Daniel Hamson

Three franchisees (Versatile, Everest, and Premium Host) sought to rescind their franchise agreements with Paramount Fine Foods under the Arthur Wishart Act, alleging the franchisor failed to provide compliant disclosure documents.

The court found that Paramount was not exempt from its disclosure obligations.

However, Versatile and Everest failed to prove on a balance of probabilities that the disclosure documents they received were fatally flawed, so their rescission claims were dismissed.

Premium Host successfully established that Paramount failed to disclose material financial information in a single document, rendering its disclosure fatally flawed.

Premium Host's rescission was deemed valid, and it was awarded statutory compensation against the franchisor and its associates, including Paramount Leasing and the Manager of Franchising.

The moving parties (respondents in the main application) brought a motion to dismiss an application to set aside an arbitral award for lack of jurisdiction.

The responding parties (applicants in the main application) sought to set aside the award on the basis of a reasonable apprehension of bias, as the arbitrator had been retained by the moving parties' counsel in an unrelated matter.

The moving parties argued that under Articles 12 and 13 of the Model Law, the responding parties were required to submit their challenge to the arbitrator first, since the arbitration was still extant regarding costs and interest.

The court dismissed the motion, finding that the arbitrator was functus officio regarding the final award on the merits, and the responding parties were entitled to seek recourse under Article 34 of the Model Law.

The applicants were successful in an application to disqualify an arbitrator and sought partial indemnity costs of $21,411.22.

The respondents argued the amount was too high and proposed $8,761.96, noting the brief hearing.

The court found the applicants' proposed amount was within the norm for a short but legally significant application.

The court exercised its discretion to award the applicants costs in the rounded amount of $21,400, inclusive of fees, disbursements, and HST.

The plaintiff was wholly successful on an interim injunction motion and sought partial indemnity costs of $79,836.56.

The plaintiff argued costs should be awarded immediately as there might not be a trial, while the defendants argued costs should be reserved to the trial judge.

The court exercised its discretion to order costs in the cause, noting it is the preferable course for interlocutory injunctions, but allowed the parties to return for a costs determination if no trial is held within 18 months.

The applicants sought the appointment of a new arbitrator for a second arbitration concerning franchise agreements, while the respondents sought to re-appoint the arbitrator from the first arbitration.

The applicants objected on the basis of a reasonable apprehension of bias, as the arbitrator had made adverse credibility findings against them in the first proceeding.

The respondents argued the original arbitrator was best positioned to determine if the new claims were res judicata.

The court declined to appoint the original arbitrator, finding that relying on his private notes from the first arbitration would violate deliberative secrecy and that the interpretation of his prior award must be done objectively by a new decision-maker.

The court appointed a retired judge as the new arbitrator.

Following their successful motion for an interlocutory injunction restraining the defendant from terminating their franchise business, the plaintiffs sought partial indemnity costs of $115,500.

The defendant argued costs should be reserved to the trial judge or reduced by half.

The court rejected reserving costs, noting the action was at an early stage.

Noting the importance of the issues and the defendant's failure to provide its own costs outline for comparison, the court fixed costs payable to the plaintiffs at $95,000 inclusive of disbursements and HST.

The plaintiffs, a franchisee and its principal, moved for an interlocutory injunction to prevent the defendant franchisor from terminating their franchise agreement pending trial.

The franchisor had issued a notice of termination alleging numerous breaches of health and safety standards following intensive inspections.

The plaintiffs argued the franchisor breached its duty of good faith and fair dealing under the Arthur Wishart Act and common law by enforcing standards with unreasonable severity to appropriate the profitable business.

Applying the RJR-MacDonald test, the court found a serious issue to be tried, irreparable harm in the potential destruction of the business, and the balance of convenience favouring the plaintiffs.

The interlocutory injunction was granted.

The plaintiff franchisor sought an interlocutory injunction to enforce restrictive covenants against the defendant franchisee, who had purported to terminate the franchise agreement and opened a competing fitness studio.

The dispute arose after the franchisor implemented a direct-to-consumer online fitness program during the COVID-19 pandemic, which the franchisee alleged constituted a fundamental breach.

The court dismissed the motion, finding that while there was a serious issue to be tried regarding fundamental breach, the franchisor failed to establish a strong prima facie case, and the balance of convenience did not favour granting the injunction given the imminent expiration of the agreement and the potential loss of livelihood for the franchisee's employees.

The franchisee applied to rescind a franchise agreement under s. 6(2) of the Arthur Wishart Act, alleging material deficiencies in the franchisor's disclosure document.

The court found that the franchisor failed to disclose complete financial statements, the absence of a head lease, a negotiated agreement to lease, and the fact that the location was the franchise's first non-mall setting.

These omissions effectively deprived the franchisee of the opportunity to make an informed investment decision, amounting to a failure to provide a disclosure document.

The application was allowed, the rescission was declared valid, and the franchisor and its associate were ordered to pay $306,581 in statutory compensation, with the franchisee's loss of income claim referred to a master.

The plaintiff franchisor requested the immediate scheduling of a motion for injunctive relief on the basis of urgency during the COVID-19 pandemic, which the defendant franchisees opposed.

The court found that the dispute, which centered on unpaid royalty fees and had been ongoing since September 2019, did not meet the criteria for urgent scheduling under the court's COVID-19 notices.

The request for immediate scheduling was denied, and a timetable was set for the motions to be heard at a later date.

The plaintiff bank brought a motion for summary judgment against a corporate franchisee and its personal guarantors for defaulting on a business loan.

The franchisee had surrendered its restaurant to the franchisor and sought to rescind the franchise agreement.

Relying on the reasons in a companion case involving the same franchisor and one of the same guarantors, the court granted summary judgment for the outstanding loan amounts and awarded full indemnity costs.