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FRANCHISING - Legislation - Franchisor disclosure - Rescission

Friday, May 22, 2020 @ 9:06 AM  


Lexis Advance® Quicklaw®
Appeal by the defendant lawyer from a motion judge’s decision that found a third-party claim did not constitute notice of rescission under the Arthur Wishart Act. The franchisee’s bank sued the franchisee for default on its loan for the acquisition of the franchise. The franchisee issued a third-party claim against the franchisor claiming damages and rescission of the franchise agreement for failure to deliver the required disclosure documents under the Arthur Wishart Act. The franchisor took the position the franchisee could not claim rescission as it had not delivered the required notice under the Act. The franchisee issued a statement of claim against the franchisor, taking the position the third-party claim in the bank action constituted the required notice under the Act. It made a separate claim against its former lawyer for negligence in failing to comply with the requirements of the Act.

HELD: Appeal allowed. There was no reason to interpret the Act in a way that required a separate notice of rescission from the claim for rescission. Notice was not a precondition to litigation. The third-party claim constituted the required notice as it complied with the Act’s requirements. The franchisor was not prejudiced by the way notice was given.

2352392 Ontario Inc. v. Msi, [2020] O.J. No. 1300, Ontario Court of Appeal, K.N. Feldman, G. Huscroft and A.L. Harvison Young JJ.A., March 23, 2020. Digest No. TLD-May182020010