IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE	
CIV-2019-488-5
[2019] NZHC 589	

BETWEEN	MAD BUTCHER HOLDINGS LIMITED
Plaintiff	
AND	STANDARD 730 LIMITED
First Defendant

ROBERT GEOFFREY WIGHTMAN
Second Defendant

ROBERT GEOFFREY WIGHTMAN, PETER WILLIAM BYERS and IAN
RICHARD WIGHTMAN in their capacities as trustees of the ROB WIGHTMAN FAMILY TRUST
Third Defendants	

Hearing:	20 March 2019	
Appearances:	S M Hunter and C Harris for the Plaintiff
M D O’Brien QC and L E Mannis for the Defendants	
Judgment:	27 March 2019	

JUDGMENT OF GAULT J

This judgment was delivered by me on 27 March 2019 at 3:00 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar

……………………………………

Solicitors / Counsel:
Mr S M Hunter, Barrister, Shortland Chambers, Auckland
Ms C Harris (plaintiff’s instructing solicitor), Jackson Russell Lawyers, Auckland
Mr M D O’Brien QC and Ms L E Mannis, Barristers, Richmond Chambers, Auckland Mr J Doughty (defendants’ instructing solicitor), Hawk Legal & Advisory, Auckland

MAD BUTCHER HOLDINGS LTD v STANDARD 730 LTD [2019] NZHC 589 [27 March 2019]

[1]	The plaintiff, Mad Butcher Holdings Ltd (MBH), is the owner and franchisor of the Mad Butcher brand, New Zealand’s largest chain of independent butchers.

[2]	The first defendant, Standard 730 Ltd (Standard), was the Mad Butcher franchisee at 97 Walton Street in Whangarei until the expiry of its franchise agreement on 4 January 2019. Standard intends to continue trading from those premises as an independent butcher.

[3]	The second defendant, Mr Wightman, is the sole director and shareholder of Standard. The third defendants are the  trustees  of  Mr  Wightman’s  family  trust. Mr Wightman and the trustees are parties to a deed of guarantee and covenant appended to the franchise agreement.

[4]	MBH alleges that Standard is in breach of the restraint of trade clause in the franchise agreement, and seeks an interim injunction restraining the defendants from operating a retail butcher business within the defined geographic area in Whangarei.

[5]	The defendants oppose the interim injunction on the grounds that operating an independent butchery does not breach the restraint, the restraint is unenforceable, MBH had breached the franchise agreement and therefore cannot enforce it, and the balance of convenience and overall justice weigh against interim relief.

Background facts

[6]	Mr Wightman’s company, Standard, became the Mad Butcher franchisee at Walton Street in Whangarei in 1997.

[7]	Standard entered into its most recent franchise agreement on 26 June 2014 with Mad Butcher Ltd (a company owned by Veritas Investments Ltd, which had purchased the Mad Butcher brand in 2013). The franchise agreement includes the following clause:

22.0	NO COMPETITION

22.1	No Competition: The Franchisee covenants that except as approved in writing by the Franchisor, the Franchisee shall not anywhere within the area described in item 13 of the Schedule during the term of this

Agreement (including any renewals) and for the period after expiration or termination of this Agreement described in item 14 of the Schedule:

(a)	Engage directly or indirectly in any capacity in any business venture which is in competition with or in conflict with the Franchise Business.

(b)	Divert or attempt to divert any business of or any former or existing customers of the Premises or of any other Franchise Business to any competitor by direct or indirect inducement or otherwise.

(c)	Employ or seek to employ any person who is employed by the Franchisor or by other holders of the Franchise or to otherwise directly or indirectly induce such person to leave his or her employment.

(d)	Directly or indirectly for the Franchisee or on behalf of or in conjunction with any other person persons partnership or company own maintain or engage in any business the same as or similar to the Franchise Business.

IT IS DECLARED that the restraints and restrictions provided under this clause 22 each operate as a separate and independent obligation of the Franchisee and are not affected by any invalidity in any one or more of the other restraints or restrictions contained in this clause 22.

