Canada: Ontario Court Of Appeal Upholds Superior Court Analysis Of Statutory Disclosure Exemption

  • Facts
  • Proceedings
  • Decision
  • Comment

We previously reported on the decision of Justice Perell of the Ontario Superior Court of Justice in TA & K Enterprises Inc. v. Suncor Energy Products Inc. Justice Perell's decision was the first to consider the application of the exemption in the Arthur Wishart Act (Franchise Disclosure) whereby a franchisor is not required to deliver a disclosure document in circumstances where the franchise agreement is not valid for more than one year and does not involve the payment of a non-refundable franchise fee. On appeal by the franchisee, the Ontario Court of Appeal has confirmed Justice Perell's decision and has further elucidated the two requirements which must be met for the exemption to apply.


TA & K Enterprises Inc., the franchisee, entered into a retail franchise agreement with Suncor Energy Products Inc., the franchisor, on November 11, 2008. The term of the agreement was one year, which term would commence on November 15, 2008 and expire on November 14, 2009. The franchisor did not provide a disclosure document before execution of the agreement.

In August 2009, the franchisor's parent company merged with Petro Canada. The franchisor notified the franchisee that upon expiration of the agreement, it would be extended on a month-to-month basis with the same terms and conditions. The franchisee sought the rescission remedy and damages and commenced a proposed class action on the basis that the franchisor had not provided a disclosure document. The franchisor brought a motion for summary judgment seeking dismissal of the action as a disclosure document was not required.

The Superior Court held that the franchisor had established that the requirements for the exemption were met, namely that the franchise agreement was not valid for longer than one year and that the franchise agreement did not involve the payment of a non-refundable franchise fee.


On appeal, the franchisee argued that the franchisor did not meet either requirement of the exemption. The franchisee maintained that while the term of the agreement was one year, the term was in fact longer due to several factors which served to extend it; (i) the agreement was signed on November 11, 2008 and bound the parties between November 15, 2008 and November 14, 2009, (ii) either party could sue for anticipatory breach of contract as of signing, (iii) the indemnity and confidentiality provisions of the agreement survived termination, (iv) the terms of the agreement provided that should the franchisee remain in possession of the premises beyond the term, the tenancy becomes one of month-to-month, and (v) the month-to-month extensions of the agreement after November 14, 2009 served to make the agreement valid beyond the one year term.

The franchisee then argued that it was required to pay a franchise fee and as such the franchisor did not meet the second requirement of the exemption. To support its allegation that the second requirement of the exemption was not met, the franchisee argued that payments for intangibles such as royalties must be considered franchise fees. The Court of Appeal was firm in its rejection of this argument and held that such an analysis would prevent any franchise agreement from meeting this requirement of the exemption, which could not have been the legislature's intent. The Court of Appeal agreed with the motions judge in that a franchise fee is a fee paid for the right to become a franchisee rather than payments made for goods services or royalties.


The Court of Appeal was not persuaded by the franchisees arguments to the effect that the term of the agreement was extended beyond one year. The Court held that the legislative purpose behind the requirement that disclosure documents be provided in the context of franchise agreements with terms of more than one year, is to protect franchisees by ensuring that they receive a disclosure document before committing to an agreement, unless the period of their commitment is short and therefore 'low-risk'. The Arthur Wishart Act (Franchise Disclosure) fixes this 'low-risk' period at one year or less.

The Court of Appeal found that the term of the agreement was one year as the franchisee was bound by rights and obligations for a one year period. The Court of Appeal agreed with the motions judge and held that the availability of a cause of action is not what the term requirement of the exemption attempts to capture, which is the duration of rights and obligations under the agreement. The Court of Appeal also found that the survival of the indemnity and confidentiality provisions does not extend the agreement itself and that the over-holding provision does not extend the entirety of the agreement but rather provides solely for the over-holding of the tenancy. The Court of Appeal held that the month-to-month extensions of the agreement merely created new monthly agreements. As per the Court, the franchisee's argument was contrary to the scheme of the disclosure document sections of the Arthur Wishart Act (Franchise Disclosure) which provide that the disclosure obligation needs to be assessable when the agreement is signed so that a franchisor can be in a position to determine whether disclosure is required.


The Court of Appeal's analysis and support of the motion judge's decision provide franchisors, wishing to avoid the disclosure requirement, guidance as to how the exemption from disclosure is applied. Should a franchisor wish to avail itself of this exemption, the term of a proposed franchise agreement should be carefully drafted so as to be limited to twelve months or less and the franchisor cannot require the payment of a franchise fee. As such, it would seem that courts will uphold franchise agreements that are carefully drafted so as to take advantage of the disclosure exemption.

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.