Newsletter Article
Supreme Court of Canada Denies Leave to Appeal, Upholds Ontario Court of Appeal’s Decision Confirming the Applicability of an Arbitration Provision in a Franchise Agreement
Published: 05/11/2011
By Julianne Rawson The Supreme Court of Canada recently dismissed the franchisee plaintiffs’ application for leave to appeal an Ontario Court of Appeal decision upholding the applicability of an arbitration provision in a franchise agreement including where the issue in dispute was whether the franchise agreement itself was valid. The Cassels Brock franchise litigation team were counsel to the successful franchisor in this application.
In Nazarinia Holdings Inc. v. 2049080 Ontario Inc. (Ont.)(Civil) (By Leave), a franchisee, Nazarinia, attempted to bring an action in the Ontario Superior Court of Justice seeking remedies under the Arthur Wishart Act, including rescission and damages against the franchisor.
The franchisor brought a motion to stay the action on the grounds that the dispute fell squarely within the arbitration clause in the franchise agreement. The motions judge granted the stay of the court proceedings, finding that the arbitration clause was valid within the meaning of Ontario’s Arbitration Act, and the dispute fell within the broad scope of its terms.
Nazarinia appealed this decision to the Court of Appeal, which unanimously rejected the franchisee’s claim that the franchise agreement was void which would render the arbitration clause inoperable. The Court of Appeal’s decision was supportive of the reasoning of the motions judge, particularly his finding that “the arbitration agreement is very broad and a clear indication that the parties intended their disputes, including disputes as to the validity of the Franchise Agreement itself, should be heard by an arbitrator and not by the courts.”
The Supreme Court of Canada rejected the franchisee’s application for leave to appeal the Court of Appeal decision.
This case provides further encouragement for franchisors seeking to rely on arbitration agreements for the purposes of addressing disputes and avoiding litigation with their franchisees, and comes on heels of a similarly helpful decision of the Ontario Court of Appeal in MDG Kingston Inc. v. MDG Computers Canada Inc. (2008), 92 O.R. (3d) 4 (C.A.). The Cassels Brock franchise litigation team were also counsel to the successful franchisor in the MDG Computers case.
Read the JW Car Care decision here.
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