Lawyers advising franchisors and franchisees must take into account the impact of the recent trio of Court of Appeal of Ontario decisions, all in favour of franchisees:
- 2619506 Ontario Inc. v. 2082100 Ontario Inc., 2021 ONCA 702, released on October 12, 2021, upheld rescission based on defective financial statements.
- 2611707 Ontario Inc. v. Freshly Squeezed Franchise, 2022 ONCA 437, released on June 3, 2022, upheld rescission based on defective financial statements, as well as disclosure failures about the lease and the novelty of the franchise location.
- 2483038 Ontario Inc. v. 2082100 Ontario Inc., 2022 ONCA 453, released on June 9, 2022, upheld rescission based on failure to provide a signed franchisor’s certificate.
Taken together, the trio of decisions not only confirmed established rescission grounds, it also expanded rescission grounds and what material facts must be contained in an FDD for it to be legally valid. Equally of importance, the Court of Appeal has expanded the grounds for personal liability of individuals who sign an FDD.
For lawyers practising in regulated provinces other than Ontario, franchise statutes bear significant similarities. These three decisions are likely to impact how rescission grounds and rescission liability are interpreted in those provinces
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