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Motion to strike portions of franchise class action pleading dismissed.
In a proposed class proceeding brought by franchisees against a franchisor and alleged franchisor’s associates, the defendants moved under Rules 21.01(b), 25.06, and 25.11 to strike portions of the amended statement of claim.
The claims alleged failures to provide proper disclosure documents under franchise legislation, breaches of the statutory duty of fair dealing, unlawful conversion of exclusive territories to non‑exclusive territories, interference with franchisees’ right to associate, and entitlement to injunctive relief and rescission.
The court held that although the pleading was lengthy and complex, it adequately disclosed material facts and gave sufficient notice of the case the defendants had to meet.
Many of the defendants’ objections were found to raise substantive defences or merits issues better addressed in a statement of defence, summary judgment motion, or at trial rather than on a pleadings motion.
The court concluded that the defendants had not established a basis to strike the impugned paragraphs.
Non-competition and non-solicitation covenants held unenforceable due to indeterminate duration tied to third-party consents.
The appellant sold his minority interest in two businesses and entered into agreements containing non-competition, non-solicitation, and confidentiality covenants.
The duration of the non-competition and non-solicitation covenants was tied to the period he held an indirect interest in the businesses, which could only be disposed of with the consent of third-party lenders and the board.
The Court of Appeal held that the duration of these covenants was unreasonable and unenforceable because it depended on the unpredictable consents of unascertainable third parties, creating an indeterminate period with no fixed outside limit.
The confidentiality provision, however, was upheld as reasonable.
Restrictive covenants connected to a commercial sale transaction found reasonable and enforceable.
The applicant sought a declaration that non-competition, non-solicitation, and confidentiality agreements he signed with the respondents were unenforceable as an illegal restraint of trade.
The court found that the covenants were connected to a commercial sale transaction rather than just an employment contract, and therefore subject to a less rigorous standard of reasonableness.
The court concluded that the covenants were unambiguous, protected a legitimate business interest, and were reasonable in their scope, territory, and duration.
The application was dismissed.
