By: Anthony Pugh
Editor: Ben Hanuka
In Shoppers Drug Mart Inc. v. Mang, a May 14, 2021, decision of the Supreme Court of British Columbia, the court struck a few paragraphs from the defence (Response to Civil Claim) of the self-represented defendants, who were former Shoppers Drug Mart franchisees in Vancouver and Powell River. Some of the paragraphs that the court struck contained scandalous allegations, such as allegations of gossip, bullying, and evidence about irrelevant facts; other allegations did not advance the defence.
The court also struck the defendants’ counterclaim in its entirely. The counterclaim was based on an alleged breach of a promise for another store and sought bad faith damages for alleged poor corporate social responsibility – these allegations had not pleaded material facts and were not based on valid legal causes of action.
Shoppers Drug Mart terminated the franchise agreement with Mr. Mang, pharmacist, and related companies, alleging misappropriation of money and breach of the franchise agreement, and brought a court action against them. Among other things, Shoppers alleged that Mr. Mang had been occasionally overdrawn in his accounts, and that he withdrew funds of $470,000, after receiving default notices from Shoppers. It claimed that Mr. Mang had an equity shortfall of $418,284. It also alleged that he incurred $70,000 to $80,000 of extreme and unnecessary personal expenses, mostly relating to meals and entertainment, that he misrepresented as promotional expenses.
Mr. Mang denied these allegations, taking the position that he maintained an equity position of $470,000, which he removed after leaving the franchise. He claimed the funds were own and that his expenses were legitimate business expenses for promotional and related purposes.
Mr. Mang and the related companies filed a defence (response to civil claim) and counterclaim against Shoppers. The defence and counterclaim contained contentious allegations, as noted earlier. Shoppers brought an application to challenge the defence and counterclaim, alleged that they failed to state a reasonable legal defence and cause of action and that the allegations were vexatious, embarrassing, and scandalous.
The offending paragraphs included allegations of bullying and harassment in the workplace – Mr. Mang alleged that competing franchisees were responsible for that. The paragraphs also alleged favourtism and an overall cruel and maligned culture, which Shoppers allegedly fostered.
The court held that these allegations were scandalous and amounted to pleading evidence (which is not permitted), rather than material facts.
Other allegations in Mr. Mang survived the court challenge and were not struck out, including allegations that Shoppers provided and later withdrew assurances to him that he could open another store, coupled with a threat of immediate termination. This, if proven, could constitute bad faith conduct and failure to adhere to reasonable commercial standards.
The court also struck down the counterclaim for failing to disclose a reasonable cause of action, albeit with an opportunity to seek leave to file an amended counterclaim.
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