Contracts/Franchises: Duty to Act Fairly & In Good FaithAddison Chevrolet Buick GMC Limited v. General Motors of Canada Limited, 2016 ONCA 324 (CanLII)
The Respondents were dealers of General Motors vehicles in the Greater Toronto Area. Their dealer agreements are with General Motors Canada Limited (GMCL). GMCL was a subsidiary of General Motors Corporation (GM) in the U.S. In 2009, the auto industry in Canada and the U.S. had fallen into financial difficulty. GM commenced bankruptcy proceedings in the U.S. GM’s assets were transferred to a new company, the Applicants, General Motors Company, or its subsidiary, General Motors LLC (collectively GM US). As part of the reorganization process, GM US acquired the shares of GMCL. The governments of Ontario and Canada invested substantial funds in GM US and became shareholders. GM US then emerged from bankruptcy. As a result of the financial difficulties, GMCL restructured its dealer network by closing some dealerships, discontinuing production of some vehicles and offering opportunities to participate in new brands of vehicles. The Respondent dealerships signed Dealer Sales and Service Agreements with GMCL with respect to this restructuring. The motion judge proceeded on the assumption the agreement between the parties was a franchise agreement under the Arthur Wishart Act (Franchise Disclosure). The Respondent dealerships commenced an action against the Applicants. Their claim centered on the allegations the Applicants owed and breached their duty to act fairly and in good faith under the franchise agreement and at common law. The Applicants brought a motion under Rule 21 of the Rules of Civil Procedure alleging it did not owe a duty of good faith to the Respondent dealerships. The motion judge agreed with the Applicants and dismissed the claim. The C.A. allowed the appeal and dismissed the motion to strike. "The application for leave to appeal...is dismissed with costs."