THE Court of Appeal has granted an interim injunction against Tealive from continuing their operations following an appeal by rival Chatime, who said their tea business franchise here in Malaysia was stolen from them.

Taiwan-based La Kaffa International Co Ltd had filed an originating summons to seek an injunction to restrain Loob Holding Sdn Bhd from operating a rival tea business under the name Tealive, a popular bubble-tea business with 161 outlets and 800 employees nationwide.

In delivering his judgment yesterday, Justice Hamid Sultan Abu Backer, who leads a three-man panel, said the injunction was based on breach of post-franchise terms and also return of its properties.

“To put in simple terms, Loob having had the benefit of Chatime franchise business proceeded to set up a rivalry business which La Kaffa says is not permissible under the franchise terms as well as Franchise Act 1998.

“In consequence, they sought injunctions to restrain Loob with other mandatory prayers. The originating summons of La Kaffa, made pursuant to section 11 of Arbitration Act 2005 and/or inherent jurisdiction of the court sets out the problem as well as the restraining orders sought,” he said in his written judgment.

Hamid said Loob’s prior appeal will be dismissed with costs. The other two commissioners are Badariah Sahamid and Rhodzariah Ujang. Khoo Guan Huat represented La Kaffa while Loh Siew Cheang acted as counsel for Loob.

In December 2016, La Kaffa terminated the master franchise agreement with Loob despite having 20 years left on the deal.

Loob Holding’s chief executive officer Bryan Loo lodged a police report over the sudden termination but agreed to La Kaffa’s contract termination on January 20.

The Malaysian firm, however, created its new brand Tealive, while La Kaffa appointed Will Group its licensor of Chatime here.

The Court of Appeal’s decision yesterday has overturned the Kuala Lumpur High Court’s dismissal in May last year of an injunction bid by La Kaffa against Loob from carrying a similar business.

Hamid referred to the ruling by Judicial Commissioner Wong Kian Kheong then that an injunction would cause great risk of injustice to Loob and its business and associates.

“The learned judicial commissioner took the view by granting the prohibitory injunction, Tealive’s business, consisting of 161 outlets and the livelihood of 800 employees of Loob, will be affected.

“We do not see this to be justifiable reason when the complaint of La Kaffa in crude terms means that Loob has overnight changed the name of business Chatime and running the business under Tealive.”

He said the conduct of Loob is not only in breach of legal obligation related to restraint of trade but also breach of franchise law which does not encourage “criminal or tortious conduct of business and goodwill”.

The court-ordered injunction will hold pending the outcome of a separate ongoing arbitration at the Singapore International Arbitration Centre involving the two firms. – June 27, 2018.