The recent Ontario decision of Robert Moore Pharmacy Ltd. v. Shoppers Drug Mart Inc . provides reassurance to franchisors that Ontario courts will respect the contractual language between franchise parties in determining whether a franchisee is entitled to injunctive relief in respect of the termination of their franchise agreement.
In this case, the franchisee, Moore, operated a franchised pharmacy in a drug store owned Shoppers Drug Mart ("Shoppers"). The franchise agreement, which was entered into in 2009, was for one year with the potential for two one-year renewal terms finally expiring at the end of December 2012. Shoppers also had the right to assume absolute control over the management and supervision of the business within the last sixty days of the agreement upon providing notice to the franchisee.
On December 5, 2012, Shoppers provided Moore with notice that it would not be offering another term to Moore after the current one expired. Shoppers also advised Moore that it was exercising its management right and removed Moore from his operating role. Moore sought an injunction reinstating him as pharmacist and manager for a period of sixty days.
In applying the test for an injunction, the court held that Moore was not entitled to an injunction because he could not establish a strong prima facie case regarding the reinstatement. Relying on substantive precedent regarding the duty of good faith and fair dealing, both in common law and in respect of the Arthur Wishart Act (Franchise Disclosure), 2000, the court held that Canadian courts do not recognize a stand-alone duty of good faith independent of the contractual terms agreed to by the parties. The motions judge held that the general duty of fair dealing "cannot turn a written term of expiry into a right to renew". The court held that the clear language of the franchise agreement did not provide for any further renewal rights for Moore, and that Shoppers was entitled to exercise its management option during the last sixty days of the contractual term. The court also held that the plaintiff would not suffer any irreparable harm if it was not granted an injunction, and that the balance of convenience regarding the injunction favoured Shoppers.
This decision is a helpful reminder to Canadian franchisors that courts will diligently review and apply the express contractual language of the parties and that the duty of good faith will not permit franchisees to undermine the bargain struck between franchise agreement parties.
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