FOODSTUFFS NORTH ISLAND LIMITED v RAVLA TRADING LIMITED [2019] NZHC 2357

FOODSTUFFS NORTH ISLAND LIMITED v RAVLA TRADING LIMITED [2019] NZHC 2357 [19September 2019]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECIV-2019-416-17[2019] NZHC 2357BETWEEN FOODSTUFFS NORTH ISLANDLIMITEDApplicantAND RAVLA TRADING LIMITEDFirst RespondentJITESH RAVLASecond RespondentILABEN NATHUBHAI RAVLAThird RespondentJITESH RAVLA, ILABEN NATHUBAHIRAVLA AND NATVARLAL MANILALPATEL as trustees of the RAVLA FAMILYTRUSTFourth RespondentsHearing: 17 September 2019Counsel: I Thain for ApplicantM Freeman and H A T Willis for RespondentsJudgment: 19 September 2019JUDGMENT OF ELLIS J[1] Foodstuffs North Island Limited (Foodstuffs), seeks injunctive relief arisingfrom a franchise agreement it has entered with the first respondent, Ravla Trading Ltd(RTL). The agreement relates to the operation of a Four Square grocery store on thecorner of Winter Street and Ormond Road in Mangapapa, Gisborne.1[2] The respondents maintain that the agreement has come to an end or should beterminated. Mrs Ravla (the third respondent) wishes to continue to operate a grocerystore from the same premises, but not under the Four Square brand.[3] Both the very existence of the dispute, and the evidence before me, indicatesthat the franchise has grown over the years into a very profitable business.BackgroundThe parties[4] Foodstuffs is the franchisor of the Four Square grocery store brand and systemthroughout the North Island. As noted earlier, RTL is a Four Square franchisee.[5] The second and third respondents, Jitesh Ravla (Mr Ravla) and Ilaben Ravla(Mrs Ravla), are the directors of RTL. Mr and Mrs Ravla hold 80 per cent of the sharesin RTL. Since 6 August 2019, the remaining 20 per cent of the shares have been heldby Mr and Mrs Ravla together with Mrs Ravla's brother in law, Natvarlal Patel(Mr Patel).[6] Mr and Mrs Ravla and Mr Patel are the trustees of the Ravla Family Trust (theTrust). In that capacity they are the fourth respondents. Since 25 July 2019 the Trusthas owned the grocery store premises at 2 Winter Street.The 2008 franchise agreement[7] RTL became a Four Square franchisee and "member" of the FoodstuffsAssociation by entering into a Four Square Franchisee Trading Membership andGroup Franchise Agreement dated 29 April 2008 (the 2008 Agreement).1 The grocery store's address is usually given as 2 Winter Street.[8] The other parties to the 2008 Agreement were Foodstuffs (as franchisor),Mr Ravla (as "approved operator" and guarantor), and Mrs Ravla (as guarantor).[9] Clause 9.1 provides that Mr Ravla and FTL must ensure that: they do not, without the consent of Foodstuffs, become Concerned2 in anyway either directly or indirectly in any other business or in any enterprisewhich is itself Concerned in any other business, except for passive investmentswhere there is no significant managerial or director responsibility.[10] Mr and Mrs Ravla are named in the agreement as Guarantors. Theirobligations in that capacity are set out in cl 16, which provides:(a) the Guarantors guarantee RTL's obligations to Foodstuffs, whetherthose obligations exist now or in the future (cl 16.1);(b) the Guarantors will, on request by Foodstuffs, perform or arrange theperformance of any and all of RTL's obligations to Foodstuffs that arenot performed by RTL (cl 16.3); and(c) the Guarantors continually indemnify Foodstuffs against any liability,loss, damage or expense incurred as a result of RTL or the Guarantorsfailing to perform any obligation owed to Foodstuffs under theTransaction Documents (as defined) (cl 16.4).The 2017 franchise agreement[11] On 15 February 2017 RTL entered into a further agreement with Foodstuffs -a Four Square Franchisee Trading Membership and Group Franchise Agreement (the2017 Agreement). Mr Ravla is also a party to the 2017 Agreement, as the "ApprovedOperator".3[12] The preambular or background clauses in the 2017 Agreement record that:2 The word "Concerned" is defined in the 2008 Agreement to mean, in relation to a business,"interested in any way at all in that business."3 The extent to which the 2017 Agreement is substantially similar to the 2008 Agreement is a matterof dispute.