Canada: The Superior Court Refused To Issue An Interim Injunction To Prevent The Operation Of A Restaurant, Which Would Violate The Non-Competition And The "Disidentification" Obligations Under A Franchise Agreement.

Groupe Sportscene inc. v. 2639-6564 Québec Inc.,2013 QCCS 17

The petitioner was acting as a franchisor for the respondent franchisee, 2639-6564 Québec Inc. to operate the restaurant La Cage aux sports located in Boucherville. The franchise agreement stipulated certain obligations of non-competition and of "disidentification" in favor of the franchisor. Thus, for a period of two years after the end of the agreement, the respondent could not operate a restaurant and specialize in steak, chicken or ribs or even offer sports-related entertainment or décor. These restrictions applied within a radius of five miles from the franchised restaurant. In addition, the respondent had to eliminate all distinctive signs that could identify the franchisor, including the arrangement of the red and white colors and anything that is likely to cause confusion or error on the part of the public.

The franchisee has not renewed the franchise agreement and decided instead to open the restaurant Le Chêne Blanc at the former location of La Cage aux sports. In its request, the petitioner claimed that several elements of this new restaurant violated the franchise agreement, including the siding and the landscaping of the building, the presence of televisions, as well as the menu and presentation of the meals. The petitioner claimed an apparent right to protect its trademarks, clientele as well as expertise, and that the balance of convenience played in its favor. In addition, the petitioner argued that illegal appropriation of its customers by the respondent constitutes an irreparable harm that is extremely difficult to quantify. Finally, the petitioner pleaded the urgency that an interim injunction order be granted, given its intention to open a new La Cage aux Sports restaurant in Boucherville in the near future.

The respondent claimed that there was no urgency to proceed on a provisional basis as one month has elapsed since the opening of Le Chêne Blanc and given that the petitioner had been informed throughout the progression of the construction. In addition, the respondent argued that there was no possibility of confusion between the restaurant concept of La Cage aux sports and that of Le Chêne Blanc. In short, there was no justification that an interim injunction be granted.

Decision:

According to the Honourable Justice Gouin, the petitioner has not satisfied any of the criteria necessary to grant an interim injunction.

Justice Gouin first points out that the opening of a La Cage aux sports restaurant in Boucherville, in the short term, remains uncertain and therefore there is no urgency justifying the issuance of an interim injunction.

Similarly, Justice Gouin concluded that there was, prima facie, no risk of confusing the public. The external appearance of the Le Chêne Blanc restaurant is like all the other adjacent shops that are part of the same building complex, such as Thaï Express, Mikes or Tim Hortons, that being exterior walls having white siding and red columns. Only their respective banners distinguish them. Thus, according to the Court, a potential client's choice of restaurant is not based on the red and white exterior, but rather based on the business' banners.

Finally, Justice Gouin concluded that the petitioner has not established that there is a serious and irreparable harm because, at first glance, the concept of the Le Chêne Blanc restaurant is different from that of La Cage aux sports and seems to target a different clientele. As a result, granting the franchisor's request would cause prejudice to the respondent, who has invested substantial sums of money to create its new concept.

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit: www.fmc-law.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.