The Franchisee agrees that the restraints and restrictions under this clause 22 are fair and reasonable and necessary to protect the goodwill of the Franchisor. However, if any covenant in this clause 22 is held to be invalid as an unreasonable restraint of trade or for any other reason but would have been valid if part of the wording had been deleted or the period reduced or the range of activities or area dealt with reduced in scope, those covenants are to apply with those modifications necessary to make them valid and effective.

[8]	The schedule transposes items 13 and 14 but it is clear that the no competition period is two years after termination of the franchise agreement and the area is marked on a map attached to the franchise agreement. The area extends from the store on the corner of Walton Street and Dent Street in the Whangarei CBD – 5.9 kilometres to the north and 3.4 kilometres to the south east.

[9]	Clause 3 of the deed of guarantee and covenant states:

3.	NO COMPETITION AND RESTRAINTS

(a)	The Guarantor shall not compete with the Franchise Business during or following the Term (and any renewed term) or operate or be involved in any capacity including but not limited to financier or

landlord in any competing business in the areas and for the periods specified in the Agreement and the restraints on competition covenants in clause 22 of the Agreement shall apply to the Guarantor as if set out in full in this deed with the word “Guarantor” substituted for “Franchisee”.

(b)	It is declared that the restraints and restrictions provided in this deed each operate as a separate and independent obligation of the Guarantor enforceable to the full extent permitted by law, and shall not be affected by any invalidity in any other restraint or restriction contained in the Agreement.

[10]	In March 2018 Mad Butcher Ltd sold the Mad Butcher franchise business and assigned the franchise agreement to MBH.

[11]	In December 2018 the defendants’ solicitor wrote to MBH confirming that the franchise agreement would terminate on expiry of the term (on 4 January 2019).

[12]	Having previously indicated to MBH that he intended to set up a butcher’s training school, Mr Wightman advised MBH on 7 January 2019 that he intended to continue trading as an independent butcher. Mr Wightman had already arranged with the landlord to stay in the premises on a monthly tenancy after the lease expired  (also on 4 January 2019). Mr Wightman began operating as an independent butchery on 18 January 2019.

[13]	MBH commenced this proceeding and applied for an interim injunction on  22 January 2019.

Approach to interim injunctions

[14]	It is well settled that on an application for an interim injunction the Court addresses:1

(a)	whether the plaintiff can show there is a serious question to be tried;

(b)	where the balance of convenience lies; and

1	Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142; and
American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).

(c)	where the overall justice lies.

[15]	It is no part of the Court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend, nor to decide difficult questions of law which call for detailed argument and mature considerations.2

Serious question to be tried

[16]	Mr Hunter, counsel for MBH, submitted that MBH has a compelling case that the restraint is effective and is being breached.

[17]	Mr O’Brien QC, counsel for the defendants, accepted that there is a serious question to be tried but said it should  not  be assumed  it  is  any  more  than  that. He submitted that at this interim stage the competing cases could not be weighed.

[18]	The legal principles applicable to restraint of trade clauses are well established and not in dispute. It is common ground that restraints of trade are prima facie invalid but will be enforced where they are no wider than is reasonably necessary to protect the legitimate interests the restraint was intended to protect.3 Reasonableness in the relevant sense relates to the legitimate interest of the parties to the covenant and to the wider public interest. Reasonableness  is  assessed  at  the  time  of  the  contract.4 The onus is on the party seeking to enforce.5

2	American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407; Villa Maria Wines Ltd v Montana Wines Ltd [1984] NZLR 422 (CA) at 425; and Health Club Brands Ltd v Colven [2013] NZHC 428 at [9].
3	Brown v Brown [1980] 1 NZLR 484 (CA) at 491.
4	Mike Pero (New Zealand) Ltd v Heath [2015] NZHC 2040 at [39], citing Washworld Corporation (Leases) Ltd v Reid (1998) 8 TCLR 372 (HC) at 385. See also Dhanapala v Jackson (1999) 9 TCLR 67 (HC) at 93.
5	Blackler v New Zealand Rugby Football League (Inc) [1968] NZLR 547 (CA) at 568.

