The Ontario Court of Appeal released its decision in Welch Foods Inc., A Cooperative v. Cadbury Beverages Canada Inc. on February 1, 2001. The dispute related to a trademark licence agreement entered into almost 30 years ago, pursuant to which Cadbury has been granted the exclusive right to manufacture and sell Welch products in Canada. The principal issues during the 41-day trial were whether Cadbury had the right, with Welch’s consent, not to be unreasonably withheld, to subcontract or outsource the manufacturing of Welch-branded products (known in the industry as co-packing), and whether Welch acted unreasonably in withholding its consent to a co-packing arrangement proposed by Cadbury. Cadbury also alleged at trial that Welch had breached an agreement relating to the use of grapes grown by Canadian growers.
In dismissing Welch’s appeal on the outsourcing issue, the Court of Appeal agreed with Cadbury, concluding that it had such a right to co-pack and further, that Welch withheld its consent for a collateral and impermissible purpose and as a result, Welch unreasonably withheld its consent. The trial judge had dismissed Cadbury’s breach of contract claim. No appeal was taken from that dismissal. Cadbury was represented at trial and on appeal by John Rook, Q.C., and John Cotter of Osler, Hoskin & Harcourt LLP. Welch was represented at trial and at the Court of Appeal by Joel Richler and Teresa Howarth of Blake, Cassels & Graydon LLP.