Franchise Law - ONCA

The Court of Appeal for Ontario dismissed the appeal by the franchisor and its associates from a trial judgment granting rescission and damages to the franchisee under the Arthur Wishart Act (Franchise Disclosure), 2000.

The court upheld the trial judge’s findings that the statutory exemption from disclosure did not apply, that the franchisee validly rescinded the franchise and ancillary agreements, and that the franchisee was entitled to statutory compensation and substantial indemnity costs.

The court found no error in the trial judge’s assessment of damages or costs.

The Ontario Court of Appeal dismissed the appeal from a summary judgment ordering the appellants, 2562583 Ontario Inc. o/a Meltwich Food Co. and Janarthanan Jeyaparan, to indemnify the franchisor, Meltwich Hospitality Group Inc., for amounts paid to the landlord, Ritson Division Retail GP Limited, following the franchisee’s breach of a commercial lease.

The court upheld the motion judge’s findings that the franchisee’s breach triggered indemnity obligations under the franchise and assignment agreements, and that the settlement between the franchisor and landlord was reasonable.

The appellants’ arguments regarding the scope of indemnity, timing of liability, and procedural fairness were rejected.

The appellants, representing a class of Ontario Shoppers Drug Mart franchisees, appealed a summary judgment decision regarding their entitlement to Professional Allowances paid by generic drug manufacturers.

The Court of Appeal upheld the motion judge's findings that Shoppers breached the 2002 franchise agreement by retaining the allowances, which constituted 'revenue', but did not breach the 2010 agreement, which explicitly allowed Shoppers to retain such concessions.

The Court also upheld the application of a rolling limitation period and the refusal to award aggregate damages due to the idiosyncratic nature of the profit-sharing model.

However, the Court allowed the appeal regarding the quantification of damages, finding that Shoppers breached its duty of good faith by arbitrarily allocating $129 million as out-of-province rebates to avoid sharing the funds with Ontario franchisees, bringing the total Professional Allowances received to $1.084 billion.

The Court of Appeal for Ontario heard appeals and a cross-appeal concerning a franchise dispute under the Arthur Wishart Act.

Franchisees Versatile Holdings Inc. and Everest Group Inc. appealed the dismissal of their rescission actions, arguing errors in the burden of proof for disclosure deficiencies and the determination of franchisor's associates.

The franchisor, Paramount Franchise Group Inc., cross-appealed the trial judge's finding that Premium Host Inc. was entitled to statutory compensation, challenging disclosure exemptions, the effect of contract termination on rescission rights, material omission of financial statements, and the finding that Holly Graham and Paramount Leasing were franchisor's associates.

The Court dismissed all appeals and the cross-appeal, affirming the trial judge's findings on the burden of proof for rescission, the non-applicability of disclosure exemptions, the right to rescind despite prior termination for breach, the materiality of the financial omission, and the determination of franchisor's associates.

The appellants, several Turtle Jack's restaurant franchisees, appealed a motion judge's order that set aside an Associate Judge's decision to add a new defendant (11554891 Canada Inc.) and allow amendments to their statement of claim regarding supplier contributions to an advertising fund.

The Court of Appeal dismissed the appeal, agreeing with the motion judge that adding the new party and allowing the amendments would constitute an abuse of process due to inordinate delay, the dubious nature of the claims, and the fact that the amendments introduced new, statute-barred claims.

The court also upheld the costs award against the appellants.

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.

This appeal arose from a summary judgment order finding a franchise agreement effectively rescinded due to deficient financial disclosure (FDD) under the Arthur Wishart Act (Franchise Disclosure), 2000.

The motion judge had also found two individuals to be "franchisor's associates" and jointly and severally liable.

The appellants argued the motion judge misapplied the "informed investment decision test" and erred in finding the individuals were associates and imposing joint and several liability.

The Court of Appeal dismissed the appeal, affirming the motion judge's findings that the FDD was so deficient as to amount to no disclosure, that the informed investor test was correctly applied, and that the individuals met the definition of franchisor's associates, warranting joint and several liability.

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 appellants, corporate entities and individual guarantors, appealed summary judgments granted by the motion judge in favour of the respondent bank.

The corporate appellants had entered into franchise agreements to operate restaurants with financing provided by the respondent.

After difficulties arose and the franchisees sought to rescind the franchise agreements, they returned the restaurant operations to the franchisor.

The respondent bank demanded repayment of the outstanding financing, alleging events of default including cessation of business.

The motion judge granted summary judgment finding events of default had occurred.

The appellants argued the motion judge erred in concluding they had ceased to carry on business, contending their business had merely changed to recovering their franchise investments.

The Court of Appeal upheld the motion judge's decision, finding the appellants' position lacked business reality and common sense.

This appeal concerns a franchise dispute where the motion judge granted partial summary judgment for rescission of a franchise agreement and damages of $964,805.33 against the franchisor.