[19]	The Courts have frequently found that in the franchise context a franchisor has a legitimate interest in protecting goodwill after termination.6 As Hammond J said in Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd,7 referring to Kall-Kwik Printing UK Ltd v Rush:8

[274] … it was said franchises “do not fit particularly snugly into the master and servant situation or vendor and purchaser covenants … but they are … more akin … to the goodwill cases than to the servant cases” (p 119). Indeed, it is in this context that the conveyancing analogy has often been raised – that a restriction on competition is appropriate having regard to the “retransfer” of goodwill that takes place on the termination of the franchise agreement.

[275] However the matter is viewed in juridical terms, I have no difficulty  in holding that a franchisor in a case such as this has a protectable interest. The franchisee is assisted in the start up and running of a business; it borrows expertise and support systems of all kinds. To put it shortly, if a franchisor could not protect its interests after termination, the franchising industry generally would collapse.

[20]	The defendants say they are not in breach of clause 22. They say, as its heading suggests, it is a “no competition” clause directed at preventing competition with Mad Butcher franchise stores whereas there are no Mad Butcher franchise stores in the Whangarei area or anywhere north of Albany, some 150 kilometres away. They say MBH has no intention and no reasonable prospect of establishing another Mad Butcher franchise store in Whangarei.

[21]	In the alternative, the defendants say that, for the same reasons, MBH has no legitimate interest to protect in the Whangarei area and the clause is unenforceable. Mr O’Brien submitted that, if the clause extends to prohibiting Mr Wightman from

6	Skids Programme Management Ltd v McNeill [2013] 1 NZLR 1 (CA) at [41]–[49], citing Mike Pero (New Zealand) Ltd v Exact Solutions Ltd HC Wellington CIV 2007-442-66, 17 April 2007 at [22]; Video Ezy International (NZ) Ltd v Cameron (2004) 8 NZBLC 101,550 (HC) at [49]; Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 8 TCLR 612 (HC); and Washworld Corporation (Leases) Ltd v Reid (1998) 8 TCLR 372 (HC) at 385. See also Richmastery Ltd v Richmastery (Central) Ltd HC Tauranga CIV-2005-470-951, 24 May 2006 at [48]-[49]; P5 Holdings Ltd v Elisha’s Well Ltd HC Auckland CIV 2006-404-4067, 27 September 2006 at [65]–[66]; Health Club Brands Ltd v Colven Botany Ltd [2013] NZHC 428 at [26]; and Mike Pero (New Zealand) Ltd v Heath [2015] NZHC 2040 at [36]-[37].
7	Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 8 TCLR 612 at [274]-[275]. An appeal to the Court of Appeal succeeded on other grounds, and the Privy Council allowed a further appeal: Bilgola Enterprises Ltd v Dymocks Franchise Systems (NSW) Pty Ltd [2000] 3 NZLR 169 (CA); and Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2002] UKPC 50, [2004] 1 NZLR 289.
8	Kall-Kwik Printing UK Ltd v Rush [1996] FSR 114 (ChD). See also John Burrows, Jeremy Finn and Stephen Todd The Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 516.

working as a retail butcher in circumstances where MBH is not ready, willing and able to compete in the area, the clause is unreasonable and unenforceable. He submitted it could be modified under s 83 of the Contract and Commercial Law Act 2017.

[22]	MBH says the clause applies whether or not there is an existing Mad Butcher franchise store in the designated area. MBH wishes to re-establish in the area but cannot so while the defendants are trading. Mr Hunter relied on Health Club Brands Ltd v Colven, which also involved a situation where the plaintiff’s intention to re-establish in the relevant areas was only viable if the defendants were restrained.9 Winkelmann J considered that although the defendants were no longer using the brand, there was a respectable argument that by operating from the existing premises they continued to trade on the goodwill built up through access to the franchisor’s business model.10

[23]	If clause 22 is interpreted as the defendants contend, there is no breach and no issue of legitimate interest or enforceability arises.