(a) the Foodstuffs Co-operative operates as a co-operative of independentgrocers working together for the mutual benefit of all members;(b) membership of the Co-operative carries a commitment by the membersto support and foster the business of Foodstuffs and to uphold andpromote the "Paramount Principle", which is defined by reference toFoodstuffs' Constitution as the principle that:(i) [Foodstuffs] is the cornerstone and organisationalheart of the mutual cooperative organisation ofindependent grocers (comprising Shareholders of[Foodstuffs]) owning and operating their ownbusinesses) which has been built around [Foodstuffs]and is known collectively as 'Foodstuffs' or'Foodstuffs Members';(ii) [Foodstuffs] is guardian of the cooperative principleson which such organisation is based and has theresponsibility to preserve, protect, perpetuate andpromote the organisation and to work for the mutualbenefit of all members of the organisation;(c) Foodstuffs only grants franchises of the Four Square System if it issatisfied that the franchisee and the Approved Operator have thewherewithal to ensure that the franchise is exploited to the best mutualadvantage of Foodstuffs and the franchisee.[13] Relevantly, cl 1.1 of the Agreement defines:(a) "Agreed Business Name" as "Four Square Mangapapa";(b) "Agreed Premises" as the store premises located at 262 Ormond Rd,Gisborne 4010;4(c) "Franchised Business" as: the business and workplace of the Four Square Store carried out atthe Agreed Premises and at any other workplace by the Member andthe Approved Operator including the Four Square Loyalty Programme(if Applicable) and the Online Shopping Programme (if applicable).4 There is no dispute that this is the alternative address for the 2 Winter Street property.(d) "Lease" as any deed(s) of lease or sublease for the Agreed Premises;(e) "Manager" as the General Manager, Retail Operations of Foodstuffs, orhis or her delegate.(f) "Termination Event" as an event referred to in clause 17.1.[14] Under cl 2:(a) RTL holds 300 Group A shares in Foodstuffs at $1 per share (cl 2.1);(b) RTL is a member of the Foodstuffs Co-operative and a member of theFour Square Store advertising group (at cl 2.3);(c) RTL undertakes to Foodstuffs to uphold and promote the ParamountPrinciple (cl 2.4.1);5(d) RTL will not (by virtue of cl 2.6):(i) hold itself out as anything other than an independent owneroperator grocer and a franchisee of the Four Square System; or(ii) do, or be a party to the doing of, anything that may prejudiciallyaffect the goodwill, trade or business of the FranchisedBusiness, the Four Square Brand, the Four Square Storeadvertising group, the Foodstuffs Group or the FoodstuffsCo-operative.[15] Under cl 4.4, Mr Ravla (as the Approved Operator) will (relevantly):(a) principally control, operate, supervise and manage the FranchisedBusiness on a full time basis;(b) devote his best efforts to managing the Franchised Business; and5 See [12(b)] above.(c) comply with his obligations under clause 12.1 (which include acting ina way which does not give rise to a conflict of interest).[16] Under cl 6, RTL is required:(a) diligently and fully to exploit its rights under the Franchise Agreementto the best mutual advantage of the Foodstuffs Co-operative and RTL(cl 6.1);(b) to perform its obligations under the Lease for the Premises and exerciseany right of renewal contained in the Lease for the Premises inaccordance with its terms (cl 6.3);(c) to operate the Franchised Business as a Four Square Store in fullcompliance with the Transaction Documents (as defined) (cl 6.7.1);(d) trade as a member of the Four Square Store advertising group (cl 6.7.2);(e) conduct, manage and operate the Franchised Business under the directfull time supervision of Mr Ravla (cl 6.7.9); and(f) at all times conduct the Franchised Business to a standard that reflectsfavourably on the goodwill and reputation of the Franchised Business,the Four Square Brand, the Four Square advertising group, theFoodstuffs Group or the Foodstuffs Cooperative and will not doanything which brings, or would be likely to bring, any of them intodisrepute (cl 6.7.13).[17] Clause 6.8 contains a list of things that RTL may not do, which include (at6.8.8):Agree to sell the Franchised Business otherwise than on terms and conditionsapproved by Foodstuffs or as contemplated by the Transaction Documents.[6]6 "Transaction Documents" are defined to include the 2017 Agreement itself.[18] Pursuant to cl 12.1 RTL and Mr Ravla:... must ensure that they do not, without the written consent of Foodstuffs,become Concerned[7] in any way either directly or indirectly in any otherbusiness. This includes any business which competes directly or indirectlywith any member of the Foodstuffs Group or the Foodstuffs Co-operative andany business which supplies Groceries and Merchandise or services to othermembers of the Foodstuffs Co-operative. So far as [Mr Ravla] only isconcerned, it excludes passive investments in businesses which do notcompete with any member of the Foodstuffs Group or the FoodstuffsCo-operative and where [Mr Ravla] has no significant managerial or directorresponsibility.