Franchise Law - OCA

The appellants, franchisors of a vape store chain, appealed an application judge's decision ordering them to pay $100,000 to the respondents, former franchisees, pursuant to Minutes of Settlement.

The appellants argued the respondents breached the settlement by continuing to use proprietary store designs and branding.

The Court of Appeal dismissed the appeal, finding no error in the application judge's interpretation of the agreements or his factual finding that the respondents' store design was sufficiently distinct to avoid customer confusion.

The appellants, out-of-province franchisors, appealed a motion judge's decision dismissing their challenge to the Ontario Superior Court's jurisdiction to hear an action brought by eight Saab dealerships, five of which were located outside Ontario.

The Court of Appeal upheld the motion judge's finding of jurisdiction simpliciter based on the appellants carrying on business in Ontario, noting that joining the out-of-province plaintiffs promoted commercial efficiency.

The Court also upheld the motion judge's forum non conveniens analysis and costs award.

The appeal was dismissed.

The appellant appealed a summary judgment order finding that its relationship with the respondent was that of franchisor and franchisee, entitling the respondent to rescind their agreements under the Arthur Wishart Act due to a lack of disclosure.

The Court of Appeal upheld the finding on liability but found the motion judge's reasons for quantifying damages insufficient.

The appeal was dismissed regarding liability, and the matter was remitted to the motion judge to determine the quantum of damages in excess of the conceded amount.

The appellants entered into an agreement with the respondent to build and operate a car dealership.

The respondent terminated the agreement after the appellants failed to meet construction deadlines.

The trial judge found the termination was unreasonable but held that an exclusion clause protected the respondent from liability for damages.

On appeal, the appellants argued the exclusion clause should not apply to an unreasonable termination.

The Court of Appeal dismissed the appeal, finding the trial judge's interpretation of the broadly worded exclusion clause was reasonable and not tainted by palpable and overriding error.

The appellants appealed an order dismissing their summary judgment motion.

The Court of Appeal quashed the appeal, finding that the order was interlocutory and therefore not within its jurisdiction.

The court noted that the motion judge's remarks regarding the statement of defence and counterclaim being nullities, and about spoliation, were obiter dicta explaining his refusal to exercise discretion to allow the matter to proceed despite a defendant's bankruptcy.

The appellants, General Motors dealers in the Greater Toronto Area, sued GMCL and its US parent company, GM US, alleging breaches of the duty of good faith and fair dealing under the Arthur Wishart Act and at common law.

The motion judge struck the claim against GM US under Rule 21, finding it was neither a party to the franchise agreement nor a franchisor's associate.

The Court of Appeal allowed the appeal, holding that the determination of whether GM US was a franchisor's associate or owed a duty of fair dealing required a full factual record and should not be dismissed at the pleadings stage.

The appellants, former franchisees of a home medical equipment business, appealed a decision enforcing a restrictive covenant that prevented them from operating a similar business within a 30-mile radius for 18 months after the franchise agreement expired.

The franchisor's corporate parent operated a competing store in the same territory, and the franchisor admitted it had no intention of opening another franchise in that area.

The Court of Appeal allowed the appeal, holding that because the franchisor had no intention of operating in the protected territory, it had no legitimate or proprietary interest to protect there.

Consequently, the restrictive covenant was unreasonable and unenforceable.

The appellant appealed a partial judgment of $152,314.44 awarded to the respondent franchisee.

The appellant argued the trial judge erred by refusing an adjournment to allow him to retain new counsel and by not allowing his counsel to get off the record before hearing a motion based on an unanswered Notice to Admit.

The appellant also claimed ineffective assistance of counsel.

The Court of Appeal dismissed the appeal, finding no error in the trial judge's discretionary decision to refuse the adjournment, noting the appellant chose not to attend the trial despite warnings.

The court also rejected the ineffective assistance claim, finding counsel acted faithfully and the issues arose from the appellant's failure to communicate.

The appellants appealed an order dismissing their motion for summary judgment and granting the respondents' cross-motion for summary judgment, which declared the respondents entitled to statutory rescission of their franchise agreement.

The respondents had rescinded the agreement due to the appellants' failure to provide disclosure under the Arthur Wishart Act.

The Court of Appeal upheld the motion judge's finding that the appellants were not exempt from disclosure requirements, as they had required a new franchise agreement and a $10,000 transfer fee.

The appeal was dismissed.

The franchisor appealed a motion judge's decision finding it breached the duty of fair dealing under s. 3 of the Arthur Wishart Act by failing to disclose that it did not receive significant volume rebates.

The motion judge had read language into a certified common issue without notice to the parties.

