In a decision of the Ontario Superior Court of Justice released
on July 27, 2012, the Honourable Justice George Strathy set aside
various opt-out notices received from current and former
franchisees in a pending class action against the franchisor
regarding the franchisor's alleged failure to pass the benefits
of volume rebates on to the franchisees. (See 1250264 Ontario
Inc. v Pet Valu Canada Inc., 2012 ONSC 4317).
This decision is notable due to the fact that neither the
franchisor nor the franchisee heading the class action were
responsible for the subversion of the opt-out process. This
decision sets an interesting precedent regarding the ability of
franchisees to bring class actions against franchisors in
The facts behind the decision are relatively straightforward.
After the franchisees' association held a meeting regarding the
merits of the pending class action against the franchisor, a
sub-set of franchisees took it upon themselves to defeat the class
action. Through the use of a telephone campaign and a website which
listed franchisees who had chosen to opt out of the class action,
the sub-set of franchisees put great pressure on other franchisees
to also opt out of the proceedings. Justice Strathy held that the
actions of the sub-set of franchisees were an unabashed attempt to
end the class action and denied other franchisees their right to a
fair and informed opt-out process. Justice Strathy considered it to
be very likely that many franchisees had decided to opt out as a
result of the misleading information and unfair pressure created by
the telephone campaign and website, resulting in a corruption of
the opt-out process. Accordingly, Justice Strathy declared all of
the opt-out notices received after the commencement of the
telephone and website campaign to be invalid.
Notably, Justice Strathy explained that the franchisees'
right to associate under s. 4(1) of the Arthur Wishart Act
(Franchise Disclosure), 2000, S.O. 2000, c. 3 (the
"Act") was not at issue in this case. The right to
associate in section 4 of the Act is with regard to the
relationship between franchisor and franchisees, as opposed to the
right of association among franchisees.
Instead, Justice Strathy held that the exercise of the
franchisees' right to associate pursuant to the Act had
interfered with the franchisees' rights under the Class
Proceedings Act, 1992, S.O. 1992, c. 6 to such an extent that
the relief granted was necessary.
This decision also calls into question the appropriateness of
class action proceedings in a franchise context, which depends so
heavily upon harmony among franchisees and between franchisees and
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
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).