By: Anthony Pugh
Editor: Ben Hanuka
In Unicity Holdings Ltd. v. Great British Vape Co., a September 2021, decision of the Ontario Superior Court of Justice, the court dismissed arguments by the franchisor, Great British Vape, that its former franchisee did not adequately de-identify its store layout after a settlement-based termination.
The parties entered into a franchise agreement on September 13, 2020, under which Unicity became a franchisee of the Signature Vape system in Windsor, Ontario. The franchise agreement was terminated on January 13, 2021, and the parties entered into minutes of settlement after a mediation.
The minutes required that Signature Vape pay Unicity $100,000, after Unicity confirmed the removal of certain liens. Most importantly, Unicity agreed to certain store de-identification steps – to paint its store in a different colour scheme within six months, and to refrain from using a chandelier lighting fixture.
On February 25, 2021, Unicity gave notice that it was in compliance with its obligations under the minutes and requested the settlement funds. Signature Vape refused to pay the $100,000, alleging that Unicity had not complied with its store de-identification obligations.
Store was distinguishable from the Signature Vape brand
The court found that each party had overstated its case. Unicity tried to argue that it owned some of Signature Vape’s brand because it was an original franchisee and helped Signature Vape develop it.
Signature Vape argued that it was entitled to the concept of an open layout retail store.
The court dismissed both arguments. It held that the real issue was whether grey floor tiles and black, glossy, display cases were design features that were so distinctive to Signature Vape that Unicity’s new store could not be distinguished from a Signature Vape store.
Signature Vape’s principal had described Unicity’s design as “tacky”, “shabby”, and “ugly” in his testimony and it appeared that his real concern appeared to be the functionality of the design. The court held that this was not a valid objection and that any store would naturally have to have shelving.
Even if those features were distinctive, the court held that Unicity had sufficiently distinguished its store design by adding Union Jack flags and coloured stripes. As such, it concluded that Unicity had de-identified its store.
The court also held that Signature Vape had no right to withhold payment under the minutes to enforce the branding issue and that this was not only a breach of the minutes, but also in breach of Signature Vape’s duty of good faith under the Arthur Wishart Act. It ordered Signature Vape to pay the $100,000 to Unicity, together with $27,200 for costs of the Applications.
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