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Author Archives / Thomas N.T. Sutton

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Update: Ontario Court Grants Franchisees’ Claim for Ongoing Disclosure as the Pet Valu Saga Continues

Posted in Retailing

Last year, we discussed the Ontario Superior Court’s decision to substantially dismiss a class action commenced by former Pet Valu franchisees on summary judgment (here). On the basis that new evidence had arisen on the motion that could support a new common issue, Justice Belobaba deferred answering two related issues until argument could be heard on the potential new issue. The Court recently released the latest decision in the action (1250264 Ontario Inc. v. Pet Valu Canada, 2015 ONSC 29), and the final outcome of this dispute still remains to be seen.

Justice Belobaba ultimately declined to … Continue Reading

Ontario Court Substantially Dismisses Franchise Class Action Regarding Passing On of Volume Rebates

Posted in Franchising

A recent decision of the Ontario Superior Court, which resolved numerous common issues in a franchise class action on summary judgment, provides practical guidance to franchisors on how to reduce legal risk relating to the sharing of volume discounts or other pricing benefits with franchisees.

In 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2014 ONSC 6056, Justice Belobaba decided five of seven common issues certified in a class proceeding brought by about 150 former franchisees against Pet Valu, a franchisor. The decision includes three helpful lessons for franchisors:

  1. Similar to the well-known Tim Horton’s case from 2012
Continue Reading

Ontario Superior Court refunds franchise fee on the basis of frustration of contract

Posted in Franchising

The Ontario Superior Court recently affirmed a Small Claims Court decision returning a franchise fee to a franchisee where the franchise location contemplated was no longer available – in spite of a clause in the franchise agreement stating that the franchise fee “is under no circumstances refundable”. Interestingly, the decision is based on the common law doctrine of frustration of contract, without reference to franchise disclosure legislation.

In Dhillon v. PM Management Systems Inc., 2014 ONSC 5407, the franchisee entered into an agreement with the franchisor to own and operate a specialty health services business at 20 Cottrelle Blvd., … Continue Reading

Ontario Court Certifies Franchise Encroachment Claim as Class Action

Posted in Franchising, Litigation

The Ontario Superior Court of Justice recently certified a class action by dealers of a home furnishings company in 1291079 Ontario Limited v. Sears Canada Inc.

The dealers are outlet stores for a national department store (the putative franchisor) and allege that they are “franchisees” within the meaning of Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the Act).… Continue Reading

Drafting General Release Clauses in Franchise Agreements: A Cautionary Tale from the Ontario Superior Court of Justice

Posted in Franchising, Litigation

The following article may be of interest to readers of this blog:

Drafting General Release Clauses in Franchise Agreements: A Cautionary Tale from the Ontario Superior Court of Justice

The Ontario Superior Court of Justice recently struck down a general release clause in a franchise agreement, even though the franchisor only sought a release with respect to non-statutory claims. The case provides important guidance regarding how to draft a release that will withstand scrutiny under section 11 of the Arthur Wishart Act (Franchise Disclosure) (Act) and the parallel provisions in the franchise legislation in Alberta, Manitoba, New Brunswick and P.E.I. … Continue Reading

Legal Risk Management in Franchise System Change

Posted in Franchising

As a matter of competitive necessity, franchisors must continually evolve and adapt their products, services and internal operations. However, given the risk of litigation and indeed class actions from franchisees and dealers who may be negatively affected, franchise system change must be managed with special care. In a recent article published in the Ontario Bar Association’s Focus on Franchising, members of McCarthy Tétrault’s Franchise & Distribution Group have reviewed the legal trends that emerge from the franchise system change case law in Canada and distill several risk management strategies. The authors reach three key conclusions:

a.     Every proposed policy … Continue Reading

Franchise Lessons to Be Learned From the Shoppers Drug Mart Certification Decision

Posted in Corporate Matters, Franchising

The Shoppers Drug Mart franchisees recently took another step forward in their class action lawsuit. Building on his earlier decision discussed here, Justice Perell for the Ontario Superior Court of Justice (ONSC) certified a number of elements of the plaintiffs’ action as a class proceeding. In this article, we have focussed on the three aspects of the decision that, in our view, are most significant to franchise and distribution systems.… Continue Reading

Ontario Court of Appeal Considers Scope of Franchisor’s Duty to Disclose Outside Mandatory Disclosure Context

Posted in Corporate Matters, Franchising, Real Estate

In an important new decision for franchisors, 3574423 Canada Inc. v. Baton Rouge Restaurants Inc. (Baton Rouge), the Ontario Court of Appeal (ONCA) recently considered the scope of informational disclosure a franchisor is required to provide to one of its franchisees outside the context of statutory disclosure obligations. In Baton Rouge, the ONCA considered the scope of a franchisor’s duty of good faith when supplying an existing franchisee with information concerning a new location.

This appeal was from a 2012 trial decision of Justice Brown, which we previously discussed here. The trial decision clarified a number of issues … Continue Reading