Franchise Law

The plaintiff, First of Five Incorporated, sought an interlocutory injunction to prevent the defendants, Recipe Unlimited Corporation and J.S.M. Corporation (Ontario) Ltd., from terminating a franchise agreement, lease, and sublease pending the outcome of litigation.

The court found that the plaintiff had a contractual right to renew the franchise, subject to certain conditions, and that the issues raised—including good faith, payment disputes, and the effect of the Arthur Wishart Act—were serious and required trial.

The court held that irreparable harm would result if the injunction were not granted, and the balance of convenience favored the plaintiff.

The injunction was granted, and costs were awarded to the plaintiff.

The Body Shop Canada Limited (TBS Canada) brought companion motions in its CCAA proceeding seeking approval of an asset purchase agreement (APA), a sealing order, corporate name change, assignment of material agreements, expansion of the Monitor's powers, a declaration of WEPPA eligibility for terminated employees, and an extension of the stay of proceedings.

A key aspect was seeking declaratory relief regarding franchise disclosure obligations under the Arthur Wishart Act, 2000, to facilitate the APA closing, as the UK Purchaser could not provide a disclosure document within the required timeframe.

The court granted all requested relief, finding the APA transaction beneficial for stakeholders, the sale process reasonable, and the franchise disclosure exemption appropriate given the Purchaser's sophistication and consent, and the critical need to close the transaction to preserve jobs and value.

The Franchisor, Meltwich Hospitality Group Inc., sought summary judgment on its crossclaim for contribution and indemnity against the Franchisee, 2562583 Ontario Inc., o/a Meltwich Food Co., and its principal, Janarthanan Jeyaparan.

The crossclaim arose after the Franchisor settled with the Landlord, Ritson Division Retail GP Limited, following the Franchisee's default on a lease and subsequent abandonment of the premises.

The Franchisor claimed the settlement amount and legal fees incurred in defending the Landlord's action, relying on indemnification clauses in the Franchise Agreement and Mr. Jeyaparan's personal guarantee.

The Franchisee and Mr. Jeyaparan raised unsubstantiated defenses of "subterfuge" and misrepresentation by the Franchisor, and claimed they did not receive a full copy of the lease.

The court found no merit to these defenses, concluding there was no genuine issue requiring a trial.

The motion for summary judgment was granted, holding the Franchisee and Mr. Jeyaparan jointly and severally liable for the claimed damages and costs.

The plaintiff, Qualicare Canada Inc., sought default judgment against the defendants for breaches of a franchise agreement and personal guarantees.

The defendants were noted in default.

The court applied the test for default judgment, finding that the plaintiff established liability based on deemed admissions and affidavit evidence.

The plaintiff was awarded $372,487.24 in damages, including lost royalties, branding fees, and legal fees, plus pre-judgment interest at a contractual rate of 36%, and fixed costs of $11,483.29.

The plaintiff, Tripsetter Inc., brought a motion seeking leave to add Tweed Inc. and Jurgen Schreiber as defendants, alleging they are "franchisor's associates" under the Arthur Wishart Act (Franchise Disclosure), 2000.

The proposed defendants objected, arguing the claim was out of time due to a lack of notice of rescission and that the proposed pleading failed to establish the necessary control for a franchisor's associate.

The court found that the Act does not require notice of rescission to be given to an alleged franchisor's associate for a claim for damages to proceed.

It also determined that the limitation period argument was not clear-cut and could be argued at trial, as the plaintiff's knowledge of Tweed's full involvement only came to light during discovery.

The court found the proposed pleading, including the "de facto franchisor" concept, to be sufficient for the purpose of a pleadings amendment motion, noting that amendments are to be read generously.

The plaintiff, Tripsetter Inc., brought a motion seeking a further and better affidavit of documents from the defendants, 2161907 Alberta Ltd., Canopy Growth Corporation, and Justin Farbstein, and answers to undertakings and a refusal.

The core dispute concerned whether the parties' relationship was a franchise or a license, impacting disclosure obligations under the Arthur Wishart Act.

The court ordered the production of a Franchise Disclosure Document and a Financial Projections Document, finding them relevant to the nature of the relationship and the defendants' disclosure exemption arguments.

However, the plaintiff's general request for a further affidavit of documents and its requests regarding the undertakings and refusal were dismissed.