[19] If RTL wishes to sell the Franchised Business8 or the sale process is activatedby virtue of Mr Ravla's incapacity under cl 14, cl 13 provides:(a) RTL is required to first offer the Franchised Business to Foodstuffs forpurchase, "specifying a price in accordance with clause 13.7 and anyother terms and conditions" (cl 13.2).(b) RTL is able to sell the Franchised Business to another party only ifFoodstuffs declines to exercise its right of first refusal and if Foodstuffsconsents (cl 13.8). Any such sale must be 'on terms and at a price nomore favourable to the purchaser than those offered to Foodstuffs' (cl13.5).(c) Foodstuffs' will consent if a number of preconditions are met, includingthe condition that:13.8.4 The prospective purchaser will, on or beforesettlement, be entitled to a lease of the AgreedPremises [20] Clause 14 provides that if Mr Ravla is mentally or physically incapacitated sothat, in the opinion of Foodstuffs, he is unable to principally control, supervise andmanage the Franchised Business on a full time basis, RTL must:7 'Concerned' is defined in relation to a business as being 'interested in any way at all in thatbusiness. This includes being interested on his or her own account, or as a shareholder, consultant,agent, beneficiary or trustee'.8 Whether or not the business is being sold with the right to continue to use and operate the FourSquare Brand, Intellectual Property, Distinctive Get Up, Four Square System and FormatSpecification.(a) irrevocably appoint the Manager9 as manager of the FranchisedBusiness (cl 14.1);(b) irrevocably direct the Manager, on behalf of RTL, to offer theFranchised Business for sale as a going concern and to complete sucha sale in accordance with, and subject to, cl 13 for the best availableprice reasonably attainable at the time of sale (cl 14.2); and(c) pending such sale, irrevocably direct the Manager to manage theFranchised Business for the benefit of RTL (cl 14.3).[21] Termination is dealt with in cl 17. Clause 17.1 lists the circumstances in whichFoodstuffs may terminate the Agreement, including (at 17.1.1) where RTL orMr Ravla "fails to comply with its obligations under the Transaction Documents orunder the Lease and that failure is not rectifiable". Clause 17.2 states that no party isentitled to terminate except as expressly permitted under the Agreement.[22] By cl 20.1.2 of the Agreement, Mr Ravla again guaranteed to Foodstuffs thatRTL would perform its obligations to Foodstuffs whether those obligations existed atthe time of the agreement "or in the future". Foodstuffs say that, by virtue of cl 16.1of the 2008 Agreement and cl 22.2 of the 2017 Agreement, Mrs Ravla remains boundby her former guarantee.10[23] Neither RTL nor Mr Ravla have express termination rights under the 2017Agreement.119 Foodstuffs' General Manager, Retail Operations or his delegate.10 While clause 22.1 provides that the 2017 Agreement supersedes and is in substitution for the 2008Agreement, cl 22.2 of the 2017 Agreement provide that nothing in that document discharged,prejudiced or released any guarantee provided in any "Transaction Document" (which includesany document or arrangement between RTL and Foodstuffs).11 The respondents nonetheless say that they must have an implied right to terminate - on the givingof reasonable notice.The events leading to the present proceedings[24] When RTL first became a franchisee in 2008, it held a lease of the Premisesfrom third parties, the trustees of the Jackson Family Trust. Pursuant to the Deed ofLease:(a) the lease of the Premises commenced on 1 January 2006;(b) RTL had a right of renewal for a further term of 6 years; and(c) the final expiry date was 31 December 2017.[25] On 12 September 2016 (prior to RTL's entry into the 2017 Agreement),however, ownership of the Premises was transferred to RTL.[26] On 19 June 2019, Mr Ed Hunt, the lawyer for RTL and Mr Ravla wrote toFoodstuffs advising that Mr Ravla's heath had deteriorated and had received medicaladvice that he should "make some serious changes in his work direction". Then, hesaid:Both Mr Ravla and his wife Ila, have made the following decisions which withyour co-operation will bring the parties to mutual [sic] agree that theAgreement will be brought to an end:(a) Under clause 17.1, Mr Ravla will no longer be able to principallycontrol or manage the business on a full-time basis.