A recent decision of the Ontario Court of Appeal confirms the strict nature of the disclosure requirements under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “Act”).
In Mendoza v. Active Tire & Auto Inc., 2017 ONCA 471, the Court of Appeal made the following five key findings:
1. First, the Court reviewed the case law on the test for whether a disclosure document is fatally deficient under the Act, thus entitling the franchisee to rescind the franchise agreement within two years of the date that the franchise agreement is signed. The Court confirmed that … Continue Reading
The Final Report has just been released for the Changing Workplaces Review, containing recommendations for legislative changes to Ontario’s Employment Standards Act, 2000 and Labour Relations Act, 1995. A number of changes are either specific to franchises or may have an impact depending on the sector of the franchise and the way the franchise operates. Here we have summarized recommendations that are most relevant franchisors.
Recommendations concerning the Ontario Labour Relations Act, 1995 (“LRA”):
… Continue Reading
- Broader Based Bargaining: The Final Report recommends that the Ontario Labour Relations Board be given certain powers to implement a model of centralized bargaining,
In the recent decision Dairy Queen Canada, Inc. v. M.Y. Sundae Inc., 2017 BCSC 358, the Supreme Court of British Columbia upheld a Mutual Cancellation and Release agreement in the context of a franchisor-franchisee relationship. The decision confirms that, absent evidence of duress or unconscionability, a franchisor is permitted to take advantage of a superior bargaining position, and obtain an enforceable release when a franchisee is in default. The decision only considered common law principles as opposed to franchise legislation. The Court also awarded damages for the tort of passing off against a franchisee who refused to … Continue Reading
In the recent decision of Cellular Baby Cell Phones Accessories Specialist Ltd. v. Fido Solutions Inc., 2017 BCCA 50 the BC Court of Appeal held that the long delay in the exercise of a supplier’s contractual right to terminate a dealership agreement rendered the termination improper. The court also held that a dealer’s obligation to mitigate its damages upon termination was met, even though the dealer declined to sell the dealership to a third party.
In this case, the supplier terminated the dealership agreement on the basis that the dealer had failed to meet quarterly sales quotas on three … Continue Reading
As we reported here, British Columbia’s new Franchises Act, SBC 2015, c 35 (the “Act”) and accompanying Franchises Regulation (the “Regulation”) will come into force effective February 1, 2017. From this date, franchisors granting, renewing or extending franchises in B.C. will be subject to the new legislation. Franchisors should also be aware that some provisions of the Act, such as the right to associate, apply to franchise agreements entered into prior to February 1, 2017.
The most important change for franchisors operating in B.C. will be the comprehensive disclosure regime articulated in s. 5 … Continue Reading
Effective February 1, 2017 BC will become the 6th Canadian province to enact franchise legislation.
On October 18, 2016, McCarthy Tétrault hosted a seminar that featured highlights of the new BC Franchises Act and Franchises Regulation and issues arising therefrom, including:
- An overview of the framework of the BC Franchises Act and Franchises Regulation;
- practice points for preparing compliant national franchise disclosure documents; and
- other important legal developments to be mindful of, including restrictions on obtaining releases of claims under the act and jurisdictional issues
The presentation can be accessed here.
Feel free to direct any questions … Continue Reading
Further to our previous posts, available here and here, the much anticipated BC Franchises Regulation (the “Regulation”) was released today, and it was proclaimed that the Franchises Act, SBC 2015, c 35 will come into force effective February 1, 2017. The Regulation and order of the Lieutenant Governor in Council can be accessed here. BC is now the sixth province to enact uniform franchise legislation.
The Regulations specify the information to be included in a disclosure document, including information related to: risk warnings, financial statements, and other prescribed information related to the franchisor and the franchise. By … Continue Reading
In the recent decision of Raibex Canada Ltd. v. ASWR Franchising Corp., the Ontario Superior Court of Justice allowed a franchisee to rescind its franchise agreement on the basis that it signed the agreement at a time when critical information regarding the costs to develop the franchise and leasing obligations had not yet come into existence. As a result, the Court found that the franchise grant was “premature” and the disclosure document provided to the franchisee deficient.
