The Swinging Franchise Pendulum

Jennifer Dolman

July/August 2013

Brian Burton, Lexpert Magazine

Jennifer Dolman talks to Lexpert Magazine about two landmark court rulings in Ontario and Québec that appear to be conflicting.

(Extract)

“We’re certainly seeing some franchisor-friendly decisions,” says Jennifer Dolman, a franchise specialist and litigator with Osler, Hoskin & Harcourt LLP in Toronto, whose clients are primarily corporate franchisors. She says franchisees have “overreached” in a couple of recent class actions and franchisors have won summary dismissals that carry important messages for the franchising business in Canada.

Dolman says she’s made five bound copies of the 2012 [Tim Horton’s] judgment. “It’s my good-faith Bible,” she says. Leave to appeal that decision was denied by the Ontario Court of Appeal last December and by the Supreme Court of Canada in May.

She adds that Tim Horton’s “gets the gold star” for contract language as well as overall operations and, thus, becomes the case study in how franchisors can meet legal requirements.

She notes that franchise practices are growing, in part, because the franchise sector of the Canadian economy is expanding. This comes partly from domestic growth and partly from American franchisors facing stagnant markets at home and discovering Canadian statistics on consumer spending and mall traffic.

Dolman says the “draconian” consequences of an adverse ruling on disclosure are another significant business driver for law firms representing franchisors.

There are, Dolman says, no equitable defences in disclosure cases. “The court doesn’t care what the franchisees did or didn’t do” during a franchise negotiation. “The court only cares what the franchisor didn’t do,” she says. If the franchisors fail in any way to fully disclose, the case against them is made. But while disclosure damages can be severe – they can also be substantially mitigated. Where the client has clearly failed on disclosure, she says, her focus is on limiting damage claims. Where a failure of disclosure can be shown to be minor in nature, it can sometimes be subject to a 60-day time limit on legal action, rather than two years, and that can spell the end of the entire claim.

The full article is available in Lexpert Magazine, July/August 2013.