The High Court has refused an application by KM Franchising Limited to stop Tedco Limited and two individuals from operating a rival printing business while a franchise dispute proceeds. The court also refused the defendants’ applications for security for costs, but ordered the first and second defendants to pay monthly royalties into court until their franchise agreement ends.
In a judgment delivered on 12 July 2013, Mr Justice Birmingham found a fair issue to be tried over whether Esmark Finch Limited was taking business from KM Franchising and damaging its goodwill. The plaintiff alleged that Esmark Finch used the franchise business’s equipment, staff, premises and confidential information, targeted its customers and removed Snap signs. The defendants denied wrongdoing and disputed that their current business relationship remained governed by the 2004 franchise agreement.
The judge said damages could adequately address the plaintiff’s claim, including lost royalties, which evidence put at an average of €8,000 a month. He also considered that the franchise was due to end in March 2014, and that granting the requested injunctions could halt Esmark Finch and leave Tedco unable to serve its clients. The balance of convenience therefore did not favour an injunction. The court’s ruling did not decide whether the alleged breaches occurred; those matters remain for trial.
The judge noted that Tedco had stopped paying royalties. As a condition attached to refusing the injunction, Tedco and Noel Candon must make monthly payments, calculated as before, into court until the agreement comes to its natural end.
The defendants separately sought security for costs, arguing that KM Franchising might not be able to pay their costs if it lost. The judge accepted that the litigation would be lengthy, complex and expensive, but was not persuaded there was reason to believe the plaintiff could not meet a costs award. He also considered the nature of the allegations and refused both security applications.
The judgment records that Candon was a director of Tedco and a signatory and guarantor to the franchise agreement. Declan Halton, a former Tedco director, was not a party to it. The court nevertheless found a fair issue to be tried concerning the extent of Halton’s alleged duty of confidence and whether he was using information gained from the Snap group to obtain a commercial advantage. No final finding on that allegation was made at this interlocutory stage.