6792341 Canada Inc. et al. v. Dollar It Ltd. et al., (2009) 250 O.A.C. 280 (CA)

• Judge: Gillese, MacFarland and LaForme, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 08, 2009
• Jurisdiction: Ontario
• Citations: (2009), 250 O.A.C. 280 (CA);2009 ONCA 385

6792341 Can. v. Dollar It Ltd. (2009), 250 O.A.C. 280 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. MY.049

6792341 Canada Inc., Guy Renaud and Rocksane Renaud (applicants/appellants) v. Dollar It Limited, Shiene Merali (aka Shane Merali) and Shikar Properties Inc. (respondents/respondents in appeal)

(C49115; 2009 ONCA 385)

Indexed As: 6792341 Canada Inc. et al. v. Dollar It Ltd. et al.

Ontario Court of Appeal

Gillese, MacFarland and LaForme, JJ.A.

May 8, 2009.

Summary:

A Dollar It franchise was unsuccessful from the outset. The franchisee served the franchisor with a notice of rescission under s. 6(2) of the Arthur Wishart Act (Franchise Disclosure), submitting that the franchisor did not make the disclosure required by s. 5 of the Act. The franchisee sought rescission of the franchise and related agreements and a refund of invested monies.

The Ontario Superior Court, in a judgment reported [2008] O.T.C. Uned. O23, dismissed the application. The franchisor met the disclosure requirements of s. 5. The franchisee appealed.

The Ontario Court of Appeal allowed the appeal. The disclosure requirements were not met. The franchisee was entitled to rescind the franchise agreement without penalty.

Franchises - Topic 2063

Franchise agreement - Duties of franchisor - To provide statement of material facts (disclosure) - Section 5 of the Arthur Wishart Act (Franchise Disclosure) provided for what information a franchisor had to disclose to a franchisee in a single disclosure document - Section 6(1) entitled a franchisee to rescind the agreement within 60 days if the franchisor failed to provide the disclosure document or if disclosure did not meet the requirements of s. 5 - Section 6(2) provided for rescission within two years "if the franchisor never provided the disclosure document" - A franchisor, although making some disclosure, admittedly failed to meet the requirements of s. 5 - Information that was required to be disclosed, but was not, included a signed and dated franchise certificate, financial statements, a copy of the head lease, information respecting a "franchise associate", information respecting advertising commitments, a description of territorial exclusivity rights and other material information - At issue was whether a franchisee was limited to rescission within 60 days under s. 6(1) where there was a disclosure document, but it did not comply with s. 5 - The franchisor argued that rescission under s. 6(2) (within two years) was available only when there was absolutely no disclosure as opposed to incomplete disclosure - The Ontario Court of Appeal held that s. 6(2) applied - The franchisee was entitled to rescind the franchise agreement without penalty within two years - Given the material information not disclosed, there was no way that anyone reviewing the disclosure document could make an informed decision about whether or not to invest in the franchise - A purported disclosure document that lacked material information was not a disclosure document for purposes of s. 6(2) - Otherwise, a franchisor could negate s. 6(2) simply by making some disclosure, no matter how deficient the informational content of the purported disclosure document was.

Franchises - Topic 2207

Franchise agreement - Termination - Rescission - [See Franchises - Topic 2063 ].

Cases Noticed:

Personal Service Coffee Corp. v. Beer et al. (2005), 200 O.A.C. 282; 256 D.L.R.(4th) 466 (C.A.), refd to. [para. 13].

1490664 Ontario Ltd. et al. v. Dig This Garden Retailers Ltd. et al. (2005), 201 O.A.C. 95; 256 D.L.R.(4th) 451 (C.A.), refd to. [para. 16].

Hi Hotel Limited Partnership v. Holiday Hospitality Franchising Inc. et al. (2007), 436 A.R. 185 (Q.B.), affd. (2008), 437 A.R. 225; 433 W.A.C. 225 (C.A.), refd to. [para. 22, footnote 1].

1518628 Ontario Inc. et al. v. Tutor Time Learning Centres LLC et al., [2006] O.T.C. 675 (Sup. Ct.), refd to. [para. 73].

6862829 Canada Ltd. et al. v. Dollar It Ltd. et al., [2008] O.T.C. Uned. O23 (Sup. Ct.), refd to. [para. 77].

Statutes Noticed:

Arthur Wishart Act (Franchise Disclosure), S.O. 2000, c. 3, sect. 5(4) [para. 17]; sect. 6(1), sect. 6(2) [para. 19].

Counsel:

Julie Audet, for the appellants;

Allan R. O'Brien, for the respondents.

This appeal was heard on January 28, 2009, before Gillese, MacFarland and LaForme, JJ.A., of the Ontario Court of Appeal.

On May 8, 2009, MacFarland, J.A., released the following judgment for the Court of Appeal.