(b) Under clause 17.1.6, Mr Ravla will hand over the running of thebusiness to his wife, Ila Ravla who is not an Approved Operator underthe Franchise Agreement.(c) Ila Ravla does not want to run the business in the normal Four Squarefranchise operation but rather will run the business in the manner of a"Corner Dairy" or "Superette"Mr Ravla has suggested a termination date of 1 August 2019 as the date forthe termination of the Agreement.On the termination date Mr Ravla will repay Foodstuffs all outstanding fees,charges, Levies and costs for produce supplied on credit. He will cause tohave removed all Four Square advertising from the premises and complywith the other provisions of clause 17.3.2 of the Agreement.[27] On 25 June 2019, Foodstuffs' Senior Legal Counsel, Ms Julie Daniels, replied,advising:(a) Foodstuffs did not wish to terminate the 2017 Agreement;(b) RTL and Mr Ravla had no right to terminate unilaterally;(c) If Mr Ravla was no longer able to manage the Franchise Business,Foodstuffs suggested that it be sold to a Foodstuffs' approved purchaserin accordance with the 2017 Agreement;(d) Alternatively:(i) Foodstuffs would be interested in purchasing the Premises ortaking a Head Lease; or(ii) clause 14.1 of the Agreement could be invoked and a Managerappointed, with a view to preparing the business for sale.[28] On 9 July 2019 Ms Daniels inquired whether Mr Hunt had any furtherinstructions from his clients. She was advised Mr Hunt was about to meet withMr Ravla and that she should hear from him shortly. On 15 July Ms Daniels made afurther inquiry, to which Mr Hunt responded, saying that the Ravlas had advised himthat they had been approached by "two Gisborne parties, one a small store operatorand the other the operator of Pak and Save". He said "We will contact you once myclients decide what avenue to pursue".[29] On 25 July 2019 Ravla Trading transferred the Premises to the Trust.[30] On 12 August 2019, Mr Hunt wrote to Ms Daniels, saying that his clients'position remained as in his previous letter. He said:We note the proposals that you put forward but none of the buy back optionscould succeed on the basis of the ownership of the land and buildings.The property was owned by the Jackson Family Trust and was sold on12 September 2016. The original lease with the Jackson's [sic] dated6 December 20015 expired on 31 December 2017 and the Company has beenin a holding over position since then.The present owners of the property are the trustees of the Ravla Family Trustand they will not grant a lease to any other party as suggested in your letter.Neither will they sell the property.It would appear then that under clause 17.1.7 of the franchise agreement, thelandlord's right not to renew the lease is a termination event that cannot berectified.In order that there is a smooth transition my client suggests a termination dateof the franchise agreement of one month from today.[31] Ms Daniels responded on 12 August 2019 saying that Foodstuffs did not wishto exercise its termination right under cl 17.1.17 and was comfortable with the "store'slease being held over". She asked Mr Hunt to confirm that his clients were stillintending to exit the Agreement and to continue operating as a non-branded grocerystore from the Premises. She reiterated her previous advice that, in that event,Foodstuffs would "seek to enforce its legal position strongly" against RTL and theRavlas as guarantors.[32] On 28 August 2019, Mr Hunt replied, advising that a new lease had beengranted to a third party. He did not substantively engage with Foodstuffs' legalposition but made it clear that his clients were proceeding with "termination".[33] On 6 September 2019 Foodstuffs' lawyers issued proceedings seeking:(a) injunctive relief against RTL and the Ravlas for anticipatory breach ofthe 2017 Agreement; or(b) injunctive relief and damages against RTL and the Ravlas for actualbreach of the 2017 Agreement; and(c) injunctive relief or damages against the Trust for unfair interferencewith contractual relations.[34] At the same time, a without notice application for interlocutory injunctions inthe same terms was also filed.12 The terms of the injunctions sought at the hearingbefore me were significantly changed (in light of subsequent events) from those in theinterlocutory application and so I do not set out them out here.