We are pleased to report that A&B litigation partners, Tim Hill and Atoosa Mahdavian, recently won an appeal which reaffirms their previous trial level success relating to the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the "Act").
In a recent appeal, A&B defended a franchisor, Baton Rouge Restaurants Corporation et al. ("BRRC"), in an appeal by a franchisee who had unsuccessfully alleged at trial a breach of a right of first refusal for an additional franchise location and breach of disclosure obligations under the Act (See 3574423 Canada Inc. v Baton Rouge Restaurants Inc., 2013 ONCA 39).
The appellant had commenced its action for damages on the basis of an alleged breach of a contractual duty of good faith and a breach of the statutory duty of fair dealing pursuant to the Act.
At trial, it was held that the appellant had waived its right of first refusal regarding a second planned franchise location when it turned down an offer extended to it by BRRC. The appellant unsuccessfully argued that BRRC failed to make full disclosure regarding the details of the new location, and that it was a "prospective franchisee" with respect to the new franchise location.
ONTARIO COURT OF APPEAL DECISION
In his decision, the Honourable Justice Sidney Lederman of the Ontario Court of Appeal dismissed the appellant's claim that BRRC had failed to disclose relevant information regarding the second franchise offer under the right of first refusal.
At trial, Justice Brown had determined that the appellant was not entitled to disclosure under the Act regarding the additional franchise, as the appellant never became a franchisee with respect to the additional franchise. This case is valuable in that it highlights the difference in the standard of disclosure required under the Act for parties who become franchisees and for those who do not. A potential investor who ultimately decides not to invest in a franchise system will not have recourse under the Act regarding claims of defective disclosure.
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