|February 17, 2014|
Previously published on February 4, 2014
In the latest installment of the Springdale Pizza Depot franchise dispute, the Ontario Superior Court of Justice clarified that, upon rescission, franchisors must buy back supplies and equipment purchased by the franchisee pursuant to the franchise agreement - even if the equipment is in very poor condition.
In 2189205 Ontario Inc. v. Springdale Pizza Depot Ltd., 2014 ONSC 530, Master Muir applied his earlier express finding in the Springdale action that section 6(6) of the Arthur Wishart Act (Franchise Disclosure), 2000, SO 2000, C.3 makes it mandatory for franchisors to repurchase equipment at a price equal to the purchase price paid by the franchisee. Although the Springdale defendants argued that the improper removal and storage of the equipment in a barn for several years made it so the plaintiff franchisees were “unable” to return the supplies, Master Muir held that there was no duty on a franchisee to mitigate, and that under the remedial scheme of the Act the franchisee is entitled to be made whole.
Franchisors should be mindful of this decision to understand their mandatory obligations when facing rescission for late or inadequate disclosure.