July 6, 2010
On June 10, 2010, approximately three years after its Franchises Act (the Act) received royal assent, New Brunswick published two franchising regulations. The first regulation sets out disclosure requirements similar to the requirements found in the other provinces that regulate franchising (Ontario, Alberta and Prince Edward Island). However, the second regulation sets out a mediation procedure originally proposed by the Uniform Law Conference of Canada in 2005, the first of its kind among regulated provinces.
The provisions of the Act are largely consistent with those in Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 (the Ontario Act); however, there are some important differences. For example, the Act explicitly states that the duty of good faith and fair dealing extends to the performance and enforcement of the franchise agreement, which includes the exercise of a right under the franchise; as opposed to the Ontario Act, which does not specifically state that the duty extends to the exercise of a right under the agreement. Similar to the legislation in Alberta and PEI, but unlike the Ontario Act, the Act specifically states that a confidentiality agreement does not qualify as a “franchise agreement” for the purposes of the timing of the 14-day disclosure period. This permits franchisors to enter into limited confidentiality agreements with franchisees within this period (though franchisors should be aware that including any other obligations in such agreements may change the nature of the agreements so that they qualify as “franchise agreements”). The Act also provides an expanded due diligence defence to directors, officers, brokers and franchisor’s associates in respect of misrepresentations within the disclosure document.
The most unique feature of the Act is the prescribed party-initiated dispute resolution process. The Act states that if there is a dispute, one party may notify the other of the nature of the dispute and the desired outcome. If such a notice is delivered the parties must attempt to resolve the dispute within 15 days of receiving the notice. If the parties are unable to resolve the dispute a notice to mediate may be delivered, and upon delivery of such notice, the parties must follow the rules relating to mediation as set out in the mediation regulation. However, the mediation regulation permits the party that received the notice of mediation to decline mediation by providing a notice declining mediation.
The disclosure regulation generally requires disclosure similar to that in other regulated provinces; however, there are some noteworthy differences, for example:
- Delivery by courier or electronic means is specifically permitted;
- Disclosure documents prepared for use in other jurisdictions can be used in New Brunswick provided additional disclosure is provided as required by the Act;
- The disclosure document must include the table of contents of any manual or a statement specifying where in New Brunswick the manual, if any, is available for inspection.
- A description of the franchisor’s policies and practices regarding internet or distance sales must be provided; and
- In addition to a list of current franchisees, the franchisor must provide a list of current businesses of the same type as the franchise being offered that the franchisor currently operates in New Brunswick.
There are other differences which must be addressed in the disclosure document, or franchisors risk a claim for rescission or misrepresentation.
Franchisors must prepare documents specific to New Brunswick – either a wrap-around or a standalone document – or risk being offside the legislation. Alternately, franchisors with a national disclosure document can modify that document to comply with New Brunswick’s unique requirements. It is anticipated that the Act will be proclaimed into force sometime in early 2011. However, once the Act does come into force franchisors will be expected to comply immediately.
Please contact a member of Osler’s Franchise Group with any questions regarding the New Brunswick Franchises Act.
Manitoba Franchises Act Receives Royal Assent
In our May 2010 edition of the Osler Franchise Review we discussed the introduction of Bill 15, The Franchises Act (the Act) in the Province of Manitoba’s legislature. The Act received royal assent on June 17, 2010, with some minor changes from the original version of the Bill, including that the payment of consideration for the purposes of the Act does not include the payment of a fully refundable deposit. Regulations to the Act are expected to be published sometime within the next year.