RF Franchising Inc. v. Singh, 2024 BCSC 212

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: RF Franchising Inc. v. Singh, 2024 BCSC 212 Date: 20240209 Docket: S214367 Registry: Vancouver Between: RF Franchising Inc. Plaintiff And Jaskirat Singh, Gabriel Santos, Kevin Park, GDS Food Ltd., Pro-Look Ent. Ltd., 10141153 B.C. Ltd., 1150406 B.C. Ltd., 1096497 B.C. Ltd., and Hellcrust Pizza Defendants Before: Associate Judge Hughes Reasons for Judgment Counsel for Plaintiff: V. Li Counsel for Defendants Jaskirat Singh, 10141153 B.C. Ltd., GDS Food Ltd. and Gabriel Santos: J.A. Rost Place and Date of Hearing: Vancouver, B.C.

January 25, 2024 Place and Date of Judgment: Vancouver, B.C. February 9, 2024 [ 1 ] The defendant applicants seek leave to file a counterclaim late. Rule 3-4(1) of the Supreme Court Civil Rules, B.C.

Reg. 168/2009 provides: A defendant in an action who wishes to pursue a claim within that action against the plaintiff must, within the time set out for the filing of a response to civil claim under Rule 3-3(3), file a counterclaim in Form 3 that accords with Rule 3-7. [ 2 ] Rule 22-4(2) allows the court to shorten or extend any period of time provided for in the Rules, even though the application for the extension is made after the period of time has elapsed. [ 3 ] By way of brief background, the plaintiff is a franchisor operating the Freshslice Pizza franchise system (the “Franchisor”).

The defendants GDS Food Ltd. and Gabriel Santos (collectively “GDS”) are former owners of a Freshslice Pizza franchise restaurant (the “Restaurant”) located at 4140 East Hastings Street, Burnaby, B.C. (the “Premises”). GDS entered into a franchise agreement with the plaintiff on April 1, 2020 (the “Franchise Agreement”). [ 4 ] In or about mid-March 2021, GDS’ business failed and the Restaurant was closed. GDS engaged in negotiations with the plaintiff to sell the Restaurant’s assets to the plaintiff, but those negotiations were unsuccessful. On or about April 2, 2021, 1014153 B.C. Ltd. (“153”), of which Mr.

Singh is a director, purchased the assets of GDS Food Ltd. Shortly thereafter, the Premises reopened as a Hellcrust Pizza restaurant. [ 5 ] The notice of civil claim was filed May 3, 2021, alleging that GDS was in breach of the Franchise Agreement, and seeking an injunction to prevent the sale of the Restaurant’s assets and to prevent the defendants from entering into a lease agreement for the Premises. [ 6 ] The notice of civil claim was served on Mr. Singh and 153 on May 5, 2021, and on GDS on May 11, 2021. On May 12, 2021, Mr.

Singh and 153 agreed to indemnify GDS and defendant Kevin Park in relation to this action in exchange for an assignment of their claims as against the Franchisor. [ 7 ] On May 25, 2021, GDS filed and served their response to civil claim. On May 31, 2021, the plaintiff’s counsel advised GDS’ counsel that they were no longer representing the plaintiff, although they took no steps to be removed as counsel of record. Following the withdrawal of plaintiff’s counsel, this action remained in abeyance until a notice of intention to proceed was filed on April 28, 2023.

It was signed by an individual named Tom Horler on behalf of the plaintiff and was served on the applicants’ counsel on June 30, 2023.

A notice of appointment or change of solicitor was filed by the plaintiff’s current counsel on June 30, 2023. [8] The plaintiff delivered its initial list of documents on July 19, 2023, and a supplemental list of documents on August 8, 2023. Nofurther steps were taken until November 1, 2023, when the plaintiff requested a list of documents from the applicants. [9] On November 15, 2023, the applicants notified the plaintiff that they intended to file a counterclaim and sought the plaintiff’sconsent to the late filing. A draft counterclaim was provided to the plaintiff on December 6, 2023.

The plaintiff did not consent to thelate filing, resulting in this application. [10] The parties agree that the applicable legal test is that set out in Smith v. British Columbia, 2010 BCSC 928 at paras. 18 and 19: [18] The court has discretion under Rule 3(2) to extend a time period set out in the Rules, and will do so if it is “just andconvenient”. [19] In Squamish Indian Band v. Canadian Pacific Ltd., (BC SC), [1998] B.C.J.

No. 1726 (S.C.), Saunders J.(when she was a member of this Court), held that the following factors should be considered in making any determination of whether itis just and convenient to extend the time to permit a counterclaim to be filed:

a) What was the length of the delay between receiving the statement of claim and proposing the draft counterclaim;

b) What were the reasons for delay;

c) Whether the counterclaim would be time barred but for s. 4(1) of the Limitation Act;

d) The connection between the proposed counterclaim and the plaintiff’s claim;

e) Whether there will be prejudice to the defendant, such as would arise if denial of the application to file a counterclaim wouldprevent the defendant from making full answer and defence to the claim brought against it; and

f) Whether there will be prejudice to the plaintiff by permitting the proposed counterclaim, such as if the counterclaim wouldrequire additional investigation and potentially delay the trial of the matter. Length of the delay [11] The defendants could have filed a counterclaim within 21 days from service of the notice of civil claim, as required by Rule 3-4(1). The facts giving rise to the claims in the proposed counterclaim were well known to the defendants at that time.