[24]	I consider MBH has a strong argument that the plain meaning of clause 22 is that it applies whether or not there is an existing Mad Butcher franchise store in the designated area. The restraint extends to competition with, or engaging in, any business the same as or similar to, the “Franchise Business”, which refers to “establishing, equipping and operating retail butchery shops under the name and style of The Mad Butcher”. The clause is not limited to competing with an existing operating Mad Butcher franchisee’s shop. Even if clause 22.1(a) could be read in that way, I consider that 22.1(d) should not be.

[25]	There may be some force in the defendants’ alternative argument that the restraint could be unreasonable, at least if the franchisor had no intention of competing or continuing business in the region.11 However, the restraint is to be scrutinised as at the date of the agreement, not according to subsequent events,12 and there was no

9	Health Club Brands Ltd v Colven [2013] NZHC 428 at [25].
10	At [28].
11	Propellor Property Investments Ltd v Moore [2015] NZHC 863 at [20]; and Mike Pero (New Zealand) Ltd v Heath [2015] NZHC 2040 at [33].
12	Brown v Brown [1980] 1 NZLR 484 (CA) at 491.

suggestion that in 2014 MBH had no intention of continuing in the Whangarei area if the franchise agreement came to an end.

[26]	I consider MBH also has a strong argument that it has a legitimate interest in protecting the investment and goodwill in the business model by prohibiting franchisees from exploiting it for their own advantage and in competition with the franchisor and other franchisees, as referred to in a number of the franchise cases.13

[27]	It is against this legitimate interest that the reasonableness of the restraint, particularly its duration and geographic scope, is to be assessed. This was not contested at this interim stage. Based on the evidence available at this stage and comparison with restraints in other franchise cases, I consider that MBH has a relatively strong argument that the two-year restraint in the defined geographic area of central Whangarei is reasonable. In any event, Mr O’Brien acknowledged that even if the term or geographic area were to be read down at trial, that would make no difference at this stage. The term of the restraint only commenced on 4 January 2019 and the independent butchery is operating from the same premises in the middle of the geographic area.

[28]	The defendants also say that MBH has breached oral and/or implied terms of the franchise  agreement  and  is  accordingly  not  entitled  to  enforce  clause  22.  In summary, they plead that the franchise agreement was partly written and partly oral, including terms implied by conduct and practice over 20 years of earlier franchise agreements and dealings. The particular implied terms pleaded are a duty of good faith, that the business would be maintained to allow competent franchisees to make a reasonable profit, that franchisees would be treated equitably, and that the franchisor would work cooperatively and in consultation with, and support, franchisees.

[29]	MBH robustly rejects the existence of these further terms and any breach.   Mr Hunter said no oral terms are pleaded and there is no real factual foundation for the implied terms, although he acknowledged the issue of an implied term of good faith in franchise agreements was left open by the Privy Council in Dymocks Franchise

13	See n 6 above.

Systems (NSW) Pty Ltd v Todd.14 He referred to the entire agreement clause and acknowledgement of independent advice in the franchise agreement. He also referred to Mr Morton’s evidence refuting the factual allegations. Whether such terms are incorporated into the franchise agreement and, if so, were breached by MBH are issues for trial.

[30]	There is also an issue as to whether, if the defendants were to establish a breach by MBH that would have justified cancellation of the franchise agreement, they would not be bound to perform the ongoing restraint. In Health Club Brands, Winkelmann J accepted that such a proposition was arguable.15 This was contrary to the earlier view of Randerson J in Safety Step (New Zealand) Ltd v Safety Step Auckland Ltd.16

[31]	Mr Hunter says that the defendants have not pleaded that breaches by MBH would have justified cancellation. Mr O’Brien said that, if needed, the defendants will amend.

[32]	This is also an issue for trial. Mr O’Brien said he raised these issues at this stage to caution against an early conclusion that MBH has a strong case. My initial impression, based on the lack of particularity and evidence so far, is that the defendants will have an uphill battle establishing breaches by MBH sufficient to release the defendants from performing ongoing obligations in the franchise agreement. However, I accept that the allegations need to be factored into MBH’s otherwise strong case.

