Can a franchisee claim for breach of fiduciary duty against the franchisee?

Ontario, Canada


The following excerpt is from Arie v. Schreiber, 2006 CanLII 12420 (ON SC):

Second, Lax J. found that not only the factual basis for, but also the "damages flowing from", the breach were the same. The damages to which the franchisee plaintiff might have been entitled had the breach of trust claim succeeded would have been identical to the damages to be awarded for breach of contract. In our case, the breach of fiduciary duty, if established, has the real possibility of enhancing the potential for punitive damages. In Vorvis v. Insurance Corp. of British Columbia, 1989 CanLII 93 (SCC), [1989] 1 S.C.R. 1085, [1989] S.C.J. No. 46, McIntyre J. established the very high standard for an award of punitive damages, referring to conduct of a "harsh, vindictive, reprehensible and malicious nature": at para. 27. With respect to punitive awards in contract cases, he said: The question before us now is whether the trial judge was right in concluding that it was not open to him to award the punitive damages. In my view, while it may be very unusual to do so, punitive damages may be awarded in cases of breach of contract. It would seem to me, however, that it will be rare to find a contractual breach which would be appropriate for such an award . . . In an action based on a breach of contract, the only link between the parties for the purpose of defining their rights and obligations is the contract. Where the defendant has breached the contract, the remedies open to the plaintiff must arise from that contractual relationship, that "private law", which the parties agreed to accept. The injured plaintiff then is not entitled to be made whole; he is entitled to have that which the contract provided for him or compensation for its loss. This distinction will not completely eliminate the award of punitive damages but it will make it very rare in contract cases. (At para. 26, emphasis added).

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