The case below is from the Canadian Legal Information Institute (CanLII)

COURT FILE NO.: 06-CV-6642CM

DATE: 20070227

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

)

)

Walid Chafchak

)

)

)

Gregory D. Wrigglesworth, for the Plaintiff/Responding Party

)

Plaintiff/Responding Party

)

)

- and -

)

)

)

Hungry Howie’s Pizza & Subs Inc.

)

)

)

Jon-David Giacomelli and Christopher R. Durdan, for the Defendant/Moving Party

)

Defendant/Moving Party

)

)

)

)

HEARD: December 13, 2006

REASONS ON MOTION

Patterson J.

[1] The Defendant, Hungry Howie’s Pizza & Subs Inc. (“Hungry Howie’s”), is a company incorporated in the State of Michigan, with its head office located in Madison Heights, Michigan.

[2] The Plaintiff, Walid Chafchak (“Chafchak”), resides in the City of Windsor in the Province of Ontario and he was a franchisee of Hungry Howie’s by three Franchise Agreements dated May 13, 1992, August 1, 2000 and July 23, 2001.

[3] Chafchak, by separate multi unit franchise agreement dated August 1, 2000, received the rights from Hungry Howie’s to operate a total of five franchises in Ontario.

[4] In March 2005, Hungry Howie’s commenced an action in the State of Michigan against Chafchak on the basis that Chafchak was in default and in material breach of the Agreements: namely, for failure to make royalty payments, for failure to conform with Hungry Howie’s standard of operations, and for closing and abandoning a franchise location.

[5] Chafchak retained a Michigan attorney and, in my opinion, attorned to the jurisdiction of the Circuit Court of the County of Oakland in the State of Michigan by submitting a defence to the Michigan action and by having his counsel appear on a motion for summary judgment brought by Hungry Howie’s.

[6] On January 25, 2006, after reviewing the motion for summary judgment, including briefs submitted by the parties and having heard oral arguments on behalf of Hungry Howie’s and Chafchak, the presiding judge, Judge Mester, dismissed Chafchak’s motion for dismissal and granted judgment to Hungry Howie’s in the amount of $238,702.72 (US). The summary judgment was issued on February 8, 2006, which triggered a 21-day appeal period by Michigan Law. Chafchak did not appeal the Michigan judgment.

[7] On March 16, 2006, approximately one month after the Michigan judgment was granted, Chafchak commenced the Ontario action which is the subject matter of this stay motion before me brought by Hungry Howie’s.

[8] In the Ontario Action, Chafchak seeks damages for negligent or fraudulent misrepresentation, loss of opportunity, punitive and exemplary damages, and aggravated damages.

[9] Hungry Howie’s takes a position that the allegations in the Ontario action were, or could have been raised, within the Michigan action.

[10] In regard to Chafchak’s allegation in the Ontario action, that there were pre-agreement misrepresentations, which induced him to enter into the agreements with Hungry Howie’s, Hungry Howie’s points out that within the Michigan action in defences claimed by Chafchak, Chafchak stated that:

That the Defendant (Chafchak) was induced to enter into the agreement by misrepresentation by Plaintiff (Hungry Howie’s).

[11] Hungry Howie’s further states that in the brief filed by Mr. Chafchak’s lawyer to the Michigan summary judgment motion, the following:

The Defendant (Chafchak) states that misrepresentations were contained in the offering circular. Plaintiff (Hungry Howie’s) restricted the products which could be sold eliminating submarine sandwiches which was not disclosed in the offering circular causing substantial loss to Defendant.

[12] Hungry Howie’s points out in the motion before me that Judge Mester (the Michigan Judge) in his reasons stated:

Although the Defendant (Chafchak) makes reference to misrepresentations in the offering circular, the Defendant (Chafchak) provides no evidence to support [this] claim.

[13] Hungry Howie’s indicates that as his matter was dealt with in the Michigan court it is improper to have this issue of misrepresentation re-litigated in Ontario.