[33]	Even so, I consider that MBH has a strongly arguable claim that it has enforceable contractual provisions which currently restrain the defendants from engaging in a retail butchery shop in the existing premises. Conversely, at this stage, the defendants have not established any particularly strong basis for their claim that breaches by MBH disentitle it or release the defendants from performing the franchise agreement. Whether they will be able to do so at trial is another matter.

14	Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2002] UKPC 50, [2004] 1 NZLR 289 at [57].
15	Health Club Brands Ltd v Colven [2013] NZHC 428 at [32].
16	Safety Step (New Zealand) Ltd v Safety Step Auckland Ltd HC Auckland CP466/01, 14 September 2001 at [53].

[34]	A subsidiary issue is that MBH says that Standard and Mr Wightman procured the sale or transfer of business assets without having first offered them for sale to MBH as required by the franchise agreement. The defendants say that the transfer was to a related entity for tax reasons and that they did notify MBH. MBH did not exercise its right to acquire under the franchise agreement. This raises a serious question to be tried, but I do not assume any more than that.

[35]	I am satisfied the plaintiff has shown at least a serious question to be tried.

Balance of convenience

[36]	MBH asks the Court to restore the status quo as at the end of the term of the franchise agreement. Mr Hunter submitted that the potential to transition customers to a new Mad Butcher store – the very thing protected by the restraint – is steadily diminishing and the value of the lost opportunity to re-establish a franchise in Whangarei is very difficult to assess. He also submitted that MBH’s strong or compelling case weighs in favour of an interim injunction, which he said is common in franchise cases, referring to Health Club Brands.17 Mr Hunter referred to the broader policy interest in enforcing valid contracts, relying on Supatreats Asia Pty Ltd v Grace & Glory Ltd,18 where Wylie J quoted the comments of the Court of Appeal in Wholesale Distributors Ltd v Songle Supermarket Ltd that “a franchisor is entitled to expect that its franchisee will comply with the terms of the franchise agreement and to seek injunctive relief if it does not”, and in Fuel Espresso Ltd v Hsieh that “agreements are made to be kept”.19

[37]	Mr O’Brien submitted the balance of convenience weighs against granting an interim injunction. He favoured an early trial. He submitted that damages are an adequate remedy for MBH but are unlikely to be so for the defendants, relying on Green Acres Franchise Group Ltd v Reubes, where Lang J declined to grant an interim injunction.20 He also raised ‘clean hands’ in relation to MBH’s own breach of the franchise agreement, referred to above.

17	Health Club Brands Ltd v Colven [2013] NZHC 428 at [51].
18	Supatreats Asia Pty Ltd v Grace & Glory Ltd [2018] NZHC 1612 at [80].
19	Wholesale Distributors Ltd v Songle Supermarket Ltd [2014] NZCA 565 at [32]; and Fuel Espresso Ltd v Hsieh [2007] NZCA 58, [2007] 2 NZLR 651 at [21].
20	Green Acres Franchise Group Ltd v Reubes [2014] NZHC 402.

[38]	As Lang J said in Green Acres Franchise Group Ltd v Reubes, in this area each case turns on its own facts.21

[39]	Whether or not interim relief is granted, there will be uncertainty pending trial for both parties and any potential new franchisee. An early trial could reduce the impact but will not negate it. The parties agree that the matter could be ready for trial within six months. I consider this proceeding is suitable for an application for a priority fixture. Even so, with counsel’s best early estimates indicating the trial would require five to seven days, a fixture within six months does not appear possible – indeed this year seems unlikely.

[40]	I first consider whether damages will be an adequate remedy for MBH. Rule
8.3 requires the defendants to preserve their records, including ongoing trading records, which will be available at trial.22 Damages based on the defendants’ trading may be reasonably easily calculated, but that does not necessarily mean that damages would be an adequate remedy. As Holland J said in Linde Aktiengesellschaft v C W F Hamilton & Co Ltd, in normal events a party to a contract with a valid restraint of trade clause is entitled to have the clause enforced and damages would not often be regarded as an adequate remedy for loss of the plaintiff’s contractual rights.23

[41]	I accept that MBH’s lost opportunity to re-establish a franchise in Whangarei will be difficult to quantity. Damage to goodwill in franchise cases, and intellectual property cases generally, is often difficult to measure, which weighs in favour of interim relief. Mr Hunter points to MBH’s $6.78m of goodwill on its balance sheet.

