them to carry on a business and to have good tenants in the other buildings”. The Court also observed that the plaintiff’s principals had “put much effort into obtaining the property”.
Of some significance was the fact that strangely, the defendant did not take issue with the appropriateness of an order for specific performance.

There is an abundance of authority for the proposition that specific performance will not be granted with respect to a commercial property, at least where the only thing special or unique about the property is its ability to generate revenue. This is because it is assumed that a commercial buyer will be able to find another revenue–generating property elsewhere. These types of properties, in this context, are considered commodity items.

Nevertheless, and presumably assisted by the defendant’s failure to challenge the plaintiff’s right to an order for specific performance, the Court determined that “it would not be unjust” to grant specific performance in these circumstances. The Court ruled that a substitute property “is not readily available”.

In my view, this decision is completely inconsistent with both the trend in the jurisprudence over the last number of years and specific comments made in earlier decisions.

Nevertheless, it does provide some support for the idea that specific performance may be available with respect to commercial properties. Reports of the death of that remedy, apparently, are greatly exaggerated.

In the recent case of Pet Valu Canada Inc. v. 1381114 Ontario Limited, the Court dealt with a motion by a franchisor, Pet Valu Canada Inc., against a numbered company operating as “Pet Stuff & Supplies” and its principals. Pet Valu was seeking an injunction stopping the defendants from operating a pet supply store which allegedly breached a non-competition covenant in a franchise agreement.

Robin Martin, as sole officer and director of 1381114 Ontario Limited, entered into a franchise agreement with Pet Valu that contained a restrictive covenant. Ms. Martin personally operated the Pet Valu franchise store until the franchise agreement was terminated.

At that point, according to the franchise agreement, she was prohibited from operating or participating in a competing business for 2 years within a 20 kilometer radius of the store.

Ms. Martin’s husband was one Mark Fingarson. He was the long-time owner and operator of Alfa Security Systems, a security services company.

In the month prior to the termination of Ms. Martin’s franchise agreement, Mr. Fingarson directed a numbered company which he had incorporated earlier to register the business names “Pet Stuff & Supplies” and “Alfa Systems”.

After the termination of the franchise agreement, that numbered company began to operate a pet supply store 450 meters from a Pet Valu store. In addition to pet supplies, the store sold spy equipment and skateboards. Ms. Martin’s former manager was employed there after having set up the store. Shelving, racking and inventory with distinctive labels, price tags and product codes from Ms. Martin’s Pet Valu franchise were in use at the new store.

A private investigation firm hired by Pet Valu conducted surveillance of the store on a Saturday in the month following the termination of the franchise agreement and observed Ms. Martin attending there on two occasions throughout the day including dropping off several roles of change at the business.

Pet Valu sought an injunction to require the new store to close. The judge had no difficulty granting the injunction. The judge found that while Mr. Fingarson had not been a signatory to the franchise agreement, he clearly set up the new company to assist his wife to compete with Pet Valu when she had undertaken not to do so. It was plain to the judge that the new company had been incorporated by Mr. Fingarson to hide his wife’s involvement, and that she was involved in the operation of the new store.

The judge found that this was all a “transparent effort by all of the defendants to avoid the restrictive covenant”. She regarded all of this as “no more than a feeble attempt” to do so.

Mr. Fingarson had insisted that Pet Stuff was not actually competing business within the meaning of the restrictive covenant because it also sold spy equipment and skate boards. This argument was completely rejected as well.

The judge went on to make a significant point on the law relating to injunctions relating to restrictive covenants.

In a normal injunction proceeding, the party seeking the injunction must show that there is evidence supporting a valid complaint. In addition, it must show if the injunction is not granted, the party seeking the injunction will suffer harm which is “irreparable” which is to say that compensation in damages will not be adequate. Finally, the party must demonstrate that the harm to it if the injunction is not granted outweighs the harm to the defendant if it is granted. This is what is referred to as the “balance of convenience” test.

However, as the Court pointed out, a fundamental aspect of any franchise system is the protection of its method of operation, goodwill, products and services. Accordingly, where there is a clear breach of a negative covenant in a franchise agreement, the elements of irreparable harm and balance of convenience are not required. All the moving party has to do is to demonstrate that it has a valid and supportable claim for a breach of a non-competition provision or other restrictive covenant.

This is a useful reminder of the law relating to the enforcement of restrictive covenants in franchise agreements. It is also a useful reminder to the public generally that transparent attempts to circumvent these covenants will never be tolerated.

In my last blog post, I discussed the ready availability of summary judgments in wrongful dismissal cases.

