Reader disagrees with assertions about Canada

As a result of these differences, the Canadian legal system is not overrun with frivolous lawsuits and, franchise claims are often settled before they are initiated or at the pre-trial stage.

Franchise Times
October 1, 2001

Reader disagrees with assertions about Canada
Frank Zaid

Phil Zeidman’s article on international franchising, titled “Our Neighbour to the North” in the August 2001 issue of Franchise Times argues that the difference in attitude among Canadian franchisors and United States franchisors with respect to franchise legislation may lie in the different “demographics” of the franchisee populations in the two countries. He concludes that by reason of the fact that most franchisees in Canada are individuals with a single unit or at most a very small number of units, taken together with the less litigation-oriented nature of Canadian society, the result has been a much lower level of litigation activity involving franchisors and, consequently, much less concern about franchise legislation.

Mr. Zeidman’s conclusions are generalized… Canada has long been known internationally as a nation of peacekeepers. Our litigation and court systems also reflect neutrality.

Franchise litigation in Canada is not initiated lightly given the following differences in approach from that in the United States:

Only recently have class proceedings been allowed (in some provinces). To date no franchise class proceeding has been conclusively certified.

In civil actions, the unsuccessful party is responsible for the successful party’s costs on a court scale basis.

Collateral actions are almost never included in franchise litigation. For example, anti-trust claims, RICO claims and conspiracy claims would not enter into a Canadian franchise lawsuit.

Treble damage claims are nonexistent in Canada. The successful party must always prove its actual damages.

Contingency actions have only recently been allowed in a restricted number of jurisdictions. Special or punitive damages are rarely awarded and, if so, are extremely modest. Civil actions are never heard before a jury…and in Ontario are now subject to mandatory mediation…

As a result of these differences, the Canadian legal system is not overrun with frivolous lawsuits and, franchise claims are often settled before they are initiated or at the pre-trial stage.

With respect to franchise legislation, Mr. Zeidman’s statement that the Canadian franchise community acquiesced to franchise legislation in the Provinces of Alberta and Ontario undermines the processes by which legislation was enacted in the two provinces.

Since Alberta had enacted legislation in the early 1970s, and shortly after a government commission proposed similar legislation in Ontario, there has been political pressure in these two provinces for franchise legislation.

Alberta originally enacted a franchise disclosure and registration statute which was administered in such a way that relationship policies were thrust upon franchisors wishing to register in the province. Franchisors and their advisors, having experienced difficulties with the administration of this legislation, seized upon the opportunity in the mid-1990s when the government announced that it would be disbanding registration and moving to a disclosure only type statute…The franchise community, with the express invitation of the Alberta government, participated in a consultative process whereby the legislation was significantly changed to provide a much fairer and widely accepted form of legislation.

The Canadian franchise community has always looked to its neighbours to the south for guidance in respect of franchise litigation and franchise legislation. What we have learned in the process is to stay away from the minefield of overlapping legislation, the horrific consequences of franchise litigation and the propensity to initiate lawsuits as a means of manipulating adversaries, rather than concentrating on negotiating resolutions.

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