[42]	Mr O’Brien submitted MBH is not yet suffering any loss because it is not ready, willing and able to compete in Whangarei. The defendants even doubt MBH’s intention to re-establish in Whangarei, relying in part on a Facebook post on 8 January 2019, although I cannot resolve this factually at this stage. MBH says it intends to do

21 Green Acres Franchise Group Ltd v Reubes [2014] NZHC 402 at [39]. See also Dorn Investments Ltd v Hoover [2016] NZHC 1325 at [21] per Asher J.
22	High Court Rules 2016, r 8.3.
23 Linde Aktiengesellschaft v C W F Hamilton & Co Ltd (1988) 3 TCLR 216 (HC) at 222. See also John Burrows, Jeremy Finn and Stephen Todd The Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 512.

so and is about to launch a home delivery service in advance of establishing a replacement store.

[43]	The evidence does suggest that MBH, despite knowing that Mr Wightman had not been happy with financial performance for some time and that the franchise agreement (and the lease) expired on 4 January 2019, did not take early steps to seek a replacement  franchise  agreement  (with  the  defendants  or  a  new  franchisee)  in anticipation of the expiry. MBH has not arranged a new franchisee or premises. The potential to transition customers may already be compromised. The evidence also suggests there may be difficulty securing a new franchisee in any event. It is common ground that while Mad Butcher was owned by Veritas in 2013–2018, Veritas sought to expand, which was not a success and a number of stores closed. The litigation uncertainty adds to the difficulty securing a new franchisee, whether or not interim relief is granted. Even if MBH can secure a new franchisee quickly, it will take time for it to commence operating. Nevertheless, MBH says it wishes to re-establish and  I accept its ability to do so may be compromised further if interim relief is not granted.

[44]	Mr O’Brien submitted that if the defendants can continue to trade, the customer base may be kept intact. However, I am cautioned by Mr Hunter’s submission that MBH is best placed to assess whether that is in its commercial interests.

[45]	I agree with Mr Hunter that Green Acres Franchise Group Ltd v Reubes is distinguishable. There, the sub-franchisee was one of several who worked in the same area and one of 750 nationally. Lang J did not consider there was a real risk of harm to the integrity of the system in the two to three months pending substantive determination by an arbitrator.24 Those considerations do not apply in this case.

[46]	However, another consideration in Green Acres does apply here. In that case, it was submitted that a factor in favour of granting an injunction was that other franchisees would otherwise see a franchisee breaching their obligations with impunity. Like Lang J, I do not consider that other franchisees will view the defendants as having effectively been freed from their obligations, if I were to decline an injunction. Those who take any interest will appreciate that MBH is taking active

24	Green Acres Franchise Group Ltd v Reubes [2014] NZHC 402 at [43] and [46].

steps to enforce its rights and the ability of the defendants to continue in business will depend on the outcome at trial.25

[47]	MBH questions  whether  the  defendants  will  be  able  to  pay  damages.  Mr O’Brien acknowledged there was no evidence on this, and it may depend on the quantum.

[48]	Taking all this into account, I am not satisfied that damages would be an adequate remedy for MBH.

[49]	I next consider whether damages would be an adequate remedy for the defendants if an interim injunction is granted but they succeed at trial. Mr O’Brien submitted that an injunction would have immediate and irreparable effect and would effectively “kill the business”. It is not suggested that an interim injunction would have the effect of determining the proceeding – the defendants can at least pursue the case to trial and, if they succeed, re-commence trading and/or seek damages.

[50]	If an interim injunction is granted and the defendants have to stop trading, it is unclear whether damages would be an adequate remedy. They will lose their customers to competitors (likely the two large supermarket chains) and if they succeed at trial there will remain a real risk that their customers will not return. They may have to give up their existing premises.   I accept these would be harsh consequences.      In addition, as the defendants say they are performing better as an independent, their ability to quantify damages would likely need to be based on trading figures for the short period before the injunction.

