Background:
Vern’s Pizza Company Limited (Franchisor) sued 101011333 Saskatchewan Ltd. (Franchisee) over the expiration of a franchise agreement. The dispute arose after the Franchisee ceased operating one of two required locations due to lease termination but continued using the Franchisor’s trademarks.
Key Legal Issues:
- Contract Interpretation: The Franchisor argued the agreement required continuous operation at two specified locations for the franchise term to remain valid. The Franchisee contended the agreement allowed operation at either location independently.
- Duty of Honest Performance: The Franchisee alleged the Franchisor breached this duty by failing to warn about termination risks tied to lease expiry.
- Trademark Violations: The Franchisor claimed the Franchisee infringed trademarks and engaged in passing off after the agreement ended.
Court’s Findings:
- The agreement’s term ended in August 2016 due to lease termination at one location.
- The Franchisor did not breach the duty of honest performance, as silence about contract terms did not amount to bad faith.
- The Franchisee’s continued use of trademarks constituted infringement, but no passing-off damages were awarded as royalties were accepted.
Relief Granted:
- A declaration that the franchise agreement ended in 2016.
- An injunction requiring the Franchisee to cease operations by September 30, 2024.
- No damages were awarded, as ongoing royalties covered trademark use.
Costs Awarded:
The Franchisee was ordered to pay costs based on Column 2 of the court’s tariff, with no specific monetary amount detailed in the decision.
