DMS Caf é Ltd. v. Grandma Lee, 2011 ABQB 207

Court of Queen ’ s Bench of Alberta Citation: DMS Caf é Ltd. v. Gill, 2011 ABQB 207 Date: 20110328 Docket: 1003 12308 Registry: Edmonton Between: DMS Caf é Ltd. and Grandma Lee ’ s Canada Inc. Plaintiffs - and - Nasib Kaur Gill Defendant _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is a Plaintiff’s application for

summary judgment for part of the claim. There is ancillary application for security for costs. [ 2 ] The Defendant has a cross application to amend her pleadings. Equipment Lease

[ 3 ] The Defendant leased a kneading machine from Grandma Lees Canada Inc. effective August 1, 2008. The lease expires June 30, 2013. The monthly rent, including GST, was $78.75. The lease agreement also provided for interest on arrears at 12% per annum. [ 4 ] The Defendant purported to terminate the lease in April 2010. By paragraph 1.9 of the lease, termination does not absolve the lessee from her obligation to pay. [ 5 ] When the lease was terminated, 39 months remained on the term. The Plaintiffs seeks

summary judgment in the amount of $3,071.25. [ 6 ] Neither the existing pleadings, nor the evidence in support of the purposed amended pleadings, disclose a meritorious defence. Accordingly judgment is given in this amount together with interest at the contract rate. Franchise Royalty [ 7 ] The second part of the Plaintiffs’ application concerns royalties payable under an assignment of the franchise agreement. The Defendant claims to have a meritorious defence disclosed by her proposed amended pleading and the Affidavit filed in support.

In general terms, the defences relate to misrepresentations inducing the contract and breach of the franchise agreement. [ 8 ] The timing is important. The Defendant hired a realtor and made an offer to purchase the franchise in February of 2008. The offer included a number of buyer’s conditions of the “due diligence” type. These buyer’s conditions were supplemented by additional conditions, such a review of the vendor’s financial statements. The purchaser required that the vendor provide 30 days of training. The vendor is not a party to this action. [ 9 ] The offer to purchase was accepted March 14, 2008.

The buyer’s conditions were waived or satisfied March 24, 2008. The sale ultimately resulted in an assignment of the franchise stated to be effective July 1, 2008, although it must have been signed later because the Affidavit of Executions are dated July 22, 2008 and August 13, 2008. [ 10 ] The evidence before me discloses that the Plaintiffs cannot have misrepresented the financial status of the vendor/assignor. The Plaintiffs simply directed the Defendant to speak to the vendor about financial statements.

This, especially in the context of the terms and conditions of the purchase agreement, cannot found a defence to the Plaintiffs’ action for royalties. The Defendant seeks to be in a better position against the Plaintiffs then she would be against the vendor. [ 11 ] The Defendant also alleges the Plaintiffs made certain representations that induced the purchase and assignment of the franchise. However, the timing of the alleged misrepresentations follow the completed agreement to purchase and probably follow the completed assignment of the franchise.

If the alleged misrepresentations were made at all, they were made too late to have formed an inducement. [ 12 ] The Defendant also alleges that the business failed in part, from a lack of training that was to be provided by the Plaintiff and the vendor/assignor. The purchase agreement required 30 days of training. A subsequent letter from the Plaintiff offered training from June 10 to June 27, 2008. As 4 days were lost to weekends, this would have amounted to 13 days.

It appears from the evidence and from the representations of the Defendant, that she received 12 days of training from the Plaintiff and was sick for two of the days offered. The Plaintiffs provided, or substantially provided, the training they promised. The franchise agreement itself does not oblige the Plaintiff to provide training to the Defendant. [ 13 ] The balance of the training was to have been provided by the vendor/assignee. Breach of this obligation by a non-party does not found a defence to this portion of the Plaintiffs’ claim.

[ 14 ] The royalty is calculated to be $718.14 monthly in accordance with the terms of the franchise agreement. There were 48 months left of the term. The Plaintiffs will have judgment against the Defendant for royalties in the amount of $34,470.72 together with interest calculated in accordance with the agreement. [ 15 ] On the basis that the remaining claim and cross claim for damages will continue, the Defendant is granted leave to amend her pleadings in accordance with exhibit ‘A” to her Affidavit of February 1, 2011. Some of the issues may be rendered moot by this decision.

If the claims continue, the Defendant may wish to consider whether the original franchisee/vendors are necessary and proper parties. [ 16 ] In the circumstances, the application for security for costs need not be considered. [ 17 ] Costs of these applications will be in the cause. Heard on the 1 st day of March, 2011. Dated at the City of Edmonton, Alberta this 25 th day of March, 2011. W. S. Schlosser M.C.C.Q.B.A. Appearances: Sean Stepchuk Fraser Milner Casgrain LLP for the Plaintiffs Nasib Gill self represented