Steven Harold Goldman

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.

This motion, brought under Rule 21.01(1)(a) of the Rules of Civil Procedure, sought a determination of a question of law: whether a claim in a pleading (specifically, a Third Party Claim) constitutes proper notice under section 6(3) of the Arthur Wishart Act (Franchise Disclosure) 2000.

The franchisee (Shearer) and franchisor (The Works) argued that the pleading was not proper notice, while the franchisee's former lawyer (Msi), who was being sued for negligence for failing to provide proper notice, argued that it was.

The court found that a Rule 21 motion was appropriate and, following binding authority and legal principle, concluded that a Third Party Claim cannot constitute a proper notice of rescission under subsection 6(3) of the Wishart Act, as a pleading and a statutory notice serve distinct purposes and have different temporal and functional implications.