Feeling ‘Crabby'?: Ontario Court Of Appeal Clarifies Scope Of Expanded Fact-Finding Powers On Summary Judgment

Under what circumstances can a motion judge decide a contested factual issue using the expanded fact-finding powers under rule 20.04(2.1) of the Rules of Civil Procedure (the “Rules”) without oral evidence? That was one of the issues before the Ontario Court of Appeal in a recent decision,2212886 Ontario Inc. et al. v. Obsidian Group Inc. et al., 2018 ONCA 670. In that case, the Court set aside a partial summary judgment, finding that it was not “in the interest of justice” to determine a key contested factual issue on the basis of a paper record alone.

Background: The dispute arose when the plaintiffs (respondents on the appeal), William and Kirsten Porteous (“William” and “Kirsten”), who had been operating a Crabby Joe's Tap and Grill franchise in Brantford, Ontario, attempted to rescind a franchise agreement (the “Agreement”) they had entered into with the defendant franchisors, Obsidian Group Inc. and Obsidian Inc. Under the Arthur Wishart Act (“AWA”), the provincial statute that governs the relationship between franchisees and franchisors in Ontario, franchisees have the right to rescind a franchise agreement and seek damages against the franchisor in certain circumstances. One such circumstance, under s. 6(2) of the AWA, is where the franchisor never provided the required disclosure documentation to the franchisee, or where “the disclosure document provided by the franchisor… [is] so materially deficient as to constitute no disclosure at all.”1

The central question in the case was whether the omission of a chart showing anticipated weekly earnings projections for the Crabby Joe's franchise (the “Chart”) in the disclosure document that had been provided to William and Kirsten rendered the document so materially deficient “as to constitute no disclosure at all,” thus giving rise to a right of rescission and damages under ss. 6(2) and 6(6) of the AWA. The answer to this question depended on whether the franchisor's representative, Danny Grammenopoulos (“Danny”) had shown William and Kirsten a document containing the Chart at a meeting in May 2010. If the Chart was shown to them at that meeting, the franchisor had an obligation to include it in the disclosure document. Failure to do so would give rise to a right of rescission under s. 6(2).

The Motion Judge's Decision: William and Kirsten moved for summary judgment, seeking rescission of the Agreement and rescission damages. Danny and William gave contradictory affidavit evidence on the...