In Avante Automobile (2017) Corporation v. BMW Canada Inc., 2025 ONSC 87, the Ontario Superior Court of Justice held that BMW Canada breached its statutory duty of fair dealing under the Arthur Wishart Act when it failed to properly document a deadline extension and follow contractual termination procedures. While the Court found BMW liable, it dismissed the dealer's damage claims, finding that the actual sale price obtained on a subsequent purchase reflected fair market value more accurately than failed higher offers.
The decision reinforces that franchise relationships remain subject to fair dealing scrutiny even when parties operate informally and highlights the importance of proper documentation in franchise modifications.
Background
The predecessor corporation to Avante Automobile purchased a BMW dealership in Newmarket, Ontario in 2012. The transaction included specific facility renovation requirements under BMW’s new standards, with completion required by Feb. 1, 2014. The Retailer Agreement carried a 24-month term extending to Dec. 31, 2015, subject to renovation completion, and contained standard termination provisions with a 15-day cure period.
The dealership premises was subject to an Ontario Municipal Board agreement requiring consent from neighbouring residential properties for significant changes. This restriction was not discovered as no title search was completed before purchase, causing construction delays.
BMW granted several deadline extensions: first to June 2014 through formal correspondence and a second Letter of Intent, then to April 2015 through an oral agreement with BMW’s president. The final extension was documented only through email confirmations, not formal amendments to the agreement.
Despite substantial progress, renovations remained incomplete by April 2015. BMW terminated the relationship in March 2016, committing to cooperate with the dealer's sale efforts. After unsuccessful attempts to sell for $21M, the business ultimately sold for $15M.
The decision
The dealer brought an action alleging that BMW’s failure to renew the agreement and its conduct throughout the relationship breached contractual, statutory, and common law obligations, forcing a sale at reduced value.
BMW’s breach of fair dealing
The Court found that BMW breached its statutory duty of fair dealing under section 3 of the Arthur Wishart Act by failing to properly document the April 2015 extension and by not following the termination procedures outlined in the Retailer Agreement. The Court determined that the parties had continued to operate as if the agreement remained in force until March 2016, requiring BMW to follow its contractual termination procedures, which would have provided the dealer with an opportunity to cure the grounds for termination.
No recoverable damages
Despite finding BMW’s procedural breaches, the Court dismissed the dealer's damage claims. The Court concluded that the actual $15M sale price reflected fair market value more accurately than the unsuccessful $21M offers from other buyers. The Court also dismissed claims for punitive damages, effectively resulting in dismissal of the action with no net recoverable damages.
Key takeaways
- Documentation requirements: Verbal modifications to franchise agreements, particularly deadline extensions, must be properly documented through formal amendments, not just email confirmations.
- Termination procedures remain mandatory: Even when parties operate informally beyond contract terms, franchisors must still follow contractual termination procedures under fair dealing obligations.
- Fair market value controls: Courts will scrutinize damage calculations, with actual sale prices given more weight than unsuccessful higher offers in determining fair market value.
- Fair dealing scrutiny applies throughout: Arthur Wishart Act obligations continue to apply even during informal extensions of franchise relationships.
- Due diligence essential: Title searches remain critical before facility modification commitments to identify potential restrictions that could affect compliance timelines.
- Broader application in franchise law: While this case involved automotive dealers subject to different dispute resolution mechanisms, similar fair dealing scrutiny would likely apply in other franchise networks, including those subject to National Automobile Dealer Arbitration Program (NADAP) arbitration.
The decision demonstrates that while courts will closely examine fair dealing breaches in franchise terminations, successful damage claims require realistic market value assessments supported by actual transaction evidence rather than speculative offers.
BLG can assist
Our lawyers are well equipped to assist with drafting or reviewing franchise agreements, managing relationships with franchisees, or representing clients in litigation and dispute resolution. Please reach out to the author below, or any lawyer from BLG’s Franchise Licensing & Distribution or Contract Disputes groups.
