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Raibex Decision: Cassels Brock Succeeds for Franchisor in Important Appeal

Published: 01/25/2018

Team: Geoffrey B. Shaw, Christopher Horkins

On January 25, 2018, the Ontario Court of Appeal released its decision in Raibex Canada Ltd. v ASWR Franchising Corp., providing clarity on the pre-contractual disclosure obligations imposed on franchisors under the Arthur Wishart Act (Franchise Disclosure), 2000 (the Wishart Act).

In late 2016, the Ontario Superior Court granted the franchisee’s rescission claim concluding that it would be "premature" for a franchisor to provide disclosure and enter into a franchise agreement if potentially material facts about the franchise, such as the location, had yet to be determined. This decision resulted in confusion and uncertainty for franchisors, particularly those who employed the common practice of selecting a location after entering into a franchise agreement with prospective new franchisees.

The Court of Appeal’s decision granting the franchisor’s appeal and thus setting aside the rescission of the franchise agreement clarifies that the disclosure obligations under the Wishart Act must be interpreted practically and with reference to the commercial realities of the circumstances surrounding the grant of the franchise and the terms of the franchise agreement. The post-agreement location selection process employed by the franchisor, which is common in the industry, was not found to be offside of the Act’s disclosure regime. As such, the Court of Appeal clarified that franchise parties can, in certain circumstances, enter into a franchise agreement without having entered into a lease beforehand.

ASWR Franchising Corp. and the other defendants were represented in this matter by Geoffrey B Shaw and Christopher Horkins of Cassels Brock.

A copy of the Court of Appeal’s decision can be found here.

Find a full discussion of the Court of Appeal’s decision here.