The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
Issue link: https://digital.carswellmedia.com/i/829785
www.lexpert.ca/usguide-corporate/ | LEXPERT • June 2017 | 15 that it's "not unreasonable" to expect the requirement to be ad- opted by other provinces. US franchisors moving into Canada also face another very distinct challenge in Québec, Canada's second-most populous province, with more than eight million people. While Canada is officially bilingual, Québec is officially a French-speaking prov- ince. Floriani says, "We tell our clients, given 80 per cent of your population here is French-speaking, it makes good business sense to translate your materials into French." The other issue Floriani gets asked about is the difference in legal systems — Québec uses civil law while the rest of Canada is based on common law. While in some cases the difference re- quires some adaptation in the franchise agreement, he says it's not necessarily significant because Québec "has made an effort to harmonize the result" with the other provinces. In late 2016, the Québec government introduced new regula- tions requiring businesses that use trade-marks on their signs in Québec to include a French-language description or "other signif- icant presence of French." That can include a generic description of the products or services, a slogan, or any other term or indica- tion around the display of product information. The amendments specify the French name be given permanent visibility and be at least as legible as the English name in principal signs displaying the trade-mark — so if the English trade-mark sign is lit up at night, or visible from the highway, for example, the French counterpart must be lit up and visible as well. Floriani says "the market is such an important and lucrative market" that franchisors will just factor in the risk and adapt their practices and perhaps their pricing" rather than stay away. What it boils down to, Floriani and the others say, is simply do- ing your homework. For US-based franchisors, doing your home- work in Canada also means keeping up on case law. "I've been closely following Wishart Act cases for the past 17 years," says Jen- nifer Dolman, a litigation partner at Osler, Hoskin & Harcourt LLP. "I have over 200 now, many of which have interpreted the Wishart Act in ways that franchise lawyers reading the statute as drafted would never have contemplated." In the fall of 2016, Ontario Superior Court Justice Matheson considered, "an alleged failure of disclosure in breach of the Ar- thur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 ("AWA") and related regulations." In her decision in Raibex Can- ada Ltd. v. ASWR Franchising Corp., 2016 ONSC 5575, an ap- peal that is being heard by the Ontario Court of Appeal this Oc- tober, Justice Matheson held, "Among other things, the plaintiffs [franchisees] submit that the defendants are not excused from their statutory mandatory disclosure obligations simply because the location of this proposed franchise was not identified before the Franchise Agreement was signed. I agree. Here, the form of lease included in the franchise disclosure document was materi- ally incomplete and the disclosure document said that costs 'vary dramatically from location to location' and 'the Franchisor has no reasonable means of estimating or predicting those costs with any certainty.' It is insufficient for a franchisor to simply say that required material information was not known at the time of dis- closure. In the circumstances of this case, it was premature to purport to deliver the disclosure document under the AWA and enter into a franchise agreement." Dolman says this decision, "is a significant game-changer if it means franchisors can't deliver disclosure documents before leasing arrangements and all other material facts are known. Hopefully we'll get clarity from the Court of Appeal, but until then, the common practice of selecting a site after the franchise agreement has been signed is not without risk. To help reduce or eliminate exposure to rescission and other claims, franchisors should be speaking to experienced Canadian franchise counsel now about available options." In another important decision for US franchisors, the Ontario Court of Appeal heard in Addison Chevrolet Buick GMC Lim- ited v. General Motors of Canada Limited, 2016 ONCA 324, an appeal by franchisee car dealerships. Justices Doherty, Pardu and Benotto considered, in the context of a pleadings motion, wheth- er it was "plain and obvious" that a parent company, in this case GM US: "(1) Could not owe a duty of good faith or fair dealing to the appellants under the AWA; and (2) Could not owe a duty of good faith or fair dealing to the appellants at common law." The appellate court in Addison overturned the lower court and held that the Canadian franchisees' allegations that GM US — not the Canadian corporate subsidiary — was the real decision- maker in the grant and operation of the franchises should go to trial. It remains to be seen whether a court considering such an allegation in a future trial on the merits, may expand the interpre- tation of what it means to be a "party" to a franchise agreement. On all of these issues, US counsel are well advised to indeed take Canadian advice. FRANCHISE LAW "[If Ontario were to make franchisors joint employers,] it would be a huge disincentive for anybody to expand into Ontario — and Canada — especially from the US. … I feel quite confident someone in the government of Ontario will have the sanity to realize this will drive away business." Larry Weinberg Cassels Brock & Blackwell LLP