At issue in this case, was the franchisor’s failure to provide details relating to a sublease and franchise development costs, … Continue Reading
The Alberta government has recently decided to extend its Mature Franchisor Exemption under the Franchises Act until its next review in 2021. Under the Franchises Act Exemption Regulation, large franchisors meeting certain financial thresholds and holding a high level of operational experience are exempt from including financial statements as part of their Franchise Disclosure Document to prospective franchisees. In extending this exemption, the Alberta government has kept its legislation consistent with other provincial franchise legislation. Going forward, this move should help Alberta to remain attractive to franchise system investors.… Continue Reading
Further to our update in April Ontario has approved the amended regulations to the Arthur Wishart Act (Franchise Disclosure), 2000 to permit electronic delivery of franchise disclosure documents (“FDD’s”). Regulation 581/00 comes into effect July 1, 2016.
Effective July 1, 2016, franchisors will now be able to deliver FDD’s electronically or by courier, in addition to the previously approved methods of in person or registered mail delivery. The complete changes may be viewed here.
With these amendments, Ontario franchise legislation has received a mini-modernization-makeover.
The new legislation provides that electronically delivered FDD’s must meet the following conditions:
… Continue Reading
Ontario is proposing to amend Regulation 581/00 under the Arthur Wishart Act (Franchise Disclosure, 2000) to permit franchisors to electronically deliver disclosure documentation (“FDD”) to prospective franchisees as well as deliver FDD by courier. See the proposed amendments here.
The draft legislation provides that electronically delivered FDD’s must be in a form that enables the recipient to view, store, retrieve and print it, contains no links to external content and has an index for each separate electronic file that describes the subject matter therein. Electronic delivery of FDD’s will only be effective were the franchisor receives an electronic … Continue Reading
On March 17, 2016, the Supreme Court of Canada (“SCC”) dismissed the Dunkin’ Brands Canada Ltd.’s application for leave to appeal from the judgment rendered by the Québec Court of Appeal on April 15, 2015.
By dismissing the application for leave, the SCC determined that it would not review the Québec Court of Appeal decision which, notably, ruled that the obligations to enhance and protect the brand are implicit to franchise agreements. A more detailed analysis of this decision is available in our previous publication.
As is customary, the SCC did not provide its grounds for dismissing the application … Continue Reading
The recent decision of the Ontario Court of Appeal in 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONCA 24 clarifies and narrows the scope of the duty of good faith and fair dealing imposed on franchisors under section 3 of the Arthur Wishart Act (Franchise Disclosure) (“AWA”) and expressly cautions against zealous judicial intervention in the framing and amendment of common issues in class action proceedings.
Read more in the original post by our colleagues at Canadian Appeals Monitor, McCarthy Tétrault’s blog focusing on information and commentary on upcoming and recent Appeal Court decisions.… Continue Reading
In Home Instead Inc. v. 244674 Ontario Inc. et al. (“Home Instead”), the Ontario Superior Court of Justice (the “Court”) considered the granting of an injunction against the franchisees, 244674 Ontario Inc. et al. (“244”) leading to the termination of their businesses where the goodwill and reputation of Home Instead (the “Franchisor”) was at stake. The two principles Mr. Weinert and Ms. Reid were allegedly operating their two separate franchises in common ownership in breach of the terms of their respective franchise agreements. Their franchise agreements did not permit the operation of … Continue Reading
On October 30, 2015, the Divisional Court dismissed a motion brought by the Plaintiff franchisees for leave to appeal the decision of the Ontario Superior Court of Justice in Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd. In that decision, General Motors of Canada successfully struck four paragraphs of the statement of claim as it related to the duty of good faith. A summary of that decision can be found in the following link:
http://www.consumerretailadvisor.com/2015/08/not-everyone-is-a-party-some-comfort-for-foreign-franchisors/… Continue Reading
In MEDIchair LP v. DME Medequip Inc. (“MEDIchair”), the Ontario Superior Court of Justice (the “Court”) considered whether a restrictive covenant contained in a franchise agreement is enforceable by a franchisor, MEDIchair LP (the “Franchisor”) against its corporate franchisee, 2169252 Ontario Inc. (“216”) and its two principals, Allison Rolph and Ron Seiderer (collectively, the “Respondents”).The Court also considered circumstances where a franchisor may rely on the exemption set forth in Section 5(7)(a)(iv) of the Arthur Wishart Act (Franchise Disclosure), 2000 (the “Act”) to avoid the disclosure obligations … Continue Reading
As we recently wrote about here and here, BC will soon become the sixth Canadian province to enact uniform franchise legislation. On October 20, 2015, Bill 38 – Franchises Act passed Third Reading in the BC Legislature. The Provincial Government is now seeking input on the Franchise Act (Disclosure) Regulation (the “Regulation”). The legislation will come into force only after the Regulation is complete. The following is a summary of what to expect from the Regulation.