[35] At around this time, the respondents instructed a Wellington lawyer,Mr Freeman. On 6 September he wrote to DLA Piper, stating that since the expiry ofthe Lease on 31 December 2017 the Premises had been subject to a periodic tenancy.He said:The owner the premises is a trust and although Jitesh is both a trustee and thedirector of Ravla, he does not control the trust. The collective trustee decisionis to explore other options and the trust is therefore not offering a new leasefor the premise to Ravla.Jitesh's wife, Ila, is interested in taking over the lease and operating a grocerystore. She would do that through her own corporate entity separate from Ravla.The Trustees are considering that on its merits. They are yet to make a decisionabout that. Ila is not a party to the franchise agreement and is entitled to pursueher own business interests.Jitesh and Ravla have responsibly raised the above with you and sought toterminate the Four Square franchise agreement. In the circumstances yourresponse that Ravla has no right to terminate the franchise agreement andFoodstuffs does not agree to its termination is surprising. There has to be away for Ravla to exit the franchise agreement. If there is no mechanism forthis explicitly in the agreement it will be an implied term that Ravla canterminate the franchise agreement on reasonable notice. Ravla has now givenreasonable notice.However, in light of Foodstuffs position, Ravla now makes an offer toFoodstuffs to buy the business under clause 13.2 of the Franchise Agreement.There is no lease. The offer will be to purchase the fixed assets of the businessat their current depreciated value and stock at value. We look forward toreceiving notice one way or another within 30 days in accordance with clause13.3.The application for interlocutory relief[36] Rule 7.53 of the High Court Rules 2016 confers a discretionary power to grantinterlocutory injunctive relief both before and after a proceeding is commenced. Thegoverning principles are well settled.12 Although it was proposed that the matter be progressed on a Pickwick basis. Doogue J declinedto grant the interlocutory injunctions without notice. The application was subsequently timetabledto a hearing by Cooke J.[37] The purpose of such injunctions is to protect applicants from injury by aviolation of their rights for which they could not be adequately compensated indamages, in the event of later success at trial. The need for such protection must beweighed against a respondent's need to be protected from injury resulting from beingunable to exercise legal rights for which he could not be adequately compensated byway of damages, in the event the applicant does not succeed at trial.13[38] A two-stage approach is required. The first involves consideration of whetherthere is a serious question to be tried in the proceeding and, if there is, where thebalance of convenience (as between the two competing needs to which I have justreferred) lies. Ultimately, the discretion must be exercised in accordance with theoverall justice of the case.14This caseSerious question to be tried?[39] By the time of the hearing before me, Foodstuffs' position had been modifiedsomewhat from that revealed in its pleadings. In part, that modification is the resultof a better appreciation of the respondents' position, as a consequence of MrFreeman's letter of 6 September, to which I have already referred. As well, the passageof time (albeit brief) has appropriately resulted in a refinement of thinking, in terms ofthe essence of Foodstuffs' case.[40] As now articulated by Mr Thain, Foodstuffs' position is that it is seriouslyarguable that:15(a) RTL is precluded by the Franchise Agreement from transferring awayor selling any right of tenure it has to, or right to use, the AgreedPremises; and13 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 408 (per Lord Diplock).14 Harvest Bakeries Ltd v Klissers Farmhouse Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.15 Although Mr Thain also contended that it was seriously arguable that RTL and Mr Ravla have orwould become involved in a competing business in breach of cl 12 of the 2017 Agreement Iconsider this to be the weakest of Foodstuffs' claims and do not take it into account here.