The central issue was whether the franchisor failed to disclose earnings projections that were allegedly shown to the franchisees at a May 2010 meeting, constituting material non-disclosure under the Arthur Wishart Act.

The appellate court allowed the appeal in part, setting aside the rescission judgment and damages award on the basis that the motion judge erred in determining the key disputed factual issue on contradictory evidence without oral testimony.

However, the court upheld the motion judge's determination that the rescission claim was timely, as the limitation period ran from the replacement agreement signed in September 2010 rather than the original agreement signed in June 2010.

Appeal from a Superior Court judgment dismissing an appeal of an arbitrator's preliminary award.

The franchisor appealed the arbitrator's determination that the limitation period for arbitration had not expired.

The dispute arose from a franchisee's notice of rescission of a franchise agreement based on alleged non-disclosure by the franchisor.

The central issue was whether a mediation requirement in the franchise agreement constituted a precondition to arbitration that suspended the running of the two-year limitation period under the Limitations Act, 2002.

The arbitrator severed the requirement that mediation occur in Delaware, finding it contrary to the Arthur Wishart Act, and determined that the limitation period commenced only after mediation was deemed completed.

The Court of Appeal upheld the arbitrator's decision, applying a reasonableness standard of review.

On appeal from a motion judge's decision, the franchisor appealed the finding that the franchise agreement had been validly rescinded under section 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000, and the dismissal of its cross-motion for damages.

The franchisee cross-appealed certain ancillary issues.

The Court of Appeal found in favour of the franchisor on all issues.

This costs endorsement addresses the allocation of costs for both the underlying motions for summary judgment and the appeal.

The appellants (franchisor and related entities) appealed a motion judge's decision that the respondents (franchisee and principals) validly rescinded a franchise agreement under section 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000.

The motion judge found the franchise disclosure document (FDD) was so inadequate as to amount to no disclosure because it failed to include the terms of the head lease and did not provide cost estimates for converting an existing restaurant to an ASWR outlet.

The Court of Appeal allowed the appeal, finding that while the FDD may have contained deficiencies, these were not so serious as to amount to a complete lack of disclosure.

The court distinguished the case from prior jurisprudence by noting the franchise agreement contained collaborative site selection and opt-out provisions that protected the franchisee's ability to make an informed decision.

The court awarded damages to the franchisor for unpaid construction invoices and the head lease deposit, less any benefits derived from operating the franchise.

The appellants challenged the trial judge's decision on a franchise dispute under the Arthur Wishart Act (Franchise Disclosure), 2000.

The appellants argued that the trial judge erred in preventing cross-examination regarding the respondent's financing arrangements with Toronto Dominion Bank and in permitting counsel to reference the bank's judgment against the respondent.

The Court of Appeal upheld the trial judge's decision, finding that the source of funds paid by the franchisee to the franchisor is irrelevant to the statutory entitlement to refund under the Act.

The court affirmed that Ontario's legislated payback scheme requires the franchisor to refund all money received from the franchisee, regardless of how those funds were obtained.

This appeal arises from the 2009 General Motors of Canada bailout and the termination of franchise dealerships.

The franchisor offered Wind-Down Agreements to 240 dealers, providing payment in exchange for comprehensive releases of all claims, including those under the Arthur Wishart Act.

The dealers were required to obtain independent legal advice before signing.

A class action was subsequently brought by terminated franchisees claiming breaches of statutory rights.

The trial judge found the releases valid under the Tutor Time exception to section 11 of the Wishart Act, as they constituted settlements of known and existing claims entered into with legal advice.

The trial judge also held that covenants not to sue and indemnity provisions were void for public policy reasons but were severable from the release.

The Court of Appeal upheld both the validity of the releases and the severance of the covenant not to sue.

The moving party, William Watters, sought a stay of judgment pending his application for leave to appeal to the Supreme Court of Canada.

Watters was a director and shareholder of a franchisee that operated a Cora restaurant and had given a personal guarantee of the franchisee's indebtedness.

The motion judge granted summary judgment against Watters on the guarantee in the amount of $117,000 and dismissed his counter-claim as statute-barred.

The Court of Appeal dismissed Watters' appeal but allowed Cora's cross-appeal regarding the amount owing.

Watters then sought a stay pending leave to appeal to the Supreme Court of Canada.

The motion was dismissed on the grounds that Watters failed to demonstrate a serious issue of national importance, irreparable harm, or that the balance of convenience favoured a stay.

Appellants purchased a franchise from the respondent and sought rescission under section 6(2) of the Arthur Wishart Act (Franchise Disclosure), 2000 on the basis that no proper disclosure document was provided.

The motion judge found the disclosure deficient but held that the appellants received sufficient information to make an informed decision and that deficiencies were not significant or misleading.

The Court of Appeal allowed the appeal, finding that material deficiencies in the disclosure document—specifically the absence of two required director signatures and failure to provide current audited financial statements—rendered the purported disclosure document invalid under the Act and Regulation.

The appellants were entitled to rescission under section 6(2).

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.