[14] Chafchak alleges in the Ontario action, breaches of agreement on the part of Hungry Howie’s, Hungry Howie’s argues that this was dealt with and argued in the Michigan action and raised, by way of defence by Chafchak in the Michigan action, wherein he pleaded:

That Plaintiff (Hungry Howie’s) breached the agreement which excused Defendant’s performance. In the supporting brief by Chafchak’s lawyer in the Michigan action, he alleged Plaintiff (Hungry Howie’s) restricted the products which could be sold, eliminating submarine sandwiches, which was not disclosed in the offering circular causing substantial loss to the Defendant.

[15] Hungry Howie’s alleges that as this matter of breach was dealt with by full argument in the Michigan action that it is improper to have this issue re-litigated.

[16] In the Ontario action, Chafchak relies on the provisions of sections 3, 5 and 7 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000 c.3.

[17] In that regard, Hungry Howie’s argues that Chafchak’s lawyer in the Michigan action raised the Arthur Wishart Act by stating:

Defendant (Chafchak) is entitled to set off damages due to the violation by the Plaintiff (Hungry Howie’s) of Canadian Law.

[18] In the Michigan action, Hungry Howie’s indicates that Chafchak’s lawyer specifically relied on the Arthur Wishart Act to challenge the jurisdiction of the Michigan Court in material filed in the Michigan Court as follows:

Canada in 2000 adopted the Arthur Weshart [sp] Franchise Act which made void any franchise which restricts the application of Ontario law or requires the forum of suit to be outside Ontario.

[19] In fact, a complete copy of the Arthur Wishart Act was attached to Chafchak’s response to the plaintiff’s motion for summary judgment, which were reviewed and considered by the Michigan Court.

[20] Mr. Chafchak’s Michigan counsel raised the Arthur Wishart Act as a basis for damages in his initial pleading (sections 3, 5 and 7), but in his argument on the Arthur Wishart Act on the summary judgment motion he restricted his arguments to sections 9 and 10, which relate to choice of law and forum clauses in franchise agreements. On the summary judgment motion, he could have argued other provisions of the Arthur Wishart Act, namely: section 3, the duty of fair dealing in performance and enforcement; section 5, the franchiser’s obligation to disclose; and section 7, damages for misrepresentation because of failure to disclose. There was nothing to prevent Mr. Chafchak’s lawyer from making these arguments in the summary judgment motion in the Michigan action and he was not prevented from doing so by Michigan Law. From the material before me, it appears that Chafchak could have availed himself of sections 3, 5 and 7 as he now does in the Ontario action as the Michigan judge was prepared to and did apply Ontario law when requested to do so. Further, and in addition to the Ontario law, Chafchak could have availed himself of similar protections found in Michigan franchise statutes, but elected not to do so.

[21] The only allegations raised by Chafchuk in the Ontario action, which were not specifically pleaded in the Chafchak material in the Michigan action, was Hungry Howie’s duty to act in good faith. In the material before me, it appears that Michigan Law has similar law duties of fair dealing. Further, Chafchak had an opportunity to raise this issue in the Michigan action requesting the Michigan Judge to apply Ontario law but failed to do so.

[22] In regard to whether or not Michigan was precluded from dealing with the matter in Michigan because of section 10 of the Arthur Wishart Act, namely:

Any provision of a franchise agreement purporting to restrict the application of law of Ontario and to restrict jurisdiction or venue of a forum outside Ontario is void with respect to a claim otherwise enforceable under this act in Ontario.

[23] In that regard, Justice Mester’s decision delivered in Pontiac, Michigan on Wednesday, January 25, 2006, directly deals with the issue raised regarding the Arthur Wishart Act. Unfortunately Mr. Chafchak’s U.S. Attorney did not argue sections 3, 5 and 7 or the summary judgment motion for only sections 9 and 10 being the jurisdiction issue.

[24] In my opinion, the Plaintiff Chafchak is attempting to re-litigate its case by advancing new legal theory in support of a claim which is based, essentially on the same facts as the Michigan action and, therefore, is an abuse of process.

[25] The matter before me is a stay of proceedings of the Ontario action and I have authority to do so under section 106 of the Courts of Justice Act.

