A 2011 decision from the Saskatchewan Court of Queen's Bench
suggests that a franchisor may risk inadvertently waiving its
ability to enforce an arbitral decision terminating a franchisee if
that franchisor's post-termination conduct re-affirms the
In Subway Franchise Systems of Canada Ltd. v.
Laich, the franchisor, Subway, sought to
terminate a Saskatchewan franchisee due to breaches of the
parties' franchise agreement. Subway's franchise agreement
also required that all disputes be resolved by arbitration to be
held in Bridgeport, Connecticut. Accordingly, an arbitration was
held in Connecticut. The arbitrator ultimately decided in favour of
Subway, upheld the franchisee's termination and ordered the
franchisee to pay the costs of the arbitration along with damages
of $250 for each day she continued to operate her restaurant after
the arbitral award.
Despite the arbitral award, the franchisee's restaurant
remained open. This prompted Subway to bring an application in the
Saskatchewan court to recognize and enforce the award.
Saskatchewan, like Ontario, has adopted both the UNCITRAL Model Law
and the UN New York Convention on the recognition and enforcement
of international arbitral awards through provincial legislation.
This statutory regime is deferential and generally favours the
recognition and enforcement of awards, unless they fit into a
narrowly construed set of exceptions.
In this case, while the court found no deficiencies in the
arbitration process or the award itself, it declined to recognize
and enforce the award under the umbrella exception contained in
Article 36(1)(a)(i) of the New York Convention, finding that
enforcement would be "contrary to the public policy" of
The court found that Subway had, by its actions, waived the
termination by continuing to work with and support the franchisee
in a profitable partnership. In the six months between the arbitral
award and Subway's application for recognition and enforcement
in Saskatchewan, Subway and the franchisee had continued to operate
normally under the terms of the franchise agreement. The franchisee
had even received an automatically generated letter from Subway
congratulating her on record-breaking sales and a "job well
done." The letter went on to say, "we hope the great
sales trend and momentum continues." Further, since the
franchisee had continued to pay all remittances and royalties to
Subway after the award, the court found that enforcing the $250 per
day damages award would result in a double recovery by Subway
contrary to the public policy and law of Saskatchewan.
Following this decision, franchisors operating in Canada should
take care to ensure that their interactions with terminated
franchisees are not out of step with the decision to terminate, as
even an inadvertent acknowledgement that the franchise relationship
still lives on may be construed as waiving the termination.
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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