(b) RTL's intention to transfer its Franchise Business to Mrs Ravla or somenew entity controlled by her, without Foodstuffs' consent and withoutfirst offering it to Foodstuffs at a specified price and on equallyfavourable terms (including a lease of the Agreed Premises) is inanticipated breach of cls 6.8.8 and 13;(c) RTL's transfer of the Agreed Premises to the Trust was for the purposeof avoiding the operation of clause 13;(d) the Trust is a sham, insofar as the transfer of the Agreed Premises isconcerned;16(e) Mr and Mrs Ravla (personally and as Trustees) were knowinglyconcerned in the transfer;17(f) by transferring ownership of the Agreed Premises to the Trust, withoutfirst securing a lease for itself and with the intention of advantagingMrs Ravla, RTL is in breach of cl 2.6 of the 2017 Agreement;(g) by transferring ownership of the Agreed Premises to the Trust, withoutfirst securing a lease for itself and with the intention of advantagingMrs Ravla, RTL is in breach of cl 6.1 of the 2017 Agreement;(h) alienating the Agreed Premises in a way which is not consistent withthe obligations of mutuality under the 2017 Agreement constitutes abreach of a fiduciary duty owed to Foodstuffs by RTL and Mr Ravla;(i) Mr Ravla has breached his duties as a Director of RTL by permittingthe company to transfer ownership of the Agreed Premises to the Trust,without first securing a lease for itself and with the intention ofadvantaging Mrs Ravla;16 Official Assignee v Wilson [2006] 2 NZLR 841 (HC).17 Prest v Petrodel [2013] UKSC 34, [2013] AC 415.(j) in the absence of any evidence (so far) that the transfer to the Trust wasmade in exchange for any form of consideration, the Trust holds theAgreed Premises for the benefit of RTL under a resulting trust;(k) the asserted existence of fiduciary duty seems tenable, as a matter oflaw;(l) the alleged breach of Director's duty also seems tenable on the evidenceas presently disclosed;(m) Mrs and Mrs Ravla and the Trust are tortiously liable for inducing RTLto breach the 2017 Agreement:(n) RTL, Mrs and Mrs Ravla and the Trust are tortiously liable as parties toan unlawful means conspiracy (agreeing to take unlawful action18 withthe intention of damaging Foodstuffs/advantaging Mrs Ravla).19[41] Mr Freeman's position was that none of these claims was seriously arguablebecause the 2017 Agreement does not, and cannot be reasonably interpreted to:(a) prevent RTL from selling the Agreed Premises;(b) prevent the Trust from doing what it likes with its own property; or(c) require a lease of the Agreed Premises in perpetuity.[42] He also submitted that it is not possible to have a resulting trust over an expresstrust and said that some of the claims made were tantamount to allegations of fraudfor which there must be a solid foundation.[43] But I have little hesitation in concluding that some, and possibly all, of thematters raise by Mr Thain are seriously arguable questions to be tried. While I do not18 The relevant unlawful act being either ones of the alleged breaches of contract or the allegedbreach of Director's duties.19 Diver v Loctronic Industries Ltd [2012] NZCA 131, [2012] 2 NZLR 338; Wagner v Gill [2014]NZCA 336, [2015] 3 NZLR 157.intend to express anything other than incomplete and preliminary views, it seems tome that:(a) interpreting the 2017 Agreement as precluding RTL from transferringaway or selling any right of tenure to, or right to use, the AgreedPremises would be consistent with the nature of the franchisearrangement and obligations of mutuality to which it gives rise;(b) there is a reasonable inference to be drawn (particularly in the absenceof any evidence thus far as to consideration) that the transfer of theAgreed Premises to the Trust was for the sole purpose of avoiding theoperation of the 2017 Agreement;20(c) in light of (a), the other alleged breaches of the 2017 Agreement arealso seriously arguable;(d) in the absence of evidence as to any payment, it is difficult to see howthe transfer of the Agreed Premises was in RTL's interests (whichnecessarily gives rise to questions of Director's duties); and(e) on the basis of the evidence thus far there are grounds for the tortiousclaims now articulated.[44] I find the first limb of the test is satisfied, accordingly.Balance of convenience[45] Again, I agree with Mr Thain that the balance of convenience favoursFoodstuffs here, for the reasons that follow.[46] First, Foodstuffs seeks only the maintenance of the status quo. I acceptMr Thain's submission that the relevant status quo is the position as it was at the timeof the "last peaceable state between the parties", namely before the transfer of the20 On the authority of Official Assignee v Wilson, above n 16, that is capable of rendering the Trusta sham, for limited purposes.Agreed Premises in July 2019.21 If that is so, then concerns about how the injunctionssought might affect the Trust's ability to do as it likes with its own property (whichwas understandably the focus of Mr Freeman's submissions) can only be given limitedweight, at best. In any event, there is nothing before the Court to suggest that thebeneficiaries of the Trust might suffer any loss if the interlocutory injunctions aregranted.