The Court of Appeal allowed the appeal, finding the motion judge erred by effectively amending the common issue and by concluding that the alleged non-disclosure constituted a breach of the duty of fair dealing in the performance of the franchise agreement.

The plaintiff's cross-appeal regarding the dismissal of its motion to add a new common issue was dismissed.

The franchisor sued the franchisees for breach of contract, and the franchisees counterclaimed for rescission of the franchise agreement under s. 6(2) of the Arthur Wishart Act, alleging the franchisor failed to disclose ongoing litigation against a competing business.

The motion judge granted partial summary judgment dismissing the rescission claim, finding the undisclosed litigation was not a stark and material deficiency.

The Court of Appeal dismissed the franchisees' appeal, holding that summary judgment was appropriate and that the litigation, which was commenced to protect franchisees, was not a material fact and its omission did not amount to a complete failure to provide a disclosure document.

The appellants appealed a partial summary judgment declaring that the franchise disclosure document they provided to the respondents was materially deficient, entitling the respondents to rescind the franchise agreement under the Arthur Wishart Act.

The Court of Appeal upheld the motion judge's decision, finding that summary judgment was appropriate and that the disclosure document's failure to include properly verified financial statements, a compliant certificate, and information about ongoing litigation amounted to a material deficiency equivalent to no disclosure at all.

The appellant franchisor appealed a declaration that a clause in its franchise agreements requiring a general release as a condition of assignment was void and unenforceable under s. 11 of the Arthur Wishart Act.

The Court of Appeal held that while the clause was not void ab initio, it was unenforceable because it required a release of statutory claims.

The Court declined to apply notional severance to read down the clause to apply only to non-statutory claims, finding that doing so would subvert the protective purpose of the Act and invite franchisors to draft overly broad releases.

The appellants appealed a motion judge's decision finding they could not rely on the 'resale' exemption from disclosure under the Arthur Wishart Act.

The Court of Appeal upheld the motion judge's finding that the franchisor was not merely a passive participant in the transaction, as they had met with the prospective franchisees multiple times, considered a new franchise agreement, and required an acknowledgement that limited the franchisees' rights.

The appeal was dismissed.

The moving party sought an extension of time to file a notice of appeal and perfect the appeal in a class proceeding regarding franchise volume rebates.

The delay was caused by an administrative error.

The Court of Appeal dismissed the motion, finding that while the delay was short and explained, the proposed appeal lacked any merit as it challenged purely factual findings without providing any basis for the appeal.

The moving parties (defendants) sought a stay of a motion judge's order dismissing their jurisdictional challenge as an abuse of process, pending their appeal of that order.

They also sought an extension of time to perfect the appeal.

The Court of Appeal applied the RJR-MacDonald test and granted the stay, finding that the appeal raised serious issues regarding jurisdiction and joinder, that there was some risk of irreparable harm due to the uncertain law on attornment, and that the balance of convenience favoured the moving parties.

The extension of time was also granted on consent.

The appellants appealed a trial judge's decision regarding a franchise dispute.

They argued that the trial judge erred in deducting rent and related expenses under s. 6(6)(a) of the applicable Act, and in finding that a letter dated May 2, 2007, constituted a five-year franchise agreement.

The Court of Appeal dismissed the appeal, finding no error in the damages calculation and concluding that the trial judge's finding regarding the letter was reasonable and supported by the evidence.

Costs of $8,000 were awarded to the respondents.

The appellants appealed a summary judgment dismissing their proposed class action claims against a food distributor.

The appellants alleged the distributor was a 'franchisor's associate' under the Arthur Wishart Act in relation to a vending machine program run by a third party.

The Court of Appeal upheld the motion judge's finding that the distributor did not control the third party and was therefore not a franchisor's associate.

The appeal was dismissed.

The appellant franchisee appealed the dismissal of its action against the respondent franchisor for breach of the statutory duty of fair dealing under the Arthur Wishart Act.

The appellant argued that the franchisor failed to provide sufficient disclosure regarding a right of first refusal for a new restaurant location, specifically concerning the final lease terms and the size of the exclusive territory.

The Court of Appeal dismissed the appeal, upholding the trial judge's finding that the franchisor acted in good faith and in a commercially reasonable manner, and that the appellant's decision to pass on the location was an informed one based on its own financial position and lack of confidence in the landlord.

In a commercial franchise and sublease dispute, the appellant challenged an order granting the respondents possession of premises.

The court held the respondents failed to establish any claim to possession under an alleged new lease because they were not parties to it and adduced no admissible evidence that it was entered into on their behalf.

The court also held the respondents failed to prove the factual foundation for any continuing month-to-month tenancy under the original lease, namely the absence of notice from the landlord.

The appeal was allowed, the judgment below set aside, and the application dismissed with costs to the appellant.