Toronto franchise lawyer Peter Dillon says courts have taken a highly technical approach to interpreting disclosure requirements, which has resulted in more franchisees being able to get out of deals.
Dillon, partner at Siskinds LLP, says franchise legislation in Ontario, as well as four other provinces in Canada, was intended to ensure that those buying franchises had adequate information beforehand in order to make an informed decision.
“However, in the interpretation of the franchise legislation, the courts have taken a highly technical approach and it has resulted in a lot of instances of franchisees being able to get out of deals using the franchise legislation,” he tells AdvocateDaily.com.
He points to the Court of Appeal decision in Hi Hotel Limited Partnership v. Holiday Hospitality Franchising Inc., 2008 ABCA 276 (CanLII) as an example.
In this case, “the certificate of disclosure hadn’t been signed by the franchisor,” Dillon says.
“The court held that although the document itself might have been perfect and complete, and thereby had filled the disclosure principles or underlying spirit of the legislation, that nonetheless the mere fact that a signature wasn’t on the certificate was enough to make it as if the franchisee received nothing at all,” he says.
He adds that in Canada, where officers and directors can be held personally liable for defective disclosure, means that some of these minor defects can result in large damage awards being made against the people who sign these documents.
This article was originally posted on AdvocateDaily.com.