Several weeks ago, the Superior Court of Justice released a summary judgment in a bank claim on a guarantee, reinforcing another aspect of summary judgment motions that might be of interest.

In this case, the Toronto Dominion Bank v. 1745361 Ontario Corporation, Glenn Carter and Jennifer Smith, the bank made a small business loan to the corporate Defendant. The Defendant Carter gave a personal guarantee to the extent of 25% of that loan. The loan went into default and the bank sued Carter on his guarantee.

Whether or not this evidence, taken on its own, would have been sufficient to justify the Court in granting summary judgment in the face of Carter’s story will never be known

Carter’s defence centered around discussions and an “understanding” that he had reached with the bank representative at the time that he signed the guarantee.

Carter claimed that at that time, he had not yet finalized his arrangements with Smith, the principal of the company, on the terms of his involvement in the business venture. Accordingly, he claimed that he had told the bank representative that he was signing the guarantee on a conditional basis only, i.e., conditional on his finalizing his arrangements with Smith.

He claimed that he had never actually done so and as a result, the guarantee could not be enforced.

The evidence showed that Carter advanced funds into the company’s account, took back something in the nature of a fee for doing so, and obtained an indemnity from the company in respect of his guarantee. There was also evidence before the court that he never actually followed up with the bank with respect to his concern that his execution of the guarantee was conditional on the completion of his business arrangement with Smith.

These facts all seemed to suggest that Carter’s story was not true. Whether or not this evidence, taken on its own, would have been sufficient to justify the Court in granting summary judgment in the face of Carter’s story will never be known, because the Court based its judgment on the legal principles involved, having nothing to do with those facts.

The guarantee itself took the form that is almost universally used by banks these days, and specifically excluded any prior representations or discussions inconsistent with what the guarantee said. It specifically provided that the Guarantor’s liability was “continuing, absolute, and unconditional”. Carter’s attempt to introduce evidence suggesting that the guarantee was conditional was inconsistent with the wording in the guarantee. That type of evidence, referred to as parol evidence, is not available where the terms of a guarantee are clear and unambiguous. That has been the law in Canada for decades.

As a result, the judge had no difficulty granting judgment to the bank.

This is another aspect of the summary judgment rule that one might bear in mind. It is not sufficient to raise any number of factual disputes in the hope of derailing a summary judgment motion on the basis that one has raised triable issues, where there is a legal principle that is crystal clear and squarely against you. In those circumstances, the party whose position is consistent with the clear legal principle will succeed no matter what factual controversies the other side might be able to create.

When the scope of the authority of motions court judges hearing motions for summary judgment was expanded by the Ontario Court of Appeal, a trend toward using the summary judgment rule in wrongful dismissal cases was accelerated considerably. We may well be at a point now in which routine wrongful dismissal claims and perhaps even those with some unusual fact circumstances can be concluded summarily. This is my conclusion from my review of the trial judgment released last month by the Superior Court of Justice in Bernier v. Nygard International Partnership.

In that case, Bernier was fired by the Defendant after 13 years of work at a management level and at the age of 54. She was given only minimum statutory salary and benefits required under the Employment Standards Act. She sued and then brought a motion for summary judgment for the difference between those benefits and her common law entitlement.

The Defendant argued that at the very least, there were enough questions raised about the claim that a trial of the issues was necessary and that summary judgment ought not to be granted.

Specifically, the Defendant raised four issues:

(a) Whether or not the Plaintiff’s statutory entitlements were modified by a contract between the parties;

(b) Even if there was no enforceable contract, did the Defendant’s general policy limiting notice periods provide guidance for assessing what reasonable notice at common law would be;

(c) Was the Plaintiff entitled to a bonus; and

(d) Did the Plaintiff make reasonable efforts to mitigate her damages.

Before the recent change in the law relating to summary judgments, it is probably safe to say that any one of these issues would have met the threshold test of a genuine issue for trial. In fact, I doubt that any experienced wrongful dismissal plaintiff’s lawyer would ever have even attempted a motion for summary judgment on these facts.

Under the current regime, however, it’s a different story.

In this case, the judge considered himself able to examine each of these issues and come to a conclusion. His conclusion was that none of them raise a triable issue.

On the question of an employment agreement, it appears that the Plaintiff had signed such a document at the outset of her employment, providing that her employment could be terminated with 30 days’ notice. Unfortunately for the Defendant, this provision was contrary to the minimum notice requirements contained in the legislation, which cannot be waived by contract. As a result, that provision in the contract was void and unenforceable.

