Ontario Civil


Bankruptcy and Insolvency

Courts and procedure

Motion judge found that defendants’ claim was not personal and vested in trustee

Defendants entered into franchise agreement and sublease to operate store with plaintiff corporations. Defendants operated store for just under two years, when they abandoned premises and claimed rescission under Arthur Wishart Act (Franchise Disclosure), 2000 (Ont.). Plaintiffs brought action for sum of $77,112 for arrears of rent and damages for breach of franchise agreement and sublease. Defendants filed statement of defence and counterclaim. Defendants brought motion for summary judgment dismissing plaintiffs’ claim and granting judgment in favour of defendants for sum of $156,392 for rescission of franchise agreement. Motion judge dismissed defendants’ motion. Motion judge found that defendant P, which owned 60 per cent of defendant corporation, had made assignment in bankruptcy after action was commenced but before statement of defence and counterclaim were filed. Motion judge found that defendants’ claim was not personal in nature and vested in trustee in bankruptcy. Motion judge held that statement of defence and counterclaim was nullity. Defendants appealed. Appeal quashed. Order from which appeal was taken was interlocutory. Motion judge’s remarks that statement of defence and counterclaim were nullities, and about spoliation as obiter, explained why he was not inclined to exercise any discretion to allow matter to proceed despite bankruptcy of one of defendants.

Treats International Franchise Corp. v. 2247383 Ontario Inc. (June 2, 2016, Ont. C.A., R.G. Juriansz J.A., David Brown J.A., and L.B. Roberts J.A., CA M46387 (C61544)) 268 A.C.W.S. (3d) 278.

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