[47] Secondly, it is difficult to see how the interests of the other respondents will beunduly prejudiced in the short term, if interim injunctive relief is granted. RTL'sbusiness would simply continue either with Mr Ravla as the Approved Operator (if hishealth permits) or under a Manager appointed by Foodstuffs, in accordance with the2017 Agreement. Mr Thain said, and I accept, that it would not be necessary for anysuch Manager to move to sell the Franchise Business immediately, and cl 14.3 makesit clear that, in the event of such an appointment, the business must be managed forthe benefit of RTL. No doubt Mrs Ravla could and would continue to fulfil the samefunction as she has historically. And any loss suffered (and it is difficult to imaginewhat exactly this might be other than (perhaps) a loss of salary for Mr Ravla) wouldbe compensable by an award of damages.[48] By contrast, in the event that interim injunctive relief is denied, but Foodstuffslater prevails at trial, damages is unlikely to be an adequate remedy:(a) If the respondents are permitted to avoid compliance with cl 13 and soto operate a "new" grocery store from the Agreed Premises, Foodstuffswill suffer damage to the goodwill in its Four Square franchise brandand system, and its goodwill at the Premises.(b) This would not be a "simple" case of Foodstuffs having (wrongly) lostits goodwill in the Franchise Business (which could, perhaps, bequantified) but of Mrs Ravla effectively having misappropriated thatgoodwill for the Ravlas' own benefit. There is force in the submissionthat if the respondents are permitted to travel down their intended21 Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV-2007-485-1756,30 July 2008 at [10].course, Mrs Ravla will not only end up operating a grocery store fromthe same premises but potentially under the banner of one ofFoodstuffs' competitors.22(c) The loss flowing from a misappropriation of goodwill is not limited tothe direct loss of market share related to the Mangapapa store. Thereis likely to be a broader deleterious effect on other Foodstuffs'franchisees and on the Foodstuffs' franchise system itself. Thepotential for wider damage of this kind in franchising cases has beenrecognised in decisions of the New Zealand Courts.23[49] And lastly, I also record that counsel were agreed that a trial of the substantiveclaims (at least as to liability) could potentially be expedited, as there is unlikely to besignificant discovery or further evidence required.24[50] The following (modified) orders by way of interim injunction were proposedby Mr Thain at the hearing and I make them now:25(a) until further order of the Court, the respondents are prohibited fromentering, or taking steps under, any contract, agreement orunderstanding for the sale, transfer or encumbrance of any part of thegrocery store business carried out at 2 Winter Street, Mangapapa (thePremises), including the sale, transfer or encumbrance of any interestor right of possession or use in respect of the Premises other than to theplaintiff or its nominee or with the plaintiff's consent;(b) the order in (a) does not apply to the sale of items of stock at retail inthe ordinary course of the grocery store business;22 The evidence before me was that, in order to come even close to the store's current turnover,Mrs Ravla would need to align herself with (obtain a franchise from) one of Foodstuffs'competitors.23 Skids Programme Management Ltd v McNeil [2012] NZCA 314, [2013] 1 NZLR 1 (CA) andSupatreats Asia PTE Ltd v Grace & Glory Ltd [2018] NZHC 1612, [2019] NZCCLR 3.24 Except, possibly, in relation to the quantification of damages.25 I have altered the proposed wording slightly.(c) leave is reserved to the parties to apply for a variation or discharge ofthe order at (a) above and, in particular, to apply for discharge at anytime when the respondents consider that clause 13 of the 2017Agreement permits a sale to a party other than the plaintiff or itsnominee.[51] Costs are reserved.[52] The substantive proceeding should be placed in the next available ChambersList in order that further timetable orders can be made._____________________Rebecca Ellis JSolicitors:DLA Piper, Auckland for ApplicantThomas Dewar Sziranyi Letts, Lower Hutt for Respondents