Law Times

Law Times • February 24, 2014 Page 3 www.lawtimesnews.com Court gives boost to franchisees Decision strikes blow to common release condition n a decision that could affect "practically every modern franchise agreement," the Superior Court has ruled fran- chisors can't waive franchisees' right to sue them as a con- dition for selling a business to a new buyer. It's one of the common conditions franchisors ask of franchisees: If they want to sell their business to some- one else later, they would first have to release all claims against the franchisor. In 2176693 Ontario Ltd. v. Cora Franchise Group Inc., Superior Court Justice Wendy Matheson found a clause requiring a general release in a franchise agreement is "void and unenforceable" because it's contrary to s. 11 of the Arthur Wishart Act, a piece of legislation meant to level out the power between a franchisor and a franchi- see. According to the legislation, no waiver included in a franchise agreement is valid. "Franchise agreements are contracts of adhesion and it has been recognized repeatedly that the [act] is intended to mitigate and alleviate the power imbalance that exists between franchisors and franchisees," wrote Matheson in the Jan. 31 decision. In the case before Matheson, the franchisor, Cora Fran- chise Group, had offered a "narrower" release that excluded statutory claims aer the franchisee complained about the general release requirement being against s. 11 of the Arthur Wishart Act. is offer, the franchisor later argued, meant the requirement wasn't in fact contrary to the law. For Matheson, that argument didn't stand up. She said the franchise agreement couldn't be "re- written to the benefit of the franchisor." "I reject the franchisor's submission that by offering to accept a narrower release aer the issue was raised, it has saved the requirement for a general re- lease from the operation of s. 11 of the [act]," she wrote. "is approach serves only to al- low for abuse. It allows a franchisor to 'wait and see' if an objection is raised, and potentially secure the full general release if the franchisee does not assert its rights under the [act]. "us, the door is open for the fran- chisor to take advantage of the franchi- see, who may be unaware of s. 11 of the [act]." Even if Arthur Wishart Act claims are exempt from a release requirement, Matheson expressed concerns about "overlapping claims." "e suggestion that the general release should be read down to release only non-statutory rights invites considerable debate and confusion about the status of all overlapping claims," she wrote. e decision is important as "practically every mod- ern franchise agreement contains such a clause," says To- ronto franchise lawyer Ben Hanuka. "Many franchisees complain about having to release a franchisor of all claims before they can sell their fran- chise to a new purchaser." e clause typically seeks to release the franchisor from past, present, and fu- ture claims, according to Hanuka. e court's decision is good news for franchisees, Hanuka adds, but "it shouldn't be a problem for franchisors who are reasonable and practical." Osler Hoskin & Harcourt LLP fran- chise lawyer Jennifer Dolman says that for franchisors, the ruling means they have to put more thought towards claim release conditions. "On a going-forward basis, fran- chisors cannot include those general releases," she says. "ey should cer- tainly exclude statutory claims but they also have to address this issue of overlapping claims." Both Hanuka and Dolman say the case is a reminder that both franchisors and franchisees should stay on top of new developments in franchise law. It's possible, Ha- nuka adds, for an unwitting franchisee to simply accept the terms of the franchisor that may include a general release clause. However, if a general release clause occurs in the context of a settlement agreement between the franchisee and the franchisor, then "no legislation should prevent that" given the previous findings in a case called 1518628 Ontario Inc. v. Tutor Time Learning Centres LLC, says Hanuka. "So the distinction is a waiver versus a settlement," he adds. LT NEWS BY YAMRI TADDESE Law Times I The decision 'shouldn't be a problem for franchisors who are reasonable and practi- cal,' says Ben Hanuka. aw deans across the coun- try have been donning outlandish wigs and flip- ping them in a playful show of frustration about the lack of access to justice in Canada. e campaign, called Flip Your Wig for Justice, is a catchy new way of raising awareness about a problem some say has reached a crisis point. At the same time, the campaign raises funds for the sev- en non-profit legal organizations that are, in many ways, "the front lines" of the justice system, says Osgoode Hall Law School dean Lorne Sossin. e campaign is a lighthearted way of getting people to collabo- rate around a significant problem, Sossin adds. "Even though the work is really serious, the issues are really signifi- cant, the mood is one of celebrat- ing what can be done, celebrating the people who are involved in making a difference," he says. Almost 12 million Canadi- ans will have a legal issue within a three-year time frame, and 60 per cent of them will let their problem go unresolved due to an expensive and daunting justice system, Sossin adds. "In a sense, the most significant miscarriages of justice in Canada oen are simply the problems that go unsolved or that people walk away from even though an important right of theirs might be an issue because there is no obvi- ous way to go about accessing the justice system," he says. Aer a year that saw many reports on access to justice, including a final report from the Action Committee on Access to Justice in Civil and Family Mat- ters, it's time to take action, ac- cording to Sossin. "I think everyone agrees, and in fact the recent reports start off by saying, 'e time for action is now.' In fact, the time for action has passed," he adds. For Sarah McCoubrey, execu- tive director of the Ontario Justice Education Network, one of the seven non-profit organizations behind the campaign, part of the success so far has been the collab- oration between groups that oen work in silos. "We're really seeing an align- ment of our work to build access to justice initiatives across Ontario and to remind the justice sector that we are that justice system arm that's reaching out to the commu- nity and connecting with people," she says. "At the same time, we're hoping to have a lot of fun." Everyone who wears a tra- ditional judicial or just a wacky wig on March 6 will be part of a movement looking to encour- age people to collaborate in new ways and think innovatively about the issues of access to jus- tice, McCoubrey says. "e access to justice problem has reached a point where it is time for every kind of action to take place." e other organizations be- hind the Flip Your Wig for Justice campaign are Pro Bono Law On- tario, the Canadian Civil Liberties Association, the Association in Defense of the Wrongfully Con- victed, Community Legal Educa- tion Ontario, the Metropolitan Action Committee on Violence Against Women and Children, and Pro Bono Students Canada. Participants can register and donate to the campaign via flipy- ourwigforjustice.ca. LT To watch a video story on Flip Your Wig for Justice, visit lawtimesnews.com. WHAT'S HAPPENING IN EMPLOYMENT LAW? Canadian Employment Law Today is the essential newsletter you need for employment law-related rulings in court, tribunals and other judicial bodies. The bi-weekly newsletter summarizes and comments on issues and trends in employment law. Save valuable hours of research — spend more time using the information to improve procedures and decisions. START YOUR SUBSCRIPTION AND RECEIVE: • 22 issues of Canadian Employment Law Today • Full access to Canadian Employment Law Today's website, www.employmentlawtoday.com, featuring a searchable archive of past issues • Bi-weekly email alerts to keep subscribers up-to-date on breaking news and notifications of new issues SUBSCRIBE TODAY FOR ONLY 0SEFS" ORDER TODAY: Call toll free 1-800-387-5164, in Toronto 416-609-3800, online at www.employmentlawtoday.com/subscribe or email carswell.customerrelations@thomsonreuters.com Untitled-3 1 14-02-18 10:09 AM Lighthearted campaign seeks to tackle serious issue After a year that saw many reports on access to justice, it's time to take action, says Lorne Sossin. BY YAMRI TADDESE Law Times L

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