Pam Vermeersch
Managing Partner
Hamilton Office
Article
4
The Ontario Court of Appeal's decision in the controversial Raibex Canada Ltd. v. ASWR Franchising Corp., case was released on Jan. 25, 2018, and brings certainty to the courts' interpretation of the disclosure requirements under the Arthur Wishart Act (Franchise Disclosure), 2000 (the "AWA"). The decision overturned the motion judge's decision on all grounds, rejecting the franchisee's rescission of the franchise agreement on the grounds of "premature disclosure," and confirming that franchisors may provide a franchise disclosure document ("FDD") to prospective franchisees, and enter into a franchise agreement, without first having a location and a lease in place.
The lower court decision created uncertainty for franchisors who commonly entered into a franchise agreement prior to a location being determined or a lease being in place for the proposed franchised business. The lower court found that location and lease information is material and required to be disclosed to a prospective franchisee . In coming to its decision the Court of Appeal stated that:
The Court noted that the franchisee was well aware of both the terms of the lease that was being entered into, and the possible range of costs to convert the existing site into a franchised location. Further, the franchisee was put on notice of the risks of their investment because of various safeguards in the franchise agreement which included:
Franchisors that were hesitant about what amounted to "premature" or "no disclosure" of an FDD can now rest easy with the disclosure obligation more clearly defined. This decision confirms that imperfect information in an FDD does not amount to "no disclosure" under the AWA.
The Court of Appeal's decision can be found here: http://www.ontariocourts.ca/decisions/2018/2018ONCA0062.pdf
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