Previously, on the Bubble Tea Wars: the Court of Appeal ruled in favour of Chatime (La Kaffa) and ordered Tealive (Loob Holdings) to cease operations (Read our report here)
Tealive then filed an application to stay the Court of Appeal’s decision pending leave to appeal to the Federal Court. (A stay of execution application is an application to temporarily suspend or stop the effect of a court order)
What was the outcome of Tealive’s application for a stay of execution?
Today (5 July 2018), the Court of Appeal dismissed Tealive’s application for a stay of execution. This effectively means that Tealive must cease operations immediately.
Why did the Court of Appeal dismiss Tealive’s application for a stay of execution?
The Court of Appeal in dismissing the application, made the following observations (among others):
- The court cannot lean in favour of a person who by conduct is perceived to have breached the contractual obligation as well as statutory obligation with knowledge that he is likely to cause loss to the other person.
- Section 27 of the Franchise Act 1998 strictly prohibits Tealive from operating business in that manner and there is a criminal element to it, as well as attracting sanctions in the Penal Code. As such, it would be against the rule of law for the Court to disregard a statutory protection afforded by the Franchise Act 1998.
- Tealive by their own actions were purportedly in breach of contract as well as statute. It is a self induced misconduct. The Court agreed with Chatime’s submissions that the fact that Tealive’s business may be “too big to close” is not a reason to grant a stay of execution. After all, when Tealive was aware of the legal dispute with Chatime, they sought to subsume a vast majority of existing Chatime outlets by rebranding itself as Tealive. In other words, Tealive should not be able to benefit from their own conduct when they knew it could be subject to an injunction.
The Court of Appeal also had strong words about Tealive’s conduct:
“Courts should not lend its hand to persons who on the face of record are seen to be cheats. In India, such category of persons are called 420’s. The terminology originates from the Indian Penal Code section 418, 420 and many other sections. Our provisions are similar…
420’s flourish well in compromised governments with assistance of compromised judiciary. The 420s’ existence in actual fact will compromise the rule of law as well as the concept of accountability, transparency and good governance. The lack of these virtues promote corrupt practices which ultimately affects the nation and its wealth..”
What happens next?
If Tealive intends to continue operating, it must appeal against the dismissal of the stay of execution. Further, they also need to file an application for leave to appeal to the Federal Court in respect of the substantive decision of the Court of Appeal in granting the injunction.
This article was written by Donovan Cheah (Partner) and Zi-Han Lim (Associate) from Donovan & Ho’s dispute resolution practice. If you have a query, please contact us.