Oakville Marble Slab franchisees awarded $482,043 over outdated financial disclosure

The former operators of an Oakville Marble Slab Creamery franchise have been awarded $482,043 after an Ontario judge found that outdated financial disclosure entitled them to unwind their franchise agreement.

In Moonable Right Ltd. et al v. Canadian Ice Cream Company Inc. et al, 2026 ONSC 3779, released October 2, 2026, the Ontario Superior Court of Justice upheld Moonable Right Ltd. and Meng Hu’s January 31, 2023 rescission following a contested trial. Justice Parghi dismissed the defendants’ counterclaim alleging abandonment of the business.

The total compensation is payable jointly and severally by franchisor Canadian Ice Cream Company Inc., Cameron Kyle Inglis and Canadian Ice Cream Company Distribution Inc. The court also awarded prejudgment interest from January 31, 2023 to the judgment date. Costs remained unresolved.

Undisclosed statements showed financial deterioration

Canadian Ice Cream Company Inc. holds the right to grant Marble Slab Creamery franchises. After Hu expressed interest in February 2021, it supplied a disclosure document containing financial statements for the fiscal year ending January 31, 2019.

Moonable subsequently entered a franchise agreement effective March 11, 2021. Its Oakville store opened on June 17, 2022 and operated at a loss. Moonable delivered a rescission notice in January 2023 and stopped operating on January 31. A successor franchisee later operated from the same premises.

Ontario’s Arthur Wishart Act requires franchisors to provide prescribed financial information to prospective franchisees. The judge found that the 2019 statements were too old to satisfy those requirements when supplied in February 2021. Statements for the year ending January 31, 2020 had already been prepared and provided to the franchisor.

According to the court, those undisclosed statements showed that the franchisor had more than $200,000 fewer assets, almost $150,000 less revenue and almost $200,000 more expenses than in 2019. Its approximately $170,000 net income had become a net loss of approximately $103,000. These were the franchisor’s financial results, rather than the Oakville store’s.

Why the two-year rescission period applied

The central issue was whether the deficiency was serious enough to engage the Act’s two-year rescission remedy. Section 6(1) provides a 60-day remedy for certain late or deficient disclosure. Section 6(2) permits rescission within two years of entering the agreement where the franchisor never supplied a disclosure document. Courts have recognized that a document can be so deficient that it effectively amounts to no disclosure.

Justice Parghi considered both decisions treating certain deficiencies as fatal flaws and the Court of Appeal’s case-specific approach, which asks whether the disclosure enabled an informed investment decision. The judge did not resolve the tension between those approaches, finding that the franchisees succeeded under either.

The stale financial statements failed the statutory requirements. Independently, the undisclosed deterioration in the franchisor’s finances prevented the franchisees from obtaining a complete, accurate and current picture for their investment decision. The ruling therefore does not establish that every disclosure defect automatically allows two-year rescission.

The defendants argued that providing some disclosure was enough to defeat the claim. They also said the franchisor qualified for a financial-disclosure exemption and that Hu’s conduct, including building the store and expressing interest in another location, suggested satisfaction with the information.

The court rejected those arguments. The claimed exemption had not been pleaded, its financial requirements were not proven, and the disclosure document did not identify an exemption. The informed-investor test was objective and focused on the disclosure, rather than the particular franchisee’s reactions.

Compensation included expenses after rescission

The award comprised four categories:

• $33,193 for initial fees and subsequent royalties;
• $18,023 for inventory;
• $267,253 for supplies and equipment, including leasehold improvements; and
• $163,574 in losses from acquiring, setting up and operating the franchise.

The last category included unpaid labour and expenses after rescission, including rent and continued loan servicing. Both sides presented accounting experts. The judge found both credible, but generally preferred the franchisees’ expert where their approaches differed because of his franchise-dispute expertise and the consistency of his approach with the case law.

The defendants sought reductions for expired inventory, equipment and salvage value, and disputed recovery of post-rescission expenses. The court emphasized the legislation’s purpose of restoring franchisees to their pre-franchise position. It accepted the inventory and equipment amounts and found that the relevant statutory provisions did not exclude post-rescission rent and financing costs.

The court also rejected the defendants’ mitigation argument. Much of the claim concerned expenses already incurred; the remaining rent and financing obligations were fixed commitments to third parties associated with an orderly winding down.

Finally, because the agreement had been lawfully rescinded, the defendants’ counterclaim for early termination, unpaid amounts and related losses could not succeed on the theory that the franchisees had abandoned it. The judge encouraged agreement on costs, with submissions to follow if necessary.