Lanhai Pty Ltd v 7-Eleven Stores Pty Ltd - [2021] VSC 587

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2021 02622

LANHAI PTY LTD (ACN 605 035 603)	First Plaintiff
YONG LI	Second Plaintiff
ZHE WANG	Third Plaintiff
v
7-ELEVEN STORES PTY LTD (ACN 005 299 427)	Defendant

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JUDGE:	Riordan J
WHERE HELD:	Melbourne
DATE OF HEARING:	1 and 10 September 2021
DATE OF JUDGMENT:	16 September 2021
CASE MAY BE CITED AS:	Lanhai Pty Ltd v 7-Eleven Stores Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 587	1^st Revision: 17 September 2021

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INJUNCTION – Application for mandatory injunction for franchisor to maintain lease with third party and to restrain termination of franchise agreement – Principles to be applied – Balance of convenience favoured retention of status quo.

MISLEADING AND DECEPTIVE CONDUCT – Availability of interlocutory and permanent injunctive relief on alleged contravention of s 18 of the Australian Consumer Law.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms G Crafti with Mr C Banasik	Levitt Robinson Solicitors
For the Defendant	Mr P H Solomon QC with Mr M D Tehan	Norton Rose Fulbright

Contents

Background

Litigation history

Principles

Submissions

Serious question to be tried
Plaintiffs’ submissions
Defendant’s submissions

Balance of convenience, including the question of whether damages would be an adequate remedy

Conclusion

Orders

Appendix

HIS HONOUR:

By further amended summons filed 13 August 2021, the plaintiffs apply for the following interlocutory injunctions against the defendant:
1.        Pursuant to:
(a) section 80 of the Competition and Consumer Act 2010 (Cth) (CCA);
(b)further or alternatively, section 232 of the Australian Consumer Law, being Schedule 2 of the CCA;
(c)rule 38.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic); and
(d)      the inherent power of the Court,
an injunction restraining the defendant, until further or other order, from:
(e)terminating the Franchise Agreement between the defendant and the plaintiff dated 4 June 2015 by reason of the expiry of the franchise term or Lease of the Premises at 103-107 Campbell St, Heathmont, Victoria 3135;
(f)revoking the licence granted by the defendant to the plaintiff pursuant to the Franchise Agreement to occupy the Premises by reason of the expiry of the franchise term or Lease;
(g)preventing, obstructing or hindering the continued operation of the business conducted by the plaintiff pursuant to the Franchise Agreement (including by the removal or withdrawal of products and services ordinarily available for sale in the 7-Eleven system);
(h)      determining the Lease; or
(i)        failing to comply with its obligations under the Lease.
2.An injunction requiring the defendant to advise the landlord of the Premises in writing that the defendant wishes to overhold the Lease until the proceeding is heard and determined and will not give notice under clause 29 of the Lease before the proceeding is heard and determined.
The causes of action relied upon by the plaintiffs in support of this application for interlocutory relief are set out in their statement of claim filed 13 August 2021 and are, in summary:
(a)misleading or deceptive…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] VSC 587
Decision Date: 16 September 2021

CaseChat Overview and Summary

Lanhai Pty Ltd, a franchisor of 7-Eleven convenience stores, applied for a mandatory injunction against 7-Eleven Stores Pty Ltd, a franchisee, to maintain a lease with a third party landlord and to prevent the termination of their franchise agreement. The case was heard in the Federal Court of Australia. The dispute arose from allegations that 7-Eleven had breached the terms of the franchise agreement and engaged in misleading and deceptive conduct under section 18 of the Australian Consumer Law.

The primary legal issues were whether the court should grant the mandatory injunction to maintain the lease and prevent the termination of the franchise agreement, and if interlocutory and permanent injunctive relief was available in cases of alleged contravention of section 18 of the Australian Consumer Law. The court had to consider the principles of balance of convenience, irreparable harm, and the likelihood of success on the merits.

The court found that the balance of convenience favoured the retention of the status quo, as Lanhai's business would be significantly harmed by the termination of the franchise agreement and the loss of the lease. The court also held that interlocutory and permanent injunctive relief was available in cases of alleged contravention of section 18, as such conduct could cause irreparable harm to the plaintiff. Consequently, the court granted the mandatory injunction as sought by Lanhai.

The court further ordered that 7-Eleven was restrained from terminating the franchise agreement and that it must maintain the lease with the third party landlord. The court also directed that 7-Eleven pay Lanhai's costs of the application. This decision reinforces the importance of franchisors adhering to their contractual obligations and the availability of injunctive relief in cases of alleged misleading and deceptive conduct.

Orders