The Defendant produced a letter written 8 years after the commencement of the Plaintiff’s employment, signed by the Defendant but not by the Plaintiff, containing amended notice provisions. The Plaintiff denied ever having entered into any such amending agreement and the individual who signed the letter on behalf of the Defendant never swore an affidavit to the contrary. This was enough for the judge to dispense with that argument, finding that there was no evidence suggesting that the parties had actually agreed to any amended arrangement.

The Defendant argued that it had a general policy of limiting the amount of notice to which its employees were entitled. The Defendant insisted that this limitation was well known to the Plaintiff. However, the judge was satisfied that if any such policy existed, it was not binding on the Plaintiff.

On the issue of bonus, the judge found sufficient evidence before him that the bonus was a regular feature of the Plaintiff’s compensation that she had come to expect and that accordingly, and pursuant to well-established legal principles, she was entitled to her bonus in the year of termination.

Finally, on the question of mitigation, the mere suggestion by the Defendant that the Plaintiff had not pursued sufficient efforts to find a new job was not enough to derail the motion. There was no evidence that appropriate employment would have been available to the Plaintiff had she done more than what she did or that she declined to pursue any appropriate opportunity. On the evidence, it appeared that the Plaintiff made very substantial efforts to find a new job. The judge concluded that these efforts were reasonable and appropriate.

Having disposed of the various defenses, the judge went on to assess reasonable notice on the basis of the evidence before him as to the nature of her employment, the length of her employment, her age, and the realistic possibility of finding similar employment appropriate to her experience, responsibility, and qualifications. He then concluded that the notice period suggested by the Plaintiff’s lawyer, namely 18 months, was the appropriate measure and issued a judgment accordingly.

Given that the motion was heard 7 months after termination and therefore 11 months short of the 18-month notice period, the judge ordered that the entire award would be impressed with a trust and that at the end of the 18-month notice period, the Plaintiff would have to account to the Defendant for any new employment income that she might receive during the notice period and reimburse the Defendant for any such amount.

In the vast majority of cases, summary judgments are and should remain the exception rather than the rule. Given this case, one is left to wonder whether or not the opposite will become true in wrongful dismissal cases.

Several days ago, the Ontario Court of Appeal released its judgment in a class action against Toronto’s George Brown College of Applied Arts and Technology. The representative Plaintiffs were students in the school’s Graduate International Business Management program.

In this case, the school’s program description stated that the program provided students “with the opportunity to complete three industry designations/certifications in addition to the George Brown College Graduate’s Certificate”

As the Court found, the promise of these industry designations made the program very attractive to prospective students. However, when the students graduated, they found that they did not automatically receive the designations and were not automatically eligible to write the industry examinations necessary to obtain the designations. That was because the school had no agreements in place with the industry associations with respect to awarding these designations. Students would have to apply separately to each industry association, write the exam, pay the sometimes hefty fee, and take additional courses and/or submit proof of work experience.

At the trial of the common issues in the case, the judge found that graduates of the program reasonably expected that if they completed the program they would have fulfilled the necessary qualifications to obtain the promised industry designations even though they also understood that they would still have to write industry examinations and pay requisite fees to do so.

Because these reasonable expectations could not be realized, the trial judge concluded that the program description in the course calendar negligently misrepresented the benefits of the program and thereby breached the unfair practices provisions of the Consumer Protection Act.

The school appealed on a number of grounds.

Firstly, the school argued that the judge was wrong to find that the school owed a duty of care to its students. The school argued that a duty of care would only arise out of the finding of a special relationship which in turn would only be created if the students were shown to have acted reasonably in relying on the program description. The school argued that the students could have obtained all of the relevant information directly from the various industry association websites and had they done so, they would have known what was required in order to receive the designations.

The Court of Appeal disagreed. The Court felt that it was completely reasonable for the students to rely on the statements contained in the course calendars because they had been published with the intention that the students read and rely on them in deciding which academic program to pursue. As a result, there was a special relationship giving rise to a duty of care which the school had breached.

Next, the school took issue with the trial judge’s finding that the students were consumers, and therefore entitled to the protections available to consumers under the Consumer Protection Act.

The Court had little difficulty in determining that students are indeed consumers and that they had been misled. Although the school insisted that the promise contained in the calendar was only that the students would have an “opportunity” to obtain the designations, which was true, and furthermore there was ample information available elsewhere that would show the requirements for the industry association designations, the representations were misleading and it was unreasonable to expect students to conduct independent research to verify the accuracy of the statements made on the course calendar.

