Retail Franchises

Law Works represented the franchisor in this case in a dispute with its franchisee. The underlying franchise dispute was about a termination of the franchised location, consequences arising from termination and whether the individual principals of the franchisee corporation were personally liable. The matter was heard in court over whether the case should proceed by way of arbitration.

The Ontario Superior Court granted rescission to the franchisee under the Arthur Wishart Act (Franchise Disclosure), 2000, on the basis that the franchisor provided projections in the franchise disclosure document without disclosing the basis for them and other information required under the Wishart Act, as well as for delivering the disclosure document in in piecemeal.

This court decision is among the most influential Ontario Superior Court decisions on the issue of releases and waivers of statutory franchise rights.

This is a frequently cited decision of the Court of Appeal for Ontario, which reversed the decision of the motion judge and granted summary judgment for rescission in favour of the franchisee. There were significant disclosure deficiencies in the franchise disclosure document, including stale-dated financial statements of the franchisor, required signatures of the franchisor’s officers and directors, and piecemeal disclosure. This decision is also the first Court of Appeal decision expressly holding that the test for a franchisor’s compliance with its disclosure obligations under the Arthur Wishart Act (Franchise Disclosure), 2000, is objective; that the focus is on the nature of the deficiency and its impact on the disclosure requirements on a reasonable (not subjective) standard.