In a recent decision of the Ontario Superior Court of Justice,
2130489 Ontario Inc. v. Philthy McNasty's (Enterprises)
Inc. (2011 ONSC 6852), the court examined the issue of
limitation periods in respect of statutory rescission claims under
the Arthur Wishart Act (Franchise Disclosure), 2000 (the
The Act appears straightforward with respect to the limitation
period for a franchisee delivering a notice of rescission (two
years from the date of execution of the franchise agreement, or
sixty days from delivery of the franchise disclosure document,
depending on the reason for rescission).
However, once the notice of rescission is delivered, the Act is
unclear as to how long a franchisee has to bring an action in court
with respect to the franchisor's failure to abide by the notice
In this case, the franchise agreement was executed on October 9,
2007. The franchisee issued a notice of rescission under the Act on
September 23, 2009, just under two years after the agreement was
executed. The court noted that under the Act, the franchisor has
sixty days in which to satisfy the Act's rescission obligations
under the Act. By November 3, 2009 (and within the sixty days), the
franchisor advised the plaintiff franchisee that the notice of
rescission was being disputed. The plaintiff franchisee commenced
an application seeking rescission of the franchise agreement on
November 29, 2010.
The court held that the franchisee had properly issued its
notice of rescission within the two year limitation period outlined
in the Act. The court then addressed when the cause of action arose
in regards to the franchisor's failure to respond to the notice
of rescission. The court held that under the Limitations Act,
2002, the franchisee had two years from when the franchisor
rejected the rescission claim to bring an action against the
franchisor. In this case, the court found the claim against the
franchisor was discoverable on November 3, 2009, which was the date
on which the franchisor advised the franchisee that it was
disputing the rescission claim. As such, the application brought on
November 29, 2010 was commenced in time and was not barred by the
Limitations Act, 2002.
This decision is helpful in clarifying the limitation period
with respect to rescission actions. Even if a franchisee issues a
notice of rescission within the appropriate time allowed, the
franchisee still has to ensure that an action is brought as soon as
that franchisee is aware that the franchisor will be disputing the
rescission claim. Franchisors should pay close attention to this
limitation period as a defence when dealing with rescission claims
under Ontario's franchise legislation.
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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.
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