New Brunswick Follows Other Provinces

The franchise industry is having an increasingly large impact on the Canadian economy, with franchised businesses accounting for 40 percent of all retail sales. Provincial legislators are taking note of this growing industry and, in response, are introducing and passing legislation that addresses many of the perceived issues that arise between franchisors and franchisees. Most recently, the Province of New Brunswick passed franchise legislation (the "New Brunswick Act"), making it the fourth Canadian province to adopt such legislation, after Alberta, Ontario, and Prince Edward Island.

On June 26, 2007, the New Brunswick Act passed through the final step in the legislative process, with only slight amendments from the version originally introduced on February 23. It moved through the legislative process quite quickly largely because the government received very little opposition to the bill, even during public consultation. However, despite its momentum, the New Brunswick act will not come into effect until its regulations are finalized. At the time of writing, the draft regulations have not yet been released, so it is difficult to predict when the regulations will be adopted, but there is speculation that the draft regulations will be released for public comment in this fall, followed by a period of time for consideration and amendment.

As is the case with the franchise legislation in each of the other provinces, the details of what must be included in a disclosure document will be set out in the regulations to the New Brunswick Act. As a result, it is expected that the draft regulations will attract more public comment than did the act itself, given the substantive issues that will presumably be addressed in the regulations. The Canadian Franchise Association, for instance, has requested to be consulted on the draft regulations.

Since the New Brunswick Act is based on the legislation already in effect in Alberta, Ontario, and Prince Edward Island, one can infer that the regulations attached to the New Brunswick Act will be fairly comparable to the regulations in place in each of those other provinces.

A notable difference between the New Brunswick Act and the legislation in the other three provinces relates to dispute resolution. The New Brunswick Act provides that any party to a franchise agreement who has a dispute with one or more of the other parties to the franchise agreement may deliver a notice of dispute to the other party. Within 15 days of the delivery of such notice, the parties shall attempt to resolve the dispute. If the dispute is not resolved, either of the parties may deliver a notice to mediate. If the mediation is unsuccessful, information such as the costs incurred at the mediation may be disclosed to a court, tribunal, or arbitrator, which may in turn affect parties’ costs at trial. The New Brunswick Act is the only franchise statute in Canada that includes such a dispute resolution provision.

Aside from that single notable difference, the New Brunswick Act is quite similar to the franchise statutes in Alberta, Ontario, and Prince Edward Island. Like those laws, the New Brunswick Act 1) imposes an obligation on franchisors to provide pre-sale disclosure to prospective franchisees; 2) imposes a duty of fair dealing on both franchisors and franchisees; and 3) grants to franchisees the right to associate.

While the public comment anticipated with respect to the regulations to the New Brunswick Act may slow the momentum of its progress through the legislative process, it should not prevent the act from ultimately coming into effect. It is anticipated that the draft regulations will be released in the fall of 2007, with the effective date for the legislation in 2008. At that time, we will be able to confirm whether New Brunswick has in fact followed the examples of Alberta, Ontario, and Prince Edward Island in drafting its regulations.

A full version of the New Brunswick Act is available online at www.gnb.ca/0062/acts/BBA-2007/Chap-F-23-5.pdf

Jayne Westlake is an associate at Cassels Brock & Blackwell LLP, one of Canada’s leading law firms in the area of franchise and distribution law.

Published: August 21st, 2007

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