The proposed Regulation will specify what information must be included in a disclosure document and the methods of delivery.
Franchisors will benefit from … Continue Reading
The recent common issues trial in Trillium Motor World Ltd. v. General Motors of Canada Ltd. contains some interesting lessons for future cases involving system changes, in particular the court’s recognition that challenges to franchisor decisions on system-wide issues must be examined through the lens of “commercial reality”. Below is a link to a short article which provides a concise discussion of this case.
http://www.lawtimesnews.com/201509074901/focus-on/focus-gm-ruling-offers-a-lot-of-fodder-for-franchise-class-actions… Continue Reading
On October 6, 2015 the B.C. Provincial Government introduced Bill 38 – Franchises Act in the Provincial Legislature. We posted here, discussing the Bill’s primary contributions to the law governing franchises in B.C.
Since then, Bill 38 has moved quickly through the Legislature. It was debated during second reading and received broad support from both Government and Opposition members. On Tuesday, October 20, 2015, it was reported complete without amendment, read a third time, and passed. It is now in the final stage, awaiting Royal Assent. In due course, we will post a blog comparing B.C.’s franchise regime to … Continue Reading
In recent years, British Columbia has been laying the groundwork for the introduction of franchise legislation in this province. We have posted about these initiatives on various occasions, including here and here. On October 5, 2015, these efforts culminated in the Provincial Government’s introduction (first reading) of Bill 38 – Franchises Act.
Bill 38 is modeled after the similar legislation already in force in Ontario, Alberta, Manitoba, New Brunswick and Prince Edward Island. It will govern franchise agreements for franchises operated either wholly or partly in British Columbia. Its overarching purpose is to balance protections for potentially vulnerable … Continue Reading
A recent case, Addison Chevrolet Buick GMC Limited et al. v. General Motors of Canada Limited et al. (“Addison GMC”), considered the role of a foreign franchisor that is not a party to the applicable franchise agreement. In Addison GMC, the Ontario Superior Court of Justice reflected on a claim by a group of Canadian automobile dealers (the “Plaintiffs”) that certain bailout monies invested in their US parent company, General Motors Company (“New GM”) in connection with the bankruptcy reorganization (the “Reorganization”) of General Motors Corporation (“Old GM”) should … Continue Reading
In 2313103 Ontario Inc. et. al. (“231”) v JM Food Services Ltd. et. al. (“JM”), the Ontario Superior Court of Justice (the “Court”) considered whether the shareholders of a corporate franchisee (“Franchisee”) can invoke the same statutory rights afforded to franchisees under the Arthur Wishart Act (Ontario) (the “Act”). The ruling of the Court confirms that shareholders of a Franchisee must look to the remedies and rights afforded to them in applicable corporate legislation (in this case the Business Corporations Act (Ontario) (the “OBCA”)) rather than the … Continue Reading
In 2240802 Ontario Inc. v. Springdale Pizza Depot Ltd., the Ontario Court of Appeal (the “Court”) held that a franchise disclosure document provided by a franchisor to a franchisee contained certain material deficiencies such that it effectively amounted to no disclosure under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “Act”). This entitled the franchisee to rescind the franchise agreement and to receive financial compensation.
The Court outlined the following three deficiencies in the disclosure document: (i) financial statements which were compiled but not audited or reviewed; (ii) a … Continue Reading
Franchise agreements often contain covenants restricting the activities of a franchisee both during the term of the franchise agreement and for a period afterwards. In 1598631 Ontario Inc. v. Imvescor Restaurant Group Inc. (“Imvescor”), the Ontario Superior Court of Justice (the “Court”) had the opportunity to comment on the following restrictive covenant upon application by a former franchisee (the “Franchisee”) for a declaration that the covenant be void as ambiguous and/or as an unreasonable restraint of trade:
“Franchisee agrees that for a period of five years after the termination of this Agreement or expiration … Continue Reading