[51]	The defendants questioned MBH’s undertaking as to damages, pointing to its limited equity of under $700,000 and the substantial loss of equity while Veritas was owner. Mr Hunter submitted there was no reason to be concerned given MBH’s accounts but added that, if this was an issue, an interim injunction could be conditional on MBH’s principal, Mr Morton, providing security in a form acceptable to the Registrar.

25	Green Acres Franchise Group Ltd v Reubes [2014] NZHC 402 at [42]. See also Dorn Investments Ltd v Hoover [2016] NZHC 1325 at [38].

[52]	Calculating damages may not be straightforward if the defendants succeed at trial, but I consider damages are more likely to be an adequate remedy for the defendants than for MBH.

[53]	The effect on third parties is also a relevant factor. Staff and suppliers would be affected by an interim injunction. I accept that other employment prospects for staff are uncertain.

Overall justice

[54]	Mr Hunter submitted that modern injunction cases pay greater heed to the merits. The relative strength of the parties’ cases is a relevant factor in the balance of convenience where it can appropriately be ascertained, bearing in mind the limit of the Court’s function at the interim stage referred to above at [15].

[55]	As indicated above, I consider that MBH has a strongly arguable claim that it has enforceable contractual provisions that restrain the defendants from engaging in a retail butchery shop in the existing premises. Unlike in Dorn,26 I do not consider that the defendants’ claim (that breaches by MBH disentitle it or release the defendants) tips the balance.

[56]	For the same reason, I do not consider the defendants’ ‘clean hands’ argument based on MBH’s alleged breaches can be weighed against MBH at this interim stage.

[57]	I consider that the relative strengths of the parties’ claims and the doubt as to whether damages will be an adequate remedy for MBH weigh in favour of interim relief.

[58]	Each party made reference to the status quo. MBH means restoring the position as at the end of the term of the franchise agreement whereas the defendants mean allowing their trading to continue.

26	Dorn Investments Ltd v Hoover [2016] NZHC 1325 at [42]-[43].

[59]	Mr Hunter submitted the defendants have engineered the urgent situation by failing to advise MBH of their plans until 7 January 2019, after expiry of the term, and even then asking for a few extra days’ grace to trade. Mr Wightman’s evidence was that he only decided to operate an independent butchery (rather than a butcher training business) around 5 January 2019. There was reference to at least the possibility of trading as an independent butcher in the correspondence with the landlord in mid-October 2018, but I cannot resolve this factual issue at this stage.   Even so,    Mr Wightman put himself (and his staff) in this situation by commencing trading as an independent butcher on 18 January 2019, knowing the risks, and having been put on notice by MBH’s solicitors on 7 January 2019. He has proceeded with his eyes open. That is a relevant factor. Similarly, his staff would not have had employment after January if he had not commenced trading as an independent butcher.

[60]	I do not accept that delay counts against MBH. While it may have been slow taking steps to re-establish a branded store in Whangarei, it has not delayed in enforcing its contractual position as soon as it knew that the defendants intended to operate an independent butchery.

[61]	For these reasons I conclude that the balance of convenience and overall justice favour interim relief. As indicated, I have considered the possibility of an early trial but a fixture within six months does not appear possible and so this does not affect the balance in this case. However, to mitigate the impact on the defendant, the case should proceed to a substantive hearing as soon as possible.

[62]	MBH  claims  solicitor/client  costs  pursuant  to  the  franchise  agreement.  If MBH succeeds at trial, it may well be entitled to solicitor/client costs on a contractual basis. However, at this stage, I am not prepared to award costs on that basis. Rather than reserving costs, it is appropriate to award scale costs at this stage with any contractual uplift reserved until trial.

Result

[63]	The application for an interim injunction is granted, conditional on Mr Morton providing security in a form acceptable to the Registrar.

[64]	I direct counsel to confer with a view to agreeing directions to deal with pre-trial matters to expedite the proceeding and liaising with the Registry in relation to an application for a priority fixture. If counsel are unable to agree, memoranda are to be filed within 15 days (for reference to me).

[65]	MBH is entitled to costs on a 2B basis and reasonable disbursements.

Gault J