Active Green & Ross (Mendoza)

Full Case Name: Mendoza v Active Tire & Auto Inc., 2017 ONCA 471

This is a leading franchise decision of the Court of Appeal for Ontario. It was the subject matter of commentary by many lawyers in the Ontario Franchise Law Bar and is an important court decision in the development of franchise disclosure law.

The Court of Appeal for Ontario reversed the decision of the motion judge and granted summary judgment for rescission in favour of the franchisee purchaser, Mendoza, based on the disclosure deficiencies in AGR’s disclosure document. It held that the disclosure obligations are not conditional on the knowledge or conduct of a franchisee, and that the disclosure deficiencies in this case were significant. As a result, it held that AGR had not provided a disclosure document within the meaning of the Arthur Wishart Act (Franchise Disclosure), 2000.

In some ways, the Court of Appeal in this decision applied the existing law to the facts. There is a wide body of jurisprudence in Ontario, both at the trial and appellate level, holding that improperly completed franchisor’s certificates and non-compliant financial statements are alone fatal, amounting to “no disclosure at all” and allowing rescission. However, this case is also the first Court of Appeal decision expressly holding that the test for a franchisor’s compliance with its disclosure obligations under the Act is objective; that the focus must be on the nature of the deficiency and its impact on the disclosure requirements on a reasonable (not subjective) standard.

To read our firm’s article about this decision on our Franchise Law Blog click here: Court of Appeal for Ontario Provides Important Clarification About Franchise Rescission Test