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n the Court of Appeal of Alberta
Citation: 475878 Alberta Ltd. v. Help-U-Sell, Inc., 2004 ABCA 138
Date: 20040428 Docket: 0203-0383-AC Registry: Edmonton
Between:
475878 Alberta Ltd. and Wayne M. Cholak
Appellants (Plaintiffs)
- and -
Help-U-Sell, Inc., MBL Holding Corporation and S & S Acquisition Corp.
Respondents (Defendants)
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The Court: The Honourable Mr. Justice Berger The Honourable Mr. Justice Costigan The Honourable Mr. Justice Ritter _______________________________________________________
Appeal from the Judgment by The Honourable Mr. Justice W.E. Wilson Dated the 20 th day of August, 2002 Filed on the 15 th day of October, 2002
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The Court:
[1] The appellants appeal the dismissal of their action for damages for breach of a franchise agreement. The respondents cross-appeal the dismissal of their counterclaim for unpaid royalties. The central issues are whether the agreement between the parties imposed an obligation on the respondents to renew the registration of a prospectus and, if so, whether the appellants suffered damages as a result of the failure to renew. At the close of argument we dismissed the appeal and cross-appeal with reasons to follow.
[2] The facts are set out in detail in the trial judgment at , 2002 ABQB 769. The respondents registered a prospectus to sell real estate franchise agreements in Alberta. The registration was valid for one year unless renewed. The appellants entered into a franchise agreement with the respondents under which the appellants acquired the right to sell the franchises in Alberta. The appellants paid a franchise fee to the respondents pursuant to s. 6 of the franchise agreement which provided, in material part:
“6.1 ...Franchisee agrees the Franchise Fee shall be deemed to have been fully earned by Franchisor upon execution of this Franchise Agreement and cannot, and shall not, be refunded to Franchisee, in whole or part, except as explicitly provided in Section 6.4 below and in no other circumstances....
6.4 ...If Franchisor terminates the Franchise and Franchise Agreement prior to the completion of the Initial Training Program....the Franchise Fee will be refunded to the Franchisee....”
[3] The appellants completed the Initial Training Program and began to market franchises. However, the Securities Commission declined to renew the registration of the prospectus because of concerns over the financial viability of the respondent’s parent corporation.
[4] The appellants filed a statement of claim seeking recission of the agreement on the basis of material misrepresentations in the prospectus, and return of the franchise fee. The misrepresentation claim was abandoned at trial. Alternatively, the statement of claim alleged breach of the franchise agreement and claimed expectation damages for loss of profit.
[5] The respondents counterclaimed for royalties allegedly due pursuant to the franchise agreement.
[6] At trial, the appellants’ evidence on damages was directed towards establishing loss of profit. No other basis for a damage award was advanced or argued by the appellants.
[7] The trial judge concluded that the respondents did not breach the agreement because it did not oblige them to maintain registration of the prospectus. He found that loss of profit damages had not been established because the evidence was too speculative.
[8] He dismissed the counterclaim because the royalties were earned after the respondents had assigned the agreement to another corporation.
[9] Counsel for the appellants, who was not counsel at trial, argued that the trial judge erred in his interpretation of the agreement. The appellants’ counsel conceded that the trial judge had not erred in concluding that the evidentiary foundation for expectation damages was too speculative, but argued that the trial judge erred in failing to assess reliance damages comprised, in the main, of the franchise fee.
[10] Because of the conclusion that we have reached on the damages issue, it is unnecessary for us to consider the liability issue.
[11] In our view, it is too late for the appellants to advance a reliance damages argument on appeal. Reliance damages were not plead in the statement of claim. The appellants adduced no evidence at trial to support a reliance damages award and, as a result, the respondents led no evidence to meet a reliance damages claim. No argument was directed at trial to reliance damages and the trial judge did not consider the issue. Accordingly, the record on appeal provides no basis for appellate assessment of reliance damages and the risk of prejudice to the respondents is marked.
[12] Moreover, as s. 6 of the agreement specifically provides that the franchise fee was fully earned and non-refundable, it is doubtful that the franchise fee would be recoverable in any event.
[13] Therefore, as the dismissal of the expectation damages claim was quite properly not appealed and it is too late to consider a claim for reliance damages, likely barred by the agreement in any event, damages cannot be established and the appeal must be dismissed.
[14] Counsel for the respondents conceded that the cross appeal was only advanced in the event that a set-off was necessary to meet a successful damages claim. Accordingly, the cross-appeal is also dismissed.
Appeal heard on April 13, 2004
Memorandum filed at Edmonton, Alberta this 28 th day of April, 2004
Appearances:
E.D. Norheim for the Appellants
A. R. Gray for the Respondents
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© 2003 - 2007 Heydary Hamilton PC
Canadian Lawyers, U.S. Attorneys & Trademark Agents
Toronto, Ontario, Canada & Chicago, Illinois, United States
As authorized: Berger J.A.
Costigan J.A.
Ritter J.A.