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Friendly Coffee Nutrition Center Ltd. (“Friendly Coffee”). ABC Franchising(“ABC FRANCHISING”) (collectively the “Parties”). They have agreed to arbitrate certain disputes. This was arising out of their Letter of Agreement. (“The Agreement”) dated May 22, 2004.
The Parties hereto and the Arbitrator agree to the following.
The Parties agree that Steve McMullen, FCIArb (Arbitrator) has been duly and validly appointed as sole arbitrator. The Arbitrator has agreed and accepted this appointment. The applicable procedural rules governing this dispute are the Canadian Expedited Procedures. This is in the International Center for Dispute Resolution (ICDR)Canada Rules. They may be modified by agreement of the parties or by order of the Arbitrator.
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Mr. Smith will represent Friendly Coffee. Mr. Lu will represent ABC FRANCHISING throughout the arbitral proceedings. The place of arbitration is Toronto, Ontario. The applicable substantive laws are the laws of Ontario. Also, the laws of Canada applicable in Ontario.
The proceedings will be conducted entirely in writing. This is except where the Arbitrator orders an oral hearing. This would be pursuant to Article E-8 of the ICDR Canada Rules. This could be done to ensure the fair resolution of the dispute. The Parties will be jointly and severally liable for the remuneration and expenses of the Arbitrator.
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This agreement is without prejudice to the right (if any) of a party to claim an award for reimbursement. This would be by another party of all or any part of the amounts paid pursuant to this agreement. The Arbitrator will be paid at a flat fee of $5000 plus applicable taxes. This is for a proceeding that is entirely in writing. Each party will make a trust deposit of $2500. Also, an extra one-half of the applicable taxes as security for the Arbitrator’s remuneration and expenses.
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The Arbitrator might deem an oral hearing necessary in accordance with the ICDR Canada rules. Therefore, the Arbitrator will be paid $650 per hour for his services. The Arbitrator also will be reimbursed for all reasonable out-of-pocket expenses. These would be expenses while incurred while acting as Arbitrator. Also, for all applicable taxes.
The Arbitrator will submit an invoice for his hourly rate in the event of an oral hearing. The fee portion of this invoice will be expressed as a lump-sum amount. Further, it would be based on the number of hours worked. The invoice will not set out a detailed description of the work done. This is to protect the confidentiality of the Arbitrator’s deliberations.
The Ontario Arbitration judge can determine at any time that insufficient deposits are held. He or she may require supplemental deposits. He or she would give the parties as much advance notice as feasible. Further, the parties understand there might be a delay in the Final Award. Further, it will not be delivered to them unless and until the Arbitrator’s remuneration and expenses have been paid in full.
Arbitration Ontario Is Binding On The Parties
The Parties acknowledge that the Arbitration Ontario Arbitrator is not acting in the capacity as legal counsel. This is true to either party in preparing this Agreement and in acting as Arbitrator. The Parties acknowledge that the Arbitrator has recommended that each party obtain independent legal advice. This was before agreeing to the terms of this Arbitration Ontario Agreement. The Arbitrator will have the same immunity from claims. Also, immunity and compulsion to attend legal proceedings as a judge of the Ontario Superior Court.
Once 30 days have expired after the conclusion of the Arbitrator’s involvement in the case, the Arbitrator will if requested return produced party documents to the parties. This would be from whom they were received. Further, it would be at the expense of the requesting party. Otherwise, all such documents will be destroyed. This Arbitration Ontario Agreement will be governed by Ontario law and may be executed in counterparts.
Below is information about the fake arbitration case.
I am considering the relationship between ABC FRANCHISING’s remuneration for its services and its claims to exclusivity. It is notable that the Agreement contains no express set term. There is nothing like a one-year term). Further, there are not any express provisions. This would be with respect to termination of the Agreement by either party.
The absence of an express term and termination provisions is unusual. In an exclusive agency-type agreement (or exclusive finders fee type agreement) it should be there. Sometimes a finder’s fee is payable for a transaction regardless of a finder’s role. In the transaction, one would expect that those rights would be limited by a set term. Further, there should be specific provisions for the payment of fees. This would be in the event of termination.
I have found nothing in the Agreement that gives ABC FRANCHISING the exclusive right to identify new potential franchisees. This would have been to find them for Friendly Coffee. Also, the lack of exclusivity in the Agreement undermines an interpretation of the Agreement. The requirement Friendly Coffee had to pay 25% of all initial franchise fees. This was for all new franchises. This was meant to be true regardless of ABC FRANCHISING’s involvement in bringing the new franchisee to Friendly Coffee.
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It is notable that the provision for payment does not say that 25% of the franchise fee is payable to ABC FRANCHISING “whether or not the efforts of ABC FRANCHISING were an effective cause thereof.” Some exclusive agency agreements provide this language. For example, in the following case law. Citifund Capital Corp. v. Happy Valley Resort Ltd. 2010 BCSC 332.
The agreement was absent in this kind of clear language. Therefore, I am not prepared to find that the reference to “all-new Friendly Coffee Franchises” includes those new franchises. ABC FRANCHISING had no role whatsoever in bringing to Friendly Coffee the franchisees.
Lu’s subjective intention in adding the bold type to the word “all” in Section E may well have been for this reason. He might have wanted to ensure that ABC FRANCHISING would be entitled to franchise fees. This would have regardless of its involvement in the transaction leading to a new franchisee. For his part, Mr. Smith states that his subjective intention was to only pay ABC FRANCHISING commission on those franchisees that were referred by ABC FRANCHISING. However, from a contractual interpretation perspective, these subjective intentions do not help. It does not assist in determining, objectively, the joint intention at the time the Agreement was entered into.
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Applying the principles of contractual interpretation referred to above, I agree with the view put forward by Friendly Coffee. That a commercially sensible reading of the whole of the Agreement delineates the role of ABC FRANCHISING as a third party. They were commissioned to generate prospects via the provision of various marketing services.
ABC FRANCHISING would direct the leads to Friendly Coffee. This was for interviews and final evaluation. If approved by Friendly Coffee the conversion into a Friendly Coffee. On my reading of the Agreement as a whole, only those new franchisees identified by ABC FRANCHISING would result in payment of a commission to ABC FRANCHISING.
Accordingly, ABC FRANCHISING’s claim for a commission based on the franchise fees paid by all new franchisees for the term of the Agreement is dismissed.
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Both parties have sought costs. The arbitrator will retain jurisdiction to deal with the issue of costs. I refer the parties to Article 34 of the ICDR Rules with respect to the applicable considerations for costs.
I direct that Friendly Coffee delivers its submissions on costs by no later than January 13, 2004. ABC FRANCHISING delivers submissions in response by January 20, 2004. Further, any reply submissions from Friendly Coffee be delivered by January 25, 2004. Either party is at liberty to seek clarification of this direction. This is as to cost submissions by way of e-mail to me.
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