Tobmar Newstands Inc. v. 1191767 Ontario Inc.

Between
Tobmar Newstands Inc. and Tobmar Investments International
Inc., applicants, and
1191767 Ontario Inc., operating as Cancafe International,
Karim Damji, Alnasir Damji, Mobina Damji and Papa-Jones Café
Inc., respondents

[2000] O.J. No. 2471
Court File No. 99-CV-167980

Ontario Superior Court of Justice
Motions Court
E. Macdonald J.

Heard: June 19, 2000.
Oral judgment: June 27, 2000.
(13 paras.)

Counsel:

1      E. MACDONALD J. (orally):— The titled proceeding is contained on the application record which I have endorsed today as follows:

       June 19, 2000

       Mr. Klaiman for the applicants,

2      The applicants, Tobmar Newstands Inc. ("Tobmar"), operate as a franchiser under the trade name "Gateway on the Go".  Tobmar Investments International Inc. ("Tobmar Investments") is a leasing company which subleases premises to franchisees.

3      The premises in issue in this application are located at the Oakville Go Station.  The franchised operation is a coffee shop selling coffee, muffins and other baked goods to the commuting public.

4      The respondents with the surname Damji are brothers and sister.  Karim and Alnasir entered into a franchise agreement (FA) on behalf of a company to be incorporated which is now 1191767 Ontario Inc. ("1191767"). Their sister was a shareholder of 1191767 until August 14, 1996.  The sale of her shares and her resignation as an Officer and Director of 1191767 is a highly contentious issue in this application

5      It is highly relevant because the applicants allege that by reason of the terms of the FA, she, by her acts, in commencing the operation of Papa-Jones Café Inc., has caused a breach of the FA.  She is the sole officer and shareholder of Papa-Jones Café Inc. ("Papa-Jones"). Papa-Jones is small coffee hut located 200 yards from the Oakville Go Station which commenced operations in November 1998.  Mobina, employed on a full-time basis with the CIBC, operates this coffee hut from 6:00 a.m. to 8:00 a.m. five days a week.  The sales reported, are contained in the materials herein, and reveal that the sales on a monthly basis range from $654.00 to $1,712.00.  She says that she generates $50.00 net profit per day.  The lease of the premises for the operations of Papa-Jones was negotiated with CN by her brother, Karim.

6      I will not reproduce the parts of the FA that are relevant to the determination of the relief sought.  Counsel took me through these provisions in detail.  Suffice it to say, that the applicants seek to terminate the FA on the grounds that the Damji respondents have breached the FA in that they have, by operating Papa-Jones, diverted income away from Gateway on the Go at the Oakville Station, thereby reducing Tobmar's royalty income.  The applicants also say that they have breached the non-competition covenant contained in the FA.

7      There is compelling evidence that the Damji respondents have been less than honest in their dealings with Tobmar.  It is of great concern to this court that they may think, by reason of the results of this application, that their approach to the conduct of business is approved by this court.  On the contrary, it is an approach which, in some instances is offensive, because it suggests that courts are so naive as not to be able to see through it.  I refer to the state of the documentation and the absence of accounting and other records that would confirm what they say.

8      To give but one example, I refer to the coffee cup issue.  The survey does not at all persuade me.  It is not independent and is remarkable by the number of "Nos" that are checked off on the document.  The "testing" of the cups carried out by a competitor of Tobmar is in the same category. Attempting to legitimize one's position or behaviour with such evidence is offensive to the court.

9      Having made these observations, I keep in mind, at this stage of this application, that I am being asked to terminate the FA when I am unable to make the findings of credibility that are necessary to put an abrupt end to a business arrangement which appears, but for these issues, to have continued without incident.  More importantly, it is arguable on the face of the documentation, that there are triable issues between the parties.  Although, this is not framed as an application for an injunction, the court must keep in mind that the relief sought is an extraordinary remedy and should only be granted in extraordinary circumstances.

10      For these reasons, the application is dismissed. I direct a trial of the issues as defined in this application. I will assist the parties in arrangements to expedite such a trial.

11      The respondents carrying on business at the Oakville Go station are to commence forthwith using only those coffee cups which are approved by Tobmar.

12      Re Costs:  As the applicants have been partially successful, I award them part of their costs of this application which I fix at $3,000.00.  These costs are payable in the cause.

13      I order that this matter be transferred to the Commercial List.

E. MACDONALD J.