Costs were awarded to the plaintiff.

This trial decision addresses a franchise dispute under the Arthur Wishart Act (Franchise Disclosure), 2000.

Franchisees sought rescission of their franchise agreements and damages, alleging the franchisor failed to provide a compliant disclosure document for a resale franchise.

The court found that the franchisor's involvement in the resale went beyond passive consent, triggering the disclosure obligation.

It determined that the disclosure provided was deficient, entitling the franchisees to rescission and damages.

The court also identified the franchisor's associates liable for damages and awarded substantial indemnity costs to the successful franchisees, citing the opposing counsel's conduct during trial.

The Court of Appeal dismissed an appeal concerning the rescission of a franchise agreement.

The trial judge had found that the franchisees were entitled to rescind the agreement under the Arthur Wishart Act due to the franchisor's failure to provide a signed and dated disclosure certificate, and held the franchisor's sole director personally liable as a "franchisor’s associate." The appeal court affirmed that the absence of a proper certificate is a fatal flaw in disclosure, not requiring proof of an inability to make an informed investment, and upheld the finding of personal liability based on the director's representations.

The defendants, comprising law firms and solicitors, brought two summary judgment motions seeking to dismiss professional negligence claims brought against them by the plaintiffs.

The plaintiffs alleged negligence for failing to advise them of their rescission rights under the Arthur Wishart Act (Franchise Disclosure) 2000.

The court dismissed both motions, finding that there were genuine issues requiring a trial regarding the scope of the retainers, the duty of care owed by the defendants, and causation.

The court emphasized the need for a trial to assess witness credibility and the necessity of expert evidence in professional negligence claims, and declined to grant partial summary judgment due to the interconnectedness and complexity of the claims.

The plaintiffs, a franchisor group ("Tiny Hoppers"), brought a motion for summary judgment seeking repayment of $500,000 and absolution from further payments, alleging the defendants (franchisees, "Dino & Kidz") breached a settlement agreement by failing to disassociate from the brand and making defamatory statements.

The defendants brought a cross-motion for summary judgment seeking dismissal of the plaintiffs' claim and payment of $224,000, the balance owing under the settlement.

The court found that the defendants had taken reasonable steps to disassociate themselves and had not made defamatory or disparaging statements.

Consequently, the plaintiffs' motion was dismissed, and the defendants' counterclaim for the outstanding payment was granted.

A franchisee, sued by a bank, issued a third-party claim against the franchisor seeking rescission of the franchise agreement for non-disclosure under the Arthur Wishart Act.

The franchisor argued that the third-party claim did not constitute proper notice of rescission.

The motion judge agreed, ruling that a pleading could not serve as the required notice.

The lawyer who drafted the third-party claim appealed.

The Court of Appeal allowed the appeal, holding that a pleading, specifically a third-party claim, could constitute sufficient written notice of rescission under s. 6 of the Arthur Wishart Act.

The court emphasized a generous interpretation of the remedial legislation, prioritizing substance over form, and clarified that the purpose of the notice is to advise the franchisor of rescission, not to act as a precondition to litigation.

The defendant/moving party, TDL Group Corp., brought a motion to strike the plaintiff's/responding party's Amended Statement of Claim.

The plaintiff, 6646107 Canada Inc., alleged breach of the original Franchise Agreement, breach of a subsequent oral "Renewal Agreement," and negligent/intentional misrepresentation regarding the non-renewal of its Tim Hortons franchise.

The court granted the motion in part, striking claims related to the breach of the original Franchise Agreement due to explicit non-renewal clauses and the absence of a free-standing duty of good faith.

However, the court dismissed the motion to strike claims concerning the oral Renewal Agreement and negligent/intentional misrepresentation, finding these issues involved mixed fact and law and were not plain and obvious to fail.

The plaintiff, a Tim Hortons franchisee, brought motions for certification of two class actions against the franchisor, The TDL Group Corp., for the purposes of a tentative settlement.

The first action concerned the use of the Ad Fund, and the second concerned the formation of a franchisee association.

The defendant consented to certification.

The court applied the criteria under section 5 of the Class Proceedings Act, 1992, noting that the requirements need not be as rigorously applied in a settlement context.