They did not notifythe plaintiff of their intention to file a counterclaim until November 15, 2023, being 3 ½ months after being served with the notice ofintention to proceed. They did not provide a draft counterclaim until December 6, 2023. Reasons for the delay [12] Mr. Singh’s evidence is that the withdrawal of plaintiff’s counsel, followed by the subsequent inaction on the part of theplaintiff, lulled him into believing that this action was being abandoned.

Following service of the notice of intention to proceed, thisapplication was further delayed by the fact that GDS Food Ltd. had been dissolved and needed to be restored before bringing thisapplication. Whether the counterclaim would be time-barred but for s. 22 ofthe Limitation Act [13] The applicants acknowledge that their claims would be time-barred but for the operation of s. 22 of the Limitation Act, SBC2012, c 13 (the “Limitation Act”).

Connection between the proposed counterclaim and theplaintiff’s claim [14] The plaintiff’s claims against the applicants are for breach of contract in relation to the Franchise Agreement. The notice of civilclaim seeks an injunction preventing the defendants from entering into an agreement to purchase the Restaurant’s assets, and to preventthe defendants from entering into a lease agreement for the Premises.

The notice of civil claim clearly puts the terms of the FranchiseAgreement in issue. [15] The applicants’ response to civil claim pleads that the plaintiff fundamentally breached the Franchise Agreement, and/orbreached their duty of good faith, thereby rendering the Franchise Agreement, or the portions of it relied on by the plaintiff,unenforceable. The applicants further plead that the actions of the plaintiff and the terms of the Franchise Agreement are not inaccordance with reasonable commercial standards as required under section 3(3) of the Franchises Act, SBC 2015, c 35 (the “FranchisesAct”).

[16] The claims set out in the proposed counterclaim are for breach of the Franchise Agreement, breach of the common law duty ofgood faith and breach of the Franchises Act. Both the filed pleadings and the proposed counterclaim engage considerations of the rightsand obligations of each party under the Franchise Agreement. [17] The plaintiff seeks to differentiate the breach of contract claims based on the time period relevant to each party’s claims.

Inparticular, the plaintiff says that its claims relate to actions that occurred at the end of the parties’ relationship, around the time oftermination of the Franchise Agreement in March 2021, whereas the defendants’ claims relate to actions at the beginning of and duringthe parties’ relationship. I note again, as I did at the hearing, that the parties’ business relationship spanned just under 12 months, fromApril 1, 2020 to March 2021.

I have difficulty accepting the plaintiff’s argument that claims relating to the beginning or currency of thebusiness relationship are unrelated to claims surrounding the end of that relationship, particularly given the brevity of that relationshipand the nature of the pleaded allegations. [18] I am satisfied that there is a substantial connection between the proposed counterclaim and the plaintiff’s claim. Prejudice to the defendants [19] The prejudice to the applicant defendants, if they cannot now file a counterclaim, is that they would lose a cause of action againstthe plaintiff.

The plaintiff says that such prejudice is of the defendants’ own doing, as they chose not to file their counterclaim earlier. Prejudice to the plaintiff [20] The defendants say that there is minimal prejudice to the plaintiff, as the plaintiff was aware of the defendants’ claims of breachof contract and breach of duty of good faith from their response to civil claim. Further, the plaintiff was aware of the factual basisunderpinning the counterclaim as early as August 2021, when it received an affidavit sworn by Mr. dos Santos in related action S216875,Vancouver Registry.

The factual basis in the proposed counterclaim largely tracks the evidence given by Mr. dos Santos in his affidavit. [21] Further, this litigation is still in its infancy, despite having been commenced in 2021, with no trial date set or discoveriesscheduled. [22] The prejudice to the plaintiff is that it will be unable to avoid the claim on the basis that it is statute-barred, and they will have todefend it. There is no evidence of actual prejudice to the plaintiff. In my view, the presumption of prejudice is rebutted given that thislitigation is still in its early stages.

Conclusion [23] The applicants refer to para. 29 of Fang v. Fang, 2022 BCSC 1880, which is equally applicable to the case at bar: [29] Section 22(1) [of the Limitation Act] does not confer an absolute right to bring a “related claim” past the limitation period. Thecourt still has the power to permit or prevent those proceedings having regard to the passage of the limitation period and its effect on theparties: Lui v. West Granville Manor Ltd., (B.C.C.A).

However, as Lambert J.A. said in that case, when the relatedclaim is only between the original parties to the original proceedings, which is the case here, “there is no injustice in permitting all issuesto be raised that, in the words of s-s. 4(1) [now s. 22(1)], relate to or are connected with the subject matter of the original action.” Theplaintiff has pointed to no prejudice, other than delay, in responding to the claimed set-offs.

In some cases inordinate delay will give riseto a presumption of prejudice but I find that is not the case here. [24] Accordingly, I am satisfied that it is just and convenient to grant the order sought. The applicants may file their counterclaim inthe form attached as

Schedule A to their notice of application within 7 days following the release of these reasons, and are to serve thecounterclaim promptly after filing. [25] As the successful parties, the applicants are entitled to their costs of this application in the cause. “Associate Judge Hughes”