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Consumer & Retail Advisor

Ontario Court of Appeal Dismisses Dealers’ Appeal Related to GM Restructuring

Posted in Class Action, Distribution, Franchising
Helen FotinosAdam Ship

On July 4, 2017, the Ontario Court of Appeal dismissed the appeal by the Representative Dealer in a franchise class action commenced against General Motors Canada Ltd. (“GM”) relating to the restructuring of its dealer network in 2009.  The Court focused on the narrow issue of whether the release and related wind down agreement which members of the dealer class signed was enforceable, thereby barring the class action.  Since the Court found that the release was indeed enforceable, the claim was barred and the Court had no need to consider the other issues raised by the dealers on appeal.

 The core issue on appeal was the applicability of s. 11 of the Arthur Wishart Act (the “Act“).  Under this provision, any release or waiver of a right under the Act is void.  The dealers argued that the release and related wind down agreement were void under s. 11 of the Act.

 The Court was required to consider the applicability of s. 11 to the settlement of disputes.  In the leading decision of Tutor Time (1518628 Ontario Inc. v. Tutor Time Learning Centres, LLC, 2006 CanLII 25276 (ON SC), 2006 CanLII 25276 (S.C.)), affirmed by Court of Appeal in the earlier decision of Midas (405341 Ontario Limited v. Midas Canada Inc., 2010 ONCA 478), the Court found that a franchisee’s settlement of a known and existing breach of the Act was enforceable despite s. 11 as long as the franchisee received independent legal advice.

 In Trillium the Court considered whether the release and related wind down agreement signed by the dealers constituted the settlement of a known and existing breach of the Act, since the dealers acknowledged having received independent legal advice.  The Court reviewed the factual record and found that there was no doubt in anyone’s mind that the release and wind down agreement was designed to release liability in relation to GM’s decision to non-renew the dealers’ agreements.  On this basis, the Court found that the release and related wind down agreement did indeed release a known and existing alleged breach of the Act (in addition to non-statutory claims).

 On this basis, s. 11 of the Act had no application, the release was enforceable and the claims were barred.

 Trillium confirms the public policy in favour of the enforcement of settlements in Ontario.  Courts will be reluctant to set aside a settlement and release, even in the franchise context, where there is evidence that the parties were informed as to their rights, knew the claims they were releasing, and had independent legal advice.