Court dismisses Chatime’s bid for injunction against ex-franchise holder

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KUALA LUMPUR: The High Court here dismissed an injunction bid by Chatime owner, La Kaffa International Co Ltd, against its former franchise holder, Loob Holding Sdn Bhd, from carrying a similar business as Chatime.

Judicial Commissioner Wong Kian Kheong, in his oral judgement, ruled that the injunction would cause great risk of injustice to Loob Holding and its business and also associates.

“Its 161 Tealive stores and sub franchisees will have to close shop.

“The lives of its 800 staff, third parties associated with the business, the shops’ landlords, suppliers and creditors will be adversely affected,” he said.

Wong added with this decision, Loob can continue its business as usual, competing with La Kaffa, subject to the Singapore International Arbitration Centre’s outcome on the arbitration.

Meanwhile, the court also found that the franchise termination by La Kaffa was done in bad faith.

“On one side, La Kaffa sent a notice of arbitration to Loob last October and demanded payment of US600,000 while on the other hand the company awarded Loob its best partner award,” Wong said.

“La Kaffa also issued media statements to say they are taking over. The Chatime management was against the 45 days’ exit period in the franchise contract.”

The court, however, ordered Loob Holding to disclose its monthly gross sales to assist in the Singapore arbitration proceedings.

On Feb 17, La Kaffa sought an injunction to stop Loob Holding from selling similar products as theirs.

Company director Chen Zhao, through his affidavit, claimed Loob Holding had breached the terms of the main franchise agreement, leading to its termination.

He said the Taiwanese company began to have doubts about its then Malaysian counterpart in January 2016 when Loob Holding reduced its order of raw materials.

“This was in contrast to the increasing number of Chatime stores and growth in sales revenue,” Chen said.

Chen also claimed Loob Holding had failed to pay La Kaffa a sum of US$713,273.72 (about RM3.1 million) for the purchase of raw materials.

This amount was later reduced to US$644,536.32.

The dispute between La Kaffa and Loob Holding started in early December 2016, when the Taiwanese company terminated the master franchise agreement between the two parties even though there was more than 20 years left on the deal.

Loob Holding’s chief executive officer Bryan Loo had also lodged a police report over the sudden termination.

Both companies have taken their dispute to the Singapore International Arbitration Centre.

Loob Holding had agreed to La Kaffa’s contract termination on Jan 20, and had created its new brand, Tealive.

La Kaffa had also appointed a new local master licensor, Will Group, to run its bubble milk tea franchise business.