[26] Section 106 provides:

A Court, on its own initiative or on a motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.

Ontario Courts of Justice Act R.S.O. 1990, c. C.43

[27] Rules of Civil Procedure 21.01(3) provides:

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

(a) Jurisdiction – the court has no jurisdiction over the subject matter of the action;

(d) Action Frivolous, Vexatious or Abuse of Process – the action is frivolous or vexatious or is otherwise an abuse for the process of the court, and the judge may make an order or grant judgment accordingly.

[28] Justice Ground in Reddy v. Oshawa Flying Club [1992] O.J. No. 1337 at p. 3 reviewed the doctrines of cause of action and issue estoppel and relied on the decision of the Ontario Court of Appeal of Upper v. Upper, [1933] 1 O.R. for the principle that:

The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, in which the parties exercising reasonable diligence might have brought forward at the trial.

[29] Justice Lax in Britannia Airways Ltd. v. Royal Bank of Canada [2005] O.J. No. 2 (S.C.J.) at para 13:

Cause of action estoppel prevents not only the same cause of action from being litigated again, but also bars claims which properly belonged to the subject matter’s previous litigation…

[30] Justice Pitt, in CPU Options, Inc. v. Milton [2006] O.J. No. 253 (S.C.J.) at para. 18 found that there is a three part test to determine if the Ontario action should be stayed on the basis of res judicata:

iv) The prior judicial decision was a final decision pronounced by a court of competent jurisdiction over the parties and the subject-matter;

v) The decision was, or involved, a determination of the same issues or cause of action as that sought to be advanced in the present litigation; and

vi) The parties to the prior judicial proceeding or their privies are the same persons as the parties to the present action or their privies.

[31] Further, Justice Pitt held that cause of action estoppel applies not only to subsequent claims based on matters specifically decided in the prior action but also to every claim which could properly have been raised in those proceedings. Justice Pitt had to determine whether a claim for oppression could have been raised by the plaintiff in the State of Minnesota. He found that in the absence of proof of the foreign law, a court may presume that the foreign law, a court may presume that the foreign law is the same as the law of the jurisdiction where it is sitting. Justice Pitt found that the claim for oppression could have been dealt with in the Minnesota action and, accordingly, the Ontario action was stayed.

[32] The Court of Appeal in Hennig v. Northern Heights (Sault) Ltd. et al. 30 O.R. (2d) 346 (Ont. C.A.) found that a defendant who abandons, fails to pursue, or simply fails to put its best evidence forward with respect to a counterclaim, despite the availability thereof, cannot re-litigate the issue by commencing a subsequent action on the same facts as were in issue in the first action.

[33] Justice Sharpe sets out the basis for the principle of res judicata is namely that a judgment between parties to litigation is conclusive upon issues actually brought before the court and upon any issues which the parties, exercising reasonable diligence, should have brought forward on that occasion.

Las Vegas Strip Ltd. v. Toronto (City) 1996 CanLII 8037 (ON S.C.), (1996), 30 O.R. (3d) 286 (Gen.Div.)

[34] Justice Sharpe set out the following principles:

i) it is firstly necessary to have reference to the first claim asserted and the defences the defendant did or could have advanced to that claim;

ii) Next, it must be determined whether the claim advanced in the subsequent litigation could have been raised as a defence to the first action.

[35] I am satisfied that all the issues raised in the Ontario action by Chafchak either were or could have been raised in the Michigan action and that the Michigan action is res judicata and on the matters before the court as it involves exactly the same parties and exactly the same issues.

[36] Hungry Howie’s raises the issue of abuse of process. In that regard, Hungry Howie’s has provided the case of Premier Online Systems Inc. v. OMERS Realty Corp. [1999] O.J. No. 2535 (S.C.J.) at para. 20:

If there is merit to the plaintiffs’ contention that the present action constitutes a new and fresh cause of action and is not barred by the res judicata doctrine, I think this in any event a proper case for the Court to exercise its discretion to stay the present action in order to prevent an abuse of process. Both doctrines seek to avoid a multiplicity of proceedings and bring finality to litigation. They also seek to ensure that no individual is subjected more than once to proceedings for the same cause.

