Leading Canadian
FRANCHISE & BUSINESS LAW FIRM

Tutor Time Learning Centres

Full Case Name: 1518628 Ontario Inc. v. Tutor Time Learning Centres, LLC (2006)

This court decision is among the most influential Ontario court decisions under the Arthur Wishart Act (Franchise Disclosure), 2000, to date.

In this case, a Tutor Time Learning Centres day care facility was resold from the original franchisee to a new one. The franchisor required the spouse of the purchasing franchisee’s principal to sign the franchise agreement as guarantor.

The disclosure document appeared extensive and included all prescribed requirements, like financial statements, signed certificate, etc. However, it did not contain some important information about operational deficiencies that the day care had with the ministry.

After starting to operate the franchised day care, the new franchisee encountered problems and asked for the franchisor’s financial assistance. The franchisor agreed to provide financial assistance on condition of the franchisee sign a settlement agreement releasing the franchisor of any past claims. After consulting a transactional lawyer, the franchisee agreed and signed the settlement agreement and release.

Later, the franchisee started this case to cancel (rescind) its purchase of the franchise, and receive compensation for its losses. The Ontario Superior Court of Justice held as follows, for the first:

  • The franchisor was not exempt from the resale exemption in the Act because it “effected” the sale by requiring the spouse of the corporate franchisee’s principal to sign as guarantor. This requirement was in addition to the resale conditions in the franchise agreement, which required only that the principal (not the principal’s spouse) sign as guarantor.
  • The franchisor failed to provide adequate disclosure document because it did not disclose information about ministry deficiencies concerning the daycare centre’s operations.
  • However, the franchisee was not entitled to rescission because it had earlier signed a settlement and release in favour of the franchisor. The no-waiver provision in section 11 of the Act did not apply because the agreement that the settlement agreement was not a mere “release”, but rather a “settlement” with consideration. In addition, the franchisee had legal advice when signing the settlement.

The decision was made by a senior judge of the Ontario court, sitting on the specialized Commercial List, Mr. Justice Cumming (now retired), a former law professor at Osgoode Hall Law School.

Procedurally, this was the first franchise rescission case where a court held important substantive issues under the Act without a trial – through a motion for summary judgment.

More importantly, the decision has played a pivotal role in shaping, and continuing to shape, these multitude fundamental aspects of Ontario franchise disclosure law:

  • How lawyers and courts interpret complex issues of whether a particular release is part of a valid settlement or invalid under the no-waiver provision in section 11 of the Act.
  • What constitutes a ‘material fact’ that renders a disclosure document inoperative.
  • When a franchisor ‘effects’ a resale transaction and, as a result, is disqualified from the resale exemption in the Act.
  • When an additional party, such as a guarantor, is entitled to receive a separate disclosure document.
Back

Franchise Law Blog

Franchise Renewals: Introducing...

Posted by | 15 August 2017

​This article, written by Ben Hanuka, was originally published by The Lawyers Daily on July 7, 2017, under the title “Courts struggle for balance with material changes to... Read More

Court of Appeal for Ontario Provides...

Posted by | 14 June 2017

Authors: Evan Ivkovic and Jeff Nguyen, Students-at-Law, Law Works P.C. Read More

Franchise-Lease Disclosure Problems...

Posted by | 25 May 2017

This article, written by Ben Hanuka, originally appears in the May 31, 2017, issue of The Lawyers Daily. Click here to view the full article. Read More

View All

What’s New

​​Article in The Lawyers D...

We are pleased to announce that The Lawyers Daily published an article by Ben Hanuka on July 7, 2017, titled “Courts struggle for balance with material changes to renewal... Read More

Ben Hanuka quoted in Lawyers D...

We are pleased to announce that both of the top legal news publications in Canada - The Lawyers Daily and Law Times – reported about the recent Ontario Court of Appeal... Read More

Law Works Expanding to British...

We are pleased to announce that on June 2, 2017, Ben Hanuka was called (admitted) to the British Columbia Bar at an official Call to the Bar ceremony of the Law Society and... Read More

View All

Request Information

Please select the STAR and click the SUBMIT button

 Please wait...