Canada: Suncor Successful In Dismissing Proposed $200 Million Class Action

In the first decision to consider the meaning of the "one-year/no-franchise fee" exemption in the Arthur Wishart Act, the Ontario Court of Appeal has confirmed that a franchisor is not required to provide a franchisee with a disclosure document where the franchise agreement has a term of one year or less and where the franchisee does not pay any non-refundable fees in exchange for the franchise. The Court's decision in T A & K Enterprises Inc. v. Suncor Energy Products Inc. represents a significant victory for franchisors, as the Court recognizes that disclosure is not required for low-risk "one-year/no franchise fee" franchises.  Osler represented Suncor in successfully dismissing this $200 million proposed class action.


T A & K Enterprises Inc. v. Suncor Energy Products Inc. was a proposed class action launched by a former Suncor retailer, T A & K Enterprises Inc. (TAK). TAK operated a Sunoco gas station under a franchise agreement. Its franchise came to an end, and TAK commenced the action alleging that Suncor failed to deliver a disclosure document to 241 proposed class members.  As a result, TAK alleged that Suncor had breached the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the Act). For this breach, TAK alleged that class members were entitled to rescind their franchise agreements and were entitled to aggregate damages of $200 million.

Prior to determining whether the case should be certified as a class proceeding, Suncor moved for summary judgment. Suncor relied on the "one-year/no franchise fee" exemption in section 5.7(g)(ii) of the Act, which provides that a disclosure document is not required where "the franchise agreement is not valid for longer than one year and  does not involve the payment of a non-refundable franchise fee."

Suncor argued that it could rely on the exemption because TAK's franchise agreement had an express term of one year and did not require TAK to pay any upfront fees in exchange for the right to operate the franchise.

TAK claimed that the franchise agreement was "valid" for longer than one year because (a) the agreement was signed more than one year before the end of the stated term; (b) it was allegedly extended by Suncor beyond the one year term and; (c) it contained certain clauses that made the term of the agreement extend beyond one year. Further, TAK argued that the agreement involved the payment of "non-refundable franchise fees" because it required the franchisee to pay certain royalties.

The motion for summary judgment was heard in December 2010. In a decision released December 17, 2010, the motion judge rejected all of TAK's arguments and granted summary judgment to Suncor.

An appeal by TAK was heard in June 2011. On September 27, 2011, the Court of Appeal unanimously affirmed the motion judge's decision, dismissing TAK's appeal in its entirety.

Key Findings

  • While the exemption refers to "validity," the key issue is the term of the agreement:  the period during which the franchisee is granted rights and assumes obligations with respect to the franchise. 
    • The purpose of the disclosure requirement in the Act is to protect franchisees by ensuring that they receive a disclosure document before committing to a franchise agreement. However, an exemption is provided where the period in which the franchisee will have rights and obligations under the agreement is of short enough duration that the franchisee is at minimal risk. The Act fixes this duration at one year or less. This is the time frame during which the franchisee is bound to certain rights and obligations. It is during this time frame that the franchise agreement is valid for the purposes of the exemption. TAK's agreement only had a term of one year, and therefore, was not valid for longer than one year.
  • The fact that the agreement was signed before its stated term did not extend the "validity" of the agreement beyond one year.
    • Once signed, TAK may have sued for anticipatory breach of contract if Suncor had repudiated the agreement. However, the availability of this cause of action differs from the purpose of the exemption, which focuses on the duration of the rights and obligations under the franchise agreement. 
  • The fact that Suncor wrote to TAK before the expiry of its franchise agreement, extending the agreement upon expiry on a month-to-month basis, did not make the franchise agreement valid for longer than one year.
    • This letter simply created a new monthly agreement following the expiration of the one-year franchise agreement.
  • The "overholding" provision in the franchise agreement did not extend its validity beyond one year.
    • This section provided that if the franchisee remained in possession of the premises after the expiry of the term of the agreement and continued to pay a monthly rent, the tenancy became one of month-to-month, subject to the terms of the agreement. This section did not extend the agreement beyond one year; the agreement simply became a monthly tenancy. Further, at the commencement of the agreement, this section only created the possibility that the franchisee would become an over-holding tenant at the end of the term. This possibility did not itself make the agreement valid for longer than one year.
  • Neither the "indemnity" nor the "confidentiality" provisions, which survived the termination of the franchise agreement, extended the agreement beyond one year.
    • By definition, these sections only applied once the agreement had been terminated or expired. The survival of these provisions did not extend the agreement itself.
  • A "franchise fee" is in the nature of a fee paid for the right to become a franchisee. It does not include royalties or payments for goods or services.
    • If fees in the nature of royalties were included in the definition of "franchise fee", there would be virtually no circumstances in which the exemption could operate. The French version of the Act, which uses the phrase "redevances de franchisage non remboursables" does not support the conclusion that the term "franchise fee" includes royalties. The Regulations, legislative history, and existing jurisprudence all support a distinction between "franchise fees" and royalties.

Lessons Going Forward

Principles Underlying Disclosure and Exemptions

This decision provides important guidance on the principles that underlie the disclosure requirement and the exemptions to that requirement. The Court of Appeal has recognized that where a franchisee does not pay any non-refundable fees for the right to become a franchisee and only commits to operate the franchise for a term of one year or less, the risk to the franchisee is limited and does not warrant a disclosure document. Franchisors who intend to rely on the one-year/no franchise fee exemption or any of the other statutory exemptions to the disclosure requirement should pay careful attention to the reasons of the motion judge and the Court of Appeal.

Summary Judgment and Class Actions

This case also serves as an example of a class action where the merits of the action could be addressed prior to certification through a motion for summary judgment, as the primary issue in dispute was one of statutory interpretation. Given the broader scope of the new summary judgment procedures under Ontario's Rules of Civil Procedure, and the significant cost of fighting a certification motion and participating in discovery, both plaintiffs and defendants may increasingly consider summary judgment motions as a useful tool in their procedural arsenal for achieving fast and cost-effective results.

Larry Lowenstein conducts a broad corporate, commercial and complex litigation practice including class actions, corporate governance, contested mergers and acquisitions, securities litigation, environmental liability, franchising disputes and employment matters. Adam Hirsh practices general corporate/commercial litigation with experience in class action defence, insolvency proceedings and securities litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.