The case was commenced by all Pet Valu franchisees alleging breach of contract and breach of the Arthur Wishart Act (Franchise Disclosure), 2000, amongst other complaints. This Class Action lasted a total of 7 years. The Class Action was led by a representative plaintiff who lead the litigation on behalf of all the franchisees. The original litigation being 1250264 Ontario Inc. v Pet Valu Canada Inc., 2016 ONSC 5496.
Pet Valu successfully defended the Class Action. The courts then awarded Pet Valu the amount of $1,703,896.94 inclusive of taxes and disbursements. Additional costs were awarded to Pet Valu meaning the representative plaintiff owed Pet Value $1,736,657.54 in total plus interest.
The plaintiff in this case was a shell corporation with no assets and as mentioned above was led by a former franchisee owner. However, Robert Rodger (Rodger) was the sole officer, director and shareholder of the shell company. Pet Valu sought to obtain the costs award they were due from the outcome of the case 1250264 Ontario Inc. v Pet Valy Canada Inc., 2016 ONSC 5496 from Rodger personally. Rodger had provided a personal continuing guarantee of performance to its obligation to Pet Valu. Roger had also provided Pet Valu with an indemnity under the original franchise agreement he had signed.
Justice Nishikawa held that Rodger was personally liable for the Costs Award due to the franchise agreement signed with Pet Valu and as a result of the continuing guarantee provided.
The decision highlights a number of points around franchise litigation. These are outside the scope of this article. Instead we will focus on the impact to class actions and their representatives.
The personal ramifications for representative plaintiffs are severe. In this instance a representative plaintiff was held liable for $1,736,657.54 plus interest. This was due to the continuing guarantee Rodger had provided as the representative plaintiff. It highlights the importance of having After The Event insurance in place or an indemnity from a third party litigation funder. Planning how you will manage a potential adverse costs exposure if crucial when approaching litigation of this magnitude.