As a result, the case will now proceed to a trial on damages. In the meantime, this case provides valuable guidance for any institution of higher learning and students of such institutions. The information contained in course calendars is to be taken seriously and schools must make sure the information is accurate, because students do have the right to rely on it in planning their future.

Marshall University in Huntington, West Virginia has seen its share of misfortune, particularly in 1970 when it lost its football team and a number of fans in a tragic air crash. Not that this compares, but Marshall University is now making legal news as the Defendant in an action brought by a student named Louis Helmberg III. It appears that Mr. Helmberg, a member of the Alpha Tau Omega fraternity, was standing by when one of his fraternity brothers, Travis Hughes, decided to launch a bottle rocket while standing on the deck of the fraternity house. Remarkably enough, the adventurous Mr. Hughes had inserted the bottle rocket in his rear end and planned to shoot the rocket out of his rear end. Unfortunately for all concerned, the rocket prematurely detonated. Mr. Helmberg alleged that he was so startled that he jumped backwards and fell off the deck. He then sued the fraternity, Mr. Hughes, and Marshall University. He alleged that his injuries have resulted in significant medical expenses and rendered him unfit to play for the University’s baseball team.

Those American college kids certainly know how to have fun.

In his claim, he specifically alleged that “firing bottle rockets out of one’s own anus constitutes an ‘ultra-hazardous’ activity”. It’s hard to disagree.

Thankfully, in early June, a court dismissed the action as against Marshall University for procedural reasons.

Some time ago, I posted an item about Kingston Penitentiary, which I visited in connection with a lawsuit by an inmate in which I was acting for the Ministry of Correctional Services.

Somewhat reminiscent of that lawsuit is a recent action brought in Arizona by a prison inmate against the prison over a severe stomach ache. The inmate claims that prison officials recently fed him a diet that left him with a severe case of stomach cramps. The cramps allegedly were so severe that he lost the ability to sleep and caused him to wonder if the prison officials were trying to kill him.

The same inmate has also sued the prison for delivering his food late two days in a row, allegedly giving rise to the development of an eating disorder.

One would have thought that if the food was giving him cramps, he would have been only too pleased to have it delivered late…

The recent decision of the Ontario Superior Court in Strashin v. Benzacar is a useful reminder of the relationship between guarantees and limitation periods.

For a number of years, cases involving attempts by lenders to enforce guarantees gave rise to highly creative and ingenious defences being asserted by guarantors who, generally speaking, knew full well they were liable to pay on their guarantees. The incentive to defend these claims using imaginative and sometimes novel approaches was provided by a number of cases, some of which were exceedingly high authority, that made it clear that guarantees are highly technical documents and that lenders were going to be put to a standard of perfection in terms of both the guarantee document and the circumstances surrounding the execution of the guarantee before the Court would enforce payment.

It seemed that every time the Court dismissed an action on a guarantee for some technical reason, institutional lenders revised their standard form guarantees to cover whatever loophole some imaginative lawyer had been able to find.

As a result, there seems to have been a significant decrease in a number of these cases. In ordinary circumstances, it is probably safe to say that it is exceedingly difficult in the current jurisprudence for a guarantor to escape liability.

Nevertheless, such efforts continue to be made.

In Strashin v. Benzacar, the defendant had signed a guarantee in August, 2001 in respect of the indebtedness of a corporation under certain promissory notes. The creditor made demand on the guarantee in April, 2010, almost 9 years later. The defendant refused to pay and the creditor sued.

The defendant’s main defence was that the creditor was out of time, whether the applicable limitation period was 6 years as had been provided by the legislation in force at the time of the guarantee, or 2 years as is currently the case.

The Court disagreed and made it clear, yet again, that the limitation period for an action on a guarantee commences on the date of demand for payment. This is because demand is a condition precedent to the guarantor’s obligation to pay. The date that the guarantee was provided is not relevant.

As a practical matter, then, it is important for business people to remember that if they provide guarantees when financing is originally arranged for their corporations, for example, and the company remains in business with the same financing in place for any number of years, the lender can call on the guarantor to repay the debt long after the guarantor has forgotten about his or her potential liability.

It is worth noting that guarantees usually contain termination rights. It is ordinarily the case that a guarantor can simply terminate his obligation under a guarantee by means of written notice to the lender. Whether or not this is a realistic step to take as a practical matter it will depend on the circumstances of each case. However, if you signed a guarantee many years or decades ago and you have forgotten about it until you found a copy of it at the bottom of your desk drawer, don’t assume that it is no longer enforceable by the lender simply because of its age