A Hard Muffin to Swallow!
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AHARDMUFFINTOSWALLOW!
M
ARIE-ÈVECOTEANDJEAN-SEBASTIENRODRIGUEZ_PAQUETTE*
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AWYERS,PATENTANDTRADE-MARKAGENTS
Whatisthelevelofresponsibilityofeachpartyinafranchisingmatter?Whatarethe
obligationsofthelessorwithrespecttothesublesseeintheabsenceofacontractual
linkbetweenthem?
LastJanuary,in2855-0523Québecinc.c.IvanhoéCambridgeinc.,2014QCCA124,
theCourtofAppealruledonthesesubjectsanddiscussed,amongothers,the
questionoftheobligationofgoodfaithofalessor.Thefulljudgementisavailableby
followingthislink
Inthismatter,afranchisee(the“Franchisee”)ofthechainMMMuffinsCanadaInc.
(the“Franchisor”)hadbeenoperatingafoodkioskasasublesseeinthefoodcourt
oftheRocklandmallinMontrealsince1993.In2004,theownerofthemall,Ivanhoé
CambridgeInc.(the“Lessor”),decidedtorelocatethefoodcourtfollowing
renovations.TheLessorstartednegotiationswiththeFranchisorandtheFranchisee
whobothfinallyacceptedtheproposedrelocation,withoutknowingthattheLessor
hadjustrentedakiosktooneoftheirdirectcompetitors,CoffeeDepot.TheLessor
hadnotprovidedthisinformation.
Afterrelocation,theFranchiseenoticedasignificantreductioninearnings,claiming
thiswasduetothepresenceoftheCoffeeDepotkiosk.TheFranchiseearguedthat
thiskioskwasinterceptingitspotentialcustomersbecauseofthefactthattheCoffee
Depotkioskwaslocateddirectlyattheentranceofthefoodcourt.
TheFranchiseethereforedecidedtotakelegalactionagainsttheLessorforlossof
profitsanddepreciationofitsbusiness.
Initsjudgement,theSuperiorCourtrecognizedthebadfaithoftheLessor,butdidn’t
awardcompensationtoFranchisorforlostprofitsanddepreciationofthebusiness,
statingthatasufficientcausallinkwasnotdemonstrated[2855-0523Québecinc.v.
IvanhoeCambridgeinc.,2011QCCS6624].
©CIPS,2014.*FromROBIC,LLP,amultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
intheSpring2014(Vol.17,no.4)Newsletterofthefirm.Publication068.173E.
ROBIC,LLPwww.robic.ca
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MONTREAL1001Square-Victoria-BlocE-8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.:+1514987-6242Fax:+1514845-7874QUEBEC2828LaurierBoulevard,Tower1,Suite925
Quebec,Quebec,CanadaG1V0B9
Tel.:+1418653-1888Fax.:+1418653-0006
2
TheCourtofAppealconfirmedtheinitialjudgementandtooktheopportunityto
clarifycertainimportantnotions,notablytheobligationofgoodfaith[2855-0523
Québecinc.v.IvanhoeCambridgeinc.,2014QCCA124].
DuetotheabsenceofacontractbindingtheFranchiseeandtheLessor,theLessor
allegedthatithadnoobligationofgoodfaithtowardstheFranchisee.
TheCourtofAppealrejectedthisargumentandstatedthat,evenintheabsenceof
anexclusivityclauseoracontractuallink,theLessormustexerciseitsrightswhile
respectingitsobligationofgoodfaith.
However,thecourtrejectedFranchisee’sargumentthatthelocationofCoffee
Depot’skioskconstitutedunfaircompetition.Indeed,thecourtremindedtheparties
thattheLessorhastherighttouseitsspaceasitwishes,aslongasitdoesnot
abuseofitsright.Therefore,theLessorhadtheobligationtoinformtheFranchisee
ofthefactthatadirectcompetitorwouldoccupythekiosklocatedattheentranceof
thefoodcourt.ThiswouldnothoweverpreventtheLessorfromactuallyrentingthe
locationtothecompetitor.
Welearnfromthiscasethat,inafranchisingmatter,alessorhasseveralobligations
towardsasublessee,evenifnocontractbindsthem.Thelessorhastoprovegood
faithandcanbefoundliableofdamagescausedtoasublesseebyitsfault,even
withoutadirectcontractualobligation.Itisalsoprudentforafranchisortoensurethe
welfareofitsfranchisees.Thisisamatterthatourcourtsarebeingaskedtoconsider
morefrequently.
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MONTREAL1001Square-Victoria-BlocE-8thFloor
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