LEXPERT MAGAZINE
|
APRIL 2016 47
| FRANCHISING LAW |
In an interview with Canadian Law-
yer, Kenneth Fredeen, Deloitte (Canada)'s
General Counsel and a member of the
Stakeholder Panel, emphasized that creat-
ing certainty for franchisors and franchi-
sees was an "imperative" given that they
were operating "in a world where increas-
ingly that's how business is done."
To its credit, the Ontario government
did follow up on the Stakeholder Panel's
report. In early March, it set up a new
Business Law Advisory Council with a
mandate to advance the Panel's recom-
mendations. Peter Viitre of Sotos LLP in
Toronto is a member of the panel. Still, just
what kind of priority the AWA will get in
the massive task involving the overhaul of
many statutes remains to be seen.
MEANWHILE, the lingering uncertain-
ties have engendered considerable high-
profile litigation.
"ere were more franchising decisions
in 2015 than any year in recent memory,
and a couple were incredibly significant,"
says David Shaw of Blake, Cassels & Gray-
don LLP in Toronto.
e key decisions, mostly in Ontario and
Québec, featured the likes of GM, Pet Valu
and Dunkin' Donuts. But, arguably, what
the collective impact of the complex, some-
times difficult to comprehend jurispru-
dence did most was to highlight the need
for legislative change.
e Québec Court of Appeal, for ex-
ample, found Dunkin' Donuts liable to the
tune of about $11 million for breaching its
duty of good faith towards a group of 21
franchisees. e court ruled that the fran-
chisor had failed to protect and enhance its
brand in the face of a competitive onslaught
from Tim Hortons that saw Dunkin' Do-
nuts' market share reduced from 12.5 per
cent in 1995 to 4.6 per cent in 2003.
"We're all waiting to see if Dunkin' Do-
nuts will impose significant obligations on
franchisors to keep up with developments
in the business world," says Joëlle Boisvert,
who practises in the Montréal office of
Gowling WLG.
But the "wait" period could be some-
what lacking in focus. "e Court of Ap-
peal was not clear on what 'enhancement'
meant, so franchisors are still calling me all
the time about that," says Stéphane Teas-
dale of Dentons Canada LLP in Montréal.
"e truth is that I'm up to my fih binder
of cases on franchise issues generally and
new issues are still arising."
As well, because Québec has no fran-
chise legislation, controversy still rages
about whether and how Dunkin' Donuts
affects the duties of franchisors in those
the decision is not binding on courts out-
side of Québec."
e mere reference to the concept of
good faith in both Dunkin' Donuts and
Bhasin, Dolman maintains, is not suffi-
cient to allow franchisees to argue that the
Québec ruling can be applied elsewhere in
Canada. "Dunkin' Donuts is not even about
a breach of the duty of fair dealing – it is
a breach-of-contract case – one in which
both express and implied obligations were
breached," she says.
Indeed, Nadia Effendi of Borden Lad-
ner's Toronto and Ottawa offices believes
courts have been careful not to import
Bhasin into franchise law. "What judges
are saying is that the focus should be on
the duties spelled out in the legislation," Ef-
fendi says.
Less than three months later, the On-
tario Superior Court of Justice deferred
to GM's business judgment in dismissing
a class action brought by dealers aer the
company's Canadian arm, in a reorga-
nization aimed at avoiding a Companies'
Creditors Arrangement Act filing, refused
to renew some 240 dealer agreements. In-
terestingly, the reasons for judgment made
no reference to Dunkin' Donuts.
At press time, the Dunkin' Donuts case
was the subject of a leave to appeal applica-
tion to the SCC, while the GM case is on
appeal to the Ontario Court of Appeal. All
of which means that the status of even the
clearer principles enunciated in these cases
remains uncertain.
BUT NO MORE uncertain than other
important issues, especially those touching
on the balance between franchisor control
and franchisee rights. Towards the end of
2014, the Ontario Superior Court decided,
in Pillar to Post, that a franchisor could
enforce an arbitration clause precluding a
franchisee from participating in a class ac-
tion. By contrast, the Cora decision from
the Ontario Court of Appeal, delivered
just a few months aer Pillar to Post, es-
tablished that franchisors could not rely on
contractual provisions requiring franchi-
sees to release claims otherwise enforceable
under Ontario law. Most recently, the issue
arose in the GM case, where the Ontario
Superior Court ruled that waiver by a fran-
chisee of a right under the Wishart Act will
generally be void and unenforceable unless
JOËLLE BOISVERT
GOWLING WLG
"We're all waiting to see
if Dunkin' Donuts will impose
significant obligations
on franchisors to keep up
with developments in
the business world."
provinces that do have franchise laws.
"Some commentators have argued [that the
Supreme Court of Canada's decision in] Bha-
sin, [which for the first time held that a duty of
good faith existed with respect to all contrac-
tual dealings], combined with Dunkin' Do-
nuts, increases the duties of franchisors across
Canada," says Dolman. "But Dunkin' Donuts is
based on concepts contained in the Civil Code
of Québec that are not mirrored in the law of
other Canadian provinces, and in any event,
