Executive Summary: Key Legal and Evidentiary Issues

• A franchise agreement signed on March 28, 2022, between 9441-1170 Québec inc. (9441) and 9413-9862 Québec inc. / Wagram Finances Canada inc. (Wagram) gave rise to a dispute over which amounts were to be refunded upon termination of the franchise relationship.
• Central to the dispute was whether the franchise entry fee of $34,492.50, which the franchise agreement expressly declared non-refundable, was included in the verbal exit agreement reached in April 2023.
• Credibility of witnesses was a key evidentiary issue, with the court finding the testimony of Wagram's representative, Maxime Mayant, more credible than that of Arthur Le Doujet, the representative of 9441.
• Interpretation of a verbal, unwritten exit agreement required the court to consider the parties' conduct, contemporaneous documentation, and contractual context under the Civil Code of Québec.
• 9441's claim for $10,000 in damages was dismissed for failure to prove any actual loss, as no supporting documentation was filed.
• Whether Wagram's pre-litigation offer of $7,938.86 constituted a valid offre réelle (tender) under the Civil Code was also in issue, affecting the calculation of interest.

Facts of the case

Arthur Le Doujet and Laetitia Cochennec, shareholders of 9441-1170 Québec inc. (9441), are French nationals who explored the possibility of operating a Columbus Café & Co franchise in Québec. In 2021, Mr. Le Doujet contacted 9413-9862 Québec inc., also known as Wagram Finances Canada inc. (Wagram), the company responsible for managing and developing the Columbus Café network in Canada. A franchise agreement was signed on March 28, 2022, by Wagram and 9441. On the same date, the parties signed an addendum providing for the involvement of a third company, 9446-7370 Québec inc. (9446), for the actual operation of the café — an arrangement that appears to have been made to address certain difficulties related to Mr. Le Doujet and his partner's immigration status in Québec.

Upon launching the franchise in June 2022, 9441 paid two significant sums: a security deposit (dépôt de garantie) of $42,431.36 to guarantee lease obligations, and a franchise entry fee (droit d'entrée) of $34,492.50. Between December 2021 and June 2023, 9441 also injected $33,258.63 into 9446's operating account to finance the café's day-to-day operations, for a combined outlay of $110,182.49. In April 2023, Mr. Le Doujet informed Wagram's representative, Maxime Mayant, of 9441's intention to withdraw from the franchise. The parties then attempted to negotiate an orderly exit. They could not agree on which amounts were owed back to 9441, prompting this litigation.

Contractual clauses at issue

The franchise agreement contained an explicit non-refundability clause regarding the entry fee. The relevant provision stated that the entry fee of $34,500 (30,000 CAD plus applicable taxes) was "in no case refundable and shall remain definitively acquired by the Franchisor," regardless of whether the franchisee ultimately decided not to open or operate the point of sale. The agreement further conditioned any opening of the point of sale on full payment of the entry fee. The security deposit, by contrast, was governed by the lease agreement, which provided that it was paid to the lessor to "guarantee the tenant's obligations under the Lease." Although the invoice for the entry fee was addressed to 9446, it was 9441 that actually paid it by depositing the amount into 9446's account on March 2, 2022.

Court's reasoning and analysis

The court found that the parties did reach an oral exit agreement in April 2023, but that this agreement covered only the refund of the security deposit ($42,431.36) and the operating advances ($33,258.63), for a total of $75,689.99. The court did not find the entry fee to be part of that agreement.

In reaching this conclusion, the court assessed the credibility of the two key witnesses. It found Mr. Le Doujet's testimony to lack credibility overall, noting that his answers were evasive, that he minimized his own role as franchisee despite signing the franchise agreement in that capacity, and that he contradicted himself on several points — including initially claiming he had no time to read the franchise agreement before signing, then admitting in cross-examination that he had received a draft several days or weeks in advance and had not been prevented from consulting a lawyer. By contrast, the court found Maxime Mayant's testimony to be firm and consistent, both in direct examination and cross-examination, particularly regarding his express refusal to agree to any refund of the entry fee.

The court also relied on contemporaneous documentary evidence to support its finding. On July 6, 2023, Wagram's accountant wrote to Mr. Le Doujet confirming that Wagram owed 9441 the sum of $42,431.36 — a figure that corresponds only to the security deposit, not the entry fee. On July 10, 2023, Mr. Mayant sent a text message to Mr. Le Doujet expressly stating that the company could not repay the entry fee. Furthermore, the August 9, 2023 demand letter sent by 9441 itself claimed only the refund of the security deposit, not the entry fee — conduct the court treated as telling. The court applied Article 1432 of the Civil Code of Québec, which provides that in case of doubt, a contract is interpreted in favor of the debtor of the obligation, and noted that 9441's argument of unjust enrichment by Wagram was not supported, given that Wagram had already performed its obligations under the franchise agreement by providing the franchise concession, trademarks, and know-how.

On the question of whether Wagram's pre-litigation offer of $7,938.86 constituted a valid offre réelle under Articles 1576 and 1586 of the Civil Code, the court found that there was insufficient proof that the sum had actually been deposited in trust. The letter from Wagram's former counsel, Me Fraticelli, did not reference any trust deposit — it merely indicated that Wagram was "prepared to pay" the amount in exchange for a release. As the formal conditions for a valid tender were not met, interest continued to accrue under Article 1617 of the Civil Code from the expiry of the notice period in the demand letter, being August 22, 2023. The $10,000 damages claim by 9441 was dismissed in its entirety, as no documentary evidence of any actual loss was produced, and Mr. Le Doujet ultimately admitted that the only damage suffered by 9441 was legal fees — for which no invoice was filed.

Ruling and overall outcome

The Cour du Québec allowed 9441's claim in part. While the claim for the full security deposit ($42,431.36) and $10,000 in damages was rejected, the court condemned Wagram to pay 9441 the sum of $7,938.86, with interest at the legal rate plus the additional indemnity under Article 1619 of the Civil Code of Québec, running from August 22, 2023. Costs (frais de justice) were awarded in favor of Wagram, given that it had acknowledged owing this residual amount since the filing of its defence summary on August 9, 2024. Wagram was therefore the substantially successful party in this proceeding.