[37] It is Hungry Howie’s position that Chafchak had his day in Court in Michigan and that it is an abuse of process to bring the same proceedings with the same parties in Ontario.

[38] The Supreme Court of Canada in Amchen Products Inc. v. British Columbia (Worker’s Compensation Board) 1993 CanLII 124 (S.C.C.), [1993] 1 S.C.R. 897, 102 D.L.R. (4th) 96 at para. 31:

The overriding consideration which must guide the Court in exercising its discretion by refusing to grant an application to stay an action on the ground of forum non conveniens must…be the existence of some other forum more convenient and appropriate for the pursuit of the action and for securing the ends of justice.

[39] Hungry Howie’s has also made a separate argument that this Ontario action is not the forum non-convenience. The Agreements were dawn up and signed in the State of Michigan, the location of Hungry Howie’s head office. The evidence before the court is that Chafchak sent his employees to be trained in Michigan, that he personally went to Michigan on numerous occasions to pick up orders for his stores, and that all the witnesses would be key employees of Hungry Howie’s who are all located in the State of Michigan. The names of eight employees of Hungry Howie’s, all who operated out of the head office in Madison Heights, Michigan were provided to the court, namely, three officers of Hungry Howie’s, a purchasing agent, a general manager, an office manager, a custodian of the records and an accountant and bookkeeper of Hungry Howie’s, all are key to Hungry Howie’s case. The argument is that it would be extremely inefficient, inconvenient and costly to have the witnesses attend the trial in Ontario.

[40] Justice Arbour in Frymer v. Brettschneider et al [1994] O.J. No. 1411 (Ont. C.A.) at para. 57 provided:

The choice of the appropriate forum is designed to ensure that the Action is tried in the jurisdiction that has the closest connection with the Action and the parties. All factors pertaining to making this determination must be considered.

[41] A non-exhaustive list of factors to consider by the Court in exercising its jurisdiction to decline jurisdiction on the basis of the doctrine of forum non conveniens includes:

1. Location of the majority of the parties;

2. The location of key witnesses and where the bulk of evidence will come from;

3. Contractual provisions that specify applicable law or accord jurisdiction;

4. The avoidance of a multiplicity of proceedings;

5. The applicable law and its weight in comparison to the factual questions to be decided;

6. Geographical factors suggesting the natural forum;

7. Cost of conducting litigation in this jurisdiction;

8. Jurisdiction in which factual matters arose;

9. Residence or place of business of the parties;

Muscutt v. Courcelles, [2002] O.J. No. 2128 (Ont. C.A.) at para. 41.

[42] As I have stated previously, the franchise agreement in question, the subject matter of the Michigan summary judgment motion, were founded on a franchise agreement drawn up and signed in Michigan with a majority of the key witnesses being from Michigan and with Mr. Chafchak having had his employees trained in Michigan his cross boarder attendance to receive supplies and that the Michigan Law should be applied.

[43] I am satisfied that Michigan is the appropriate forum to have heard this matter and that in fact, Ontario is a forum non conveniens for the purpose of this action.

[44] Further, Chafchak, by retaining a lawyer and defending the action in Michigan has attorned to the jurisdiction and that on a balance of convenience, the State of Michigan has a more appropriate forum to hear Chafchak’s action.

[45] It is therefore ordered that:

1) there be a permanent stay of this proceeding on the basis that Ontario is not the most appropriate or convenient forum;

2) for a permanent stay of this proceeding on the basis of the document of res judicata and abuse of process;

3) costs are awarded to Hungry Howie’s.

[46] In regard to costs, I will receive submissions from Hungry Howie’s within 30 days of today’s date and response by Chafchak, 15 days thereafter.

___”original signed by Justice Patterson”__

Terrence L.J. Patterson

Justice

Released: February 27, 2007

COURT FILE NO.: 06-CV-6642CM

DATE: 20070227

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Walid Chafchak

Plaintiff

- and –

Hungry Howie’s Pizza & Subs Inc.

Defendant

REASONS ON MOTION

Patterson J.

Released: February 27, 2007