CITATION: Atec Marketing Limited v. Heart and Stroke Foundation of Canada, 2007 ONCA 1

DATE: 20070102

DOCKET: C44365

COURT OF APPEAL FOR ONTARIO

On appeal from the judgment of Justice C. Raymond Harris of the Superior Court of Justice dated September 30, 2005, with reasons reported at 2005 CanLII 44381 (ON S.C.), (2005), 12 B.L.R. (4th) 263.

E N D O R S E M E N T

[1]               In 1983, Sue Kalbfleisch and Andy Kalbfleisch formed Atec Marketing Limited, an Ontario company that produces jump ropes.  Atec supplied jump ropes to the Heart and Stroke Foundation of Canada and its provincial arm, the Heart and Stroke Foundation of Ontario (the “Foundation”) for use in a fundraising program called “Jump Rope for Heart” (the “Program”).

[2]               Atec was the exclusive supplier of jump ropes and associated educational materials to the Foundation for nineteen years.  During that time, Atec worked closely with the Foundation to promote the Program.  The Kalbfleischs devoted significant time, effort and resources to help “grow” the Program.  Among other things, they: sponsored elite skipping events; carried out an advertising campaign for the Program in the print media; placed the Program logo on Atec’s retail product packaging to promote the Program; produced a videotape to promote the Program that was supplied to the Foundation at cost; and, made many donations of various types.  Sue Kalbfleisch was also a coach, workshop leader and guideline author for the Foundation’s demonstration teams that visited schools to demonstrate techniques and promote the Program.    

[3]               When the Foundation ended its relationship with Atec in 2002 because a new and cheaper supplier of jump ropes had been found, Atec sued.  It claimed that the nature of its relationship with the Foundation was such that it was entitled to reasonable notice of termination.

[4]               In a judgment dated September 30, 2005, Harris J. dismissed Atec’s claim.  The trial judge found that the relationship was not such that Atec was entitled to notice prior to termination.  Further, he found that even if the relationship created such an obligation, the Foundation had grounds on which to terminate the relationship without notice. 

[5]               Atec appeals. 

[6]               The trial judge gave three reasons for holding that the Foundation was entitled to terminate its relationship with Atec without notice.  These reasons are summarised in para. 54 of the reasons:

[54]     After Heart and Stroke appointed a new National Director the representatives of Atec became increasingly difficult to work with.  They attempted to dominate and control an organization that was not theirs.  They published a report that had the tone of a superior who was chastising an employee who had made a serious mistake.  And most importantly, Atec refused to reduce its artificially inflated and uncompetitive price.

[7]               Earlier in the reasons, the trial judge made findings that support these conclusions.  Paragraphs 19 and 25‑27 of the reasons are significant in this respect.  Those paragraphs are set out below: 

[19]     During his testimony, Andy Kalbfleisch conceded that he had chosen to focus primarily on becoming an industrial supplier rather than a retail supplier.  It also was revealed at trial that after the completion of this non-competition agreement, and unbeknownst to the Defendant, Atec charged a hidden premium on each rope it sold to the Defendant to compensate itself for the lost school market.  For purposes of context the Defendant was purchasing upwards of 400,000 skip ropes annually.

. . .

[25]     Atec perceived Heart and Stroke to be moving the Jump program away from its skipping ropes and fitness, towards a fundraising focus.  In an effort to deter this change, Atec unilaterally prepared and published a report on youth fitness.  The report was critical of the decline of the Jump program and the concurrent decline in youth fitness across Canada.  It was written in an overbearing, demanding and harsh tone. Also the report was distributed to a list of recipients unilaterally determined by Atec including some outside the Defendant’s organization. All in all it was an intrusion by a supplier into its customer’s policies the likely purpose of which was to increase skipping rope sales.   It comes as no surprise that this report did not sit well with Heart and Stroke.

[26]     From the evidence that I have heard regarding the falling out between the parties, it is clear that the belligerent, overbearing and presumptuous attitude of Andy and Sue at Atec was the singular cause.  The stability and harmony of the past had instilled a false sense of importance in Andy and Sue Kalbfleish.  They sought to run the Jump program regardless of the fact they were merely a supplier of skipping ropes.

[27]     Also during this time, Atec was asked to reduce the prices of its skipping ropes.  When it refused to do so, Heart and Stroke found a more competitive supplier.  In March of 2002 Atec was informed of this decision.  Heart and Stroke notified Atec that it would not be the sole supplier of skipping ropes, but would be allowed to provide a quote along with other suppliers.

[8]               While it is arguable that the trial judge’s description of the report is unduly harsh, we are satisfied that he was entitled to make the balance of the findings and, thus, to conclude that the Foundation was entitled to terminate the relationship without notice.

[9]               In light of this conclusion, it is unnecessary to consider Atec’s argument that the relationship between it and the Foundation is of an intermediate nature such that a requirement for reasonable notice of termination may be implied.  See 1193430 Ontario Inc. v. Boa-Franc Inc. 2005 CanLII 39862 (ON C.A.), (2005), 78 O.R. (3d) 81 (C.A.); leave to appeal to S.C.C. refused, 31276 (April 13, 2006).  It is unnecessary, as well, to decide whether the trial judge correctly applied the law in concluding that the relationship was not one of permanence, exclusivity or dependence.     

[10]         Accordingly, the appeal is dismissed with costs to the respondent fixed at $5,000, inclusive of disbursements and GST.

“R. Roy McMurtry C.J.O.”

“E. E. Gillese J.A.”

“Robert P. Armstrong”