No stay for Tealive owner as it is case of ‘self-induced misconduct’

Judge says under the franchise agreement and the Franchise Act 1998, Loob Holding, by statute and under the contract, is prohibited from operating a similar business in competition to Chatime. (Facebook pic)

PUTRAJAYA: Tealive bubble tea brand owner Loob Holding Sdn Bhd could not be granted a stay against the appellate’s court’s decision prohibiting the company from operating its business similar to Chatime as it was a case of self-induced misconduct, the Court of Appeal held today.

Court of Appeal judge Hamid Sultan Abu Backer said the special circumstances rule, relied on by Loob Holding to seek the stay order, was not applicable in a case of self-induced misconduct.

In his 13-page judgment, Justice Hamid Sultan said Loob Holding (a former franchise holder of Chatime), by its own act, was purportedly in breach of a contract and statutory obligation and had expanded the business and continued the business, adding that it was a case of self-induced misconduct.

He said under the franchise agreement and the Franchise Act 1998, Loob Holding, by statute and under the contract, was prohibited from operating a similar business in competition to Chatime, whose owner is a Taiwanese company, La Kaffa International Co. Ltd.

“In this case, in an unusual manner and in gross disregard to the contractual obligations as well as the statutory obligation, Loob Holding in an ‘overnight’ manoeuvre had changed the name ‘Chatime’ to ‘Tealive’ and begun operating in the same premises with the staff,” he said.

He said the Court of Appeal in its earlier judgment had taken cognizance of the undisputed facts that Loob Holding was operating a business in breach of the statutory protection given to La Kaffa, which attracted criminal sanctions.

“Courts should not lend a hand to persons who … are seen to be cheats,” he said.

“The court ought not to lean in favour of a person who by conduct is perceived to have breached the contractual obligation as well as the statutory obligation, with the knowledge that he is likely to cause loss to the other person,” he said.

Hamid said he was of the view that the submissions by Loob Holding’s counsel that La Kaffa could be compensated with damages, would be contemptuous in nature when a statute strictly prohibits the company from operating the business in that manner and there is a criminal element to it, as well as attracts action under sections in the Penal Code related to cheats.

“The judge had taken an oath to preserve, protect and defend the (Federal) Constitution. In consequence, it will be against the rule of law to disregard a statutory protection in favour of La Kaffa,” he said.

Pending hearing of its leave to appeal at the Federal Court, Loob Holding sought a stay order against the appellate court’s decision on June 27 this year to allow Kaffa International’s appeal for an injunction to stop the company from operating its business.

Yesterday, the Court of Appeal’s three-man bench, comprising Justice Hamid Sultan, Badariah Sahamid and Rhodzariah Bujang, in a majority decision, dismissed Loob Holding’s application for a stay of the injunction order with RM15,000 in costs. Rhodzariah had dissented.

On June 27 this year, a three-man Court of Appeal bench, also chaired by Hamid, granted an injunction to La Kaffa against Loob Holding from carrying out a similar business as the teahouse chain, which is known for its bubble teas.

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 were more than 20 years left on the deal.

La Kaffa said the Court of Appeal, in its earlier decision to grant an injunction, had rightly considered the factual circumstances of Loob Holding’s overnight wholesale duplication of the Chatime system, with outlets being renamed practically overnight.

There are 179 Tealive outlets operating nationwide, including 22 outlets at petrol stations.

A media report had quoted a statement by Loob Holding that the company had instructed its lawyers to file for leave to appeal to the Federal Court. The application was filed yesterday.