A New Vision For Franchise Releases: Ontario Superior Court Provides Clarity To The Scope Of Enforceable Releases Of Wishart Act Claims

• Published date: 25 May 2020
• Author: Mr Christopher Horkins
• Subject Matter: Corporate/Commercial Law, Franchising
• Law Firm: Cassels

We at Cassels, and many in the Canadian franchise law bar, have long taken the position that any negotiated release of an existing and known claim under the Arthur Wishart Act (Franchise Disclosure), 2000 (Wishart Act), where the settling franchisee had the benefit of independent legal advice, is a valid and enforceable release despite the non-waiver provision found in section 11 of the Wishart Act. In New Vision Renaissance MX Ltd. v The Symposium Café Inc., the Ontario Superior Court of Justice affirmed that view, providing clarity to the law on what constitutes an enforceable release of Wishart Act claims.¹

Background

The plaintiff entered into a franchise agreement with the defendant for a new restaurant franchise in February 2015 and opened for business in June 2015 in Stouffville, Ontario. A number of amending agreements to the franchise agreement were executed prior to the opening of the restaurant. One of these amending agreements arose from a dispute regarding the franchisee's ability to close the transaction for the opening of the restaurant. The amendment resolving this dispute provided for a short term loan to the franchisee permitting them to bridge a shortfall in funds and close the transaction. In exchange for this loan, the franchisor received a release of any claims arising from the disclosure provided to the franchisee including any rescission claims.

After roughly one year of operation, the franchisee delivered a notice of rescission in May 2016 seeking to rescind the franchise agreement on the basis of several alleged deficiencies in the disclosure document it received. In response, the franchisor denied the plaintiff's entitlement to rescind and terminated the franchise agreement alleging it had been wrongfully repudiated. The franchisor further took the position that the franchisee had released any rescission claim it may have had pursuant to the amending agreement which provided the loan. The plaintiffs took the position that the release was void pursuant to section 11 of the Wishart Act, which prohibits franchise parties from contracting out of or waiving their obligations under the Wishart Act. Litigation was commenced, and both parties sought summary judgment on their respective claims.

It's Tutor Time: Release Found Valid and Enforceable

In granting summary judgment to the defendant franchisor, the Court found that the release executed as part of the amending agreement fell within the established exception to section 11 of the...