All five certification requirements were found to be met, including disclosure of a cause of action, identifiable classes (current and former franchisees), common issues, preferability of a class proceeding, and an adequate representative plaintiff with a litigation and notice plan.

The court ordered certification of both actions as class proceedings.

This decision addresses a motion to strike various claims in two proposed class actions brought by Tim Hortons franchisees against the franchisor, The TDL Group Corp. (TDL), and related corporate and individual defendants.

The claims included breach of trust, fiduciary duties, oppression remedy under the Canada Business Corporations Act (CBCA) and British Columbia Business Corporations Act (BCBCA), conversion, breach of contract (including implied duty of good faith), and statutory duties under the Arthur Wishart Act (fair dealing and right of association).

The court struck out most claims against the non-TDL defendants without leave to amend, finding a lack of material facts to support them or privity of contract.

Several claims against TDL, including breach of trust, fiduciary duties, CBCA oppression, and conversion, were also struck without leave.

Claims for breach of contract (including good faith) and statutory duty of fair dealing (s. 3 Wishart Act) against TDL were struck with leave to amend for particulars.

The claim for breach of the right of association (s. 4 Wishart Act) against TDL survived.

The court deferred the issue of declaratory relief and ordered the plaintiffs to serve amended statements of claim within 30 days, failing which the pleadings would be struck in their entirety.

The plaintiff, Hoya Lens Canada Inc., brought a motion to strike the defence and counterclaim of the defendants, 2364141 Ontario Inc. o/a Vision Tech Labs Ottawa, Carl Gauthier, and 3531244 Canada Inc., and for summary judgment.

The defendants had repeatedly failed to comply with discovery obligations, including non-attendance at examinations and inadequate document production, and engaged in delay tactics.

The court found that the defendants had demonstrated a complete disregard for the judicial system and that ordering re-attendance for discovery would be fruitless.

The court also addressed the arbitration clause in the franchise agreement, concluding that the defendants had attorned to the court's jurisdiction by undue delay in seeking a stay.

Consequently, the court struck the defence and counterclaim and granted summary judgment in favour of the plaintiff for unpaid fees, royalties, and product orders, totaling $235,402.63 and $17,841.29, plus interest and costs.

The appellant, principal owner of a Cora franchise, appealed a summary judgment against him as guarantor of the franchisee's indebtedness.

The appellant sought to assert a set-off and counterclaim for damages arising from the loss of a potential franchise sale that failed to close when the franchisee refused to provide the franchisor with a release as required by the franchise agreement.

The motion judge found no basis for set-off and determined the damages claim was statute barred.

The Court of Appeal upheld the motion judge's decision, finding the franchise agreement explicitly precluded set-off, the damages claim belonged to the franchisee not the appellant, and the limitation period had commenced before the appellant commenced the action.

The plaintiffs, a franchisee and its principals, moved for partial summary judgment seeking rescission of a franchise agreement due to alleged failures of disclosure under the Arthur Wishart Act (Franchise Disclosure), 2000.

The defendants brought a cross-motion for summary judgment to dismiss the claim.

The court found that the franchisor's disclosure document was egregiously deficient, specifically lacking a materially complete form of lease (including the head lease) and proper cost estimates for a conversion-type franchise.

The court rejected arguments that disclosure was impossible due to an undetermined location or that franchisee sophistication waived disclosure obligations.

The deficiencies amounted to a failure to provide a disclosure document, entitling the franchisee to rescission under s. 6(2) of the AWA.

The court also determined which corporate defendants were "franchisor's associates" and dismissed claims for misrepresentation and breach of good faith due to lack of focused argument.

All damages issues were referred to a Master.

The plaintiffs sued their former lawyers for solicitor's negligence, alleging they missed a limitation period in a prior action against Mitsubishi, thereby losing the opportunity to appeal on the merits of misrepresentation, negligence, and Arthur Wishart Act claims.

The defendant law firm moved for partial summary judgment to dismiss the misrepresentation component of the damages claim, arguing that the original motion judge's finding of no misrepresentations was not appealed.

The court granted the motion, finding that the plaintiffs' Notice of Appeal did not challenge the motion judge's findings on common law or statutory misrepresentation, thus no "lost opportunity" existed for this specific claim.

Costs were deemed a wash due to the defendants' initial broader motion.