A recent decision of the Court of Appeal for Ontario (ONCA)
helps define the concept of "control," as it relates to
the definition of a "franchisor's associate" in the
Ontario Arthur Wishart Act (Franchise Disclosure), 2000
In Zwaniga v. Johnvince Foods Distribution
L.P.,1 the ONCA upheld the motion judge's
determination that a major supplier would not be classified as a
"franchisor's associate" under the Act merely because
the supply agreement included minimum volume targets and allowed
the supplier to approve marketing materials. According to the ONCA,
these types of contractual provisions in a supply agreement did
"not establish direct or indirect control" of the
franchisor by the supplier.
In this case, Johnvince Foods Distribution L.P. (Johnvince), the
exclusive distributor of Planters" nut products in Canada,
entered into an agreement with Revolution Food Technologies Inc.
(Revolution) for the supply of nut products to Revolution's
vending machine distributorship program. Under the terms of the
agreement, Revolution agreed to maintain certain sales levels,
comply with reporting requirements and uphold prudent practices
with respect to Johnvince's intellectual property. Revolution
controlled the distributorship program in all material respects,
including the marketing of products, the recruitment of
distributors and the management of the distributorship's
business operations. Prospective distributors were even required to
sign a letter of understanding stating that Revolution and
Johnvince were not affiliated.
Defining "Franchisor's Associate"
The plaintiffs alleged that certain promotional materials used
in a sales presentation drafted by Revolution and prominently
displaying Planters" trademarks contained material
misrepresentations. They further alleged that Johnvince was a
"franchisor's associate" of Revolution and thus
subject to the Act's disclosure obligations and the duties of
good faith and fair dealing.
The Act defines a "franchisor's associate" to mean
who, directly or indirectly,
controls or is controlled by the franchisor, or
is controlled by another person who also controls, directly or
indirectly, the franchisor, and
is directly involved in the grant of the franchise,
by being involved in reviewing or approving the grant of
the franchise, or
by making representations to the prospective franchisee
on behalf of the franchisor for the purpose of granting the
franchise, marketing the franchise or otherwise offering to grant
the franchise, or
exercises significant operational control over the franchisee
and to whom the franchisee has a continuing financial obligation in
respect of the franchise;
Under the facts of this case, both the trial judge and the ONCA
found that Johnvince was not a franchisor's associate under the
Act. Rather, Johnvince's relationship with Revolution was akin
to that of an important supplier. Johnvince had no legal right to
exercise control over the operations of Revolution or the
distributorship program and thus lacked the requisite degree of
control required of a franchisor's associate. According to the
ONCA, influence and bargaining power does not equate with control.
The ONCA noted that the restrictions in the supply agreement
between Revolution and Johnvince were commercially reasonable in
the context of a supplier attempting to protect its licensed
intellectual property rights.
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.
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