Franchisees Cannot Claim Statutory Damages For Misrepresentation When a Franchisor Voluntarily, But Without Obligation, Provides a Disclosure Document

The Ontario Superior Court recently confirmed that a franchisee is not entitled to sue for damages under s. 7 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “AWA”) when a franchisor voluntarily, but without obligation under s. 5 of the AWA, provides a disclosure document that contains misrepresentations. The decision in 2101516 Ontario Inc. v. Radisson Hotels Canada Inc., 2019 ONSC 3302 is good news for franchisors.

Background

Section 7 (1) of the AWA provides that if a franchisee suffers a loss as a result of a misrepresentation in a disclosure document or due to the franchisor’s failure to comply with the disclosure obligations mandated by s. 5, it has a statutory right of action in misrepresentation against the franchisor, its associates, agents and every person who signed the disclosure document. Significantly, s. 7 (2) of the AWA provides that a franchisee is deemed to have relied upon any misrepresentation contained in a disclosure document.  This makes the statutory right of action under s. 7 (1) much easier for a franchisee to establish because, unlike the common law tort of misrepresentation, it does not have to prove that it detrimentally relied on the alleged misrepresentation.