Auckland City Lawns Limited v Green Acres Franchise Group Limited HC Auckland CIV 2010-404-007391

[2011] NZHC 217

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-007391

BETWEEN  AUCKLAND CITY LAWNS LIMITED Plaintiff

ANDGREEN ACRES FRANCHISE GROUP LIMITED

Defendant

Hearing:         16 March 2011

Appearances: C K Lyon for the Plaintiff

D J Chisholm for the Defendant

Judgment:      16 March 2011   

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

Solicitors/Counsel:

C Lyon, Barrister, Auckland – [email protected]

D Chisholm, Barrister, Auckland – [email protected]

AUCKLAND CITY LAWNS LIMITED V GREEN ACRES FRANCHISE GROUP LIMITED HC AK CIV

2010-404-007391 16 March 2011

[1]      The plaintiff (ACL) applies for summary judgment.  It needs to prove there is no arguable defence to its claim.

[2]      The  claim  arises  out  of  the  parties‟ settlement  of  issues  at  a  mediation convened under the High Court Mediation Pilot Scheme, on 17 June 2010. A written settlement was completed.  The defendant (Green Acres) agreed to pay $75,000 to ACL in consideration of ACL relinquishing its Green Acres franchise business for the Auckland central area.

[3]      The business was acquired by ACL pursuant to a master franchise agreement (franchise agreement) dated 20 November 1995.  In the fifteen years since the parties have constantly been in dispute.

[4]      The  mediation  agreement  provided  for  the  termination  of  the  franchise agreement (referred to also as the licence agreement) as at 5:00pm, 30 June 2010. Thereafter the agreement created a „non-exclusive licence‟ period from 1 July 2010 until 1 November 2010.  During this period ALC was able to utilise the Green Acres intellectual property within the territory it formerly held the franchise for.  The clear purpose of the creation of the non exclusive licence period was to enable ACL limited time to undertake rebranding.  Also it was to enable both parties a period of time to approach on a neutral basis the franchise holders who had subcontracted to ACL.   Those contractors operated their businesses using Green Acres name, trademarks and branding.

[5]      The mediation agreement then provided for Green Acres to pay the sum of

$75,000 (less royalties owed) on or before 1 November 2010.

[6]      The agreement is expressed to be in full and final settlement of all existing

claims or disputes between the parties “whether in the proceeding or otherwise”.

[7]      The agreement also provided:

[9]     Both parties agree that neither will disparage the other in respect of the performance of the licence or any other issues arising.

[11]   [ALC] will forthwith supply to Green Acres copies of the contractors‟ agreements (where not held by Green Acres) and details of the contractors‟ contact details.

[12]   Green Acres is entitled to consult with [ACL‟s] contractors during the non-exclusive licence period at all reasonable times with a view to ascertaining whether they wish to remain as a Green Acres contractor.

[8]      The sum of $75,000 was not paid on 1 November 2010 and has not since been paid.  In its opposition to ACL‟s summary judgment claim Green Acres asserts that ACL failed to perform the agreement and therefore the obligation to pay has not arisen.  Alternatively Green Acres says it has counter claims or set off in an amount exceeding that claimed by ACL.

[9]      In its statement of defence it pleads:

8(a)     After 30 June 2010 ACL continued to purport to offer Green Acres lawn mowing franchises for sale.

(b)      ACL refused to transfer telephone or facsimile numbers listed in the Auckland  telephone  directory  under  the  “Green  Acres”  trading name.

[10]     Further and allegedly contrary to the terms of the mediation agreement Green

Acres pleads:

(a)       An alleged failure to provide details of all its lawn mowing operators. (b)     That ACL proceeded to disparage Green Acres to its contractors by

letters written by it, its counsel, Mr Banbrook and its solicitor, Mr

Lyon and sent to those contractors.

(c)      That ACL failed to comply with the termination provisions in the licence agreement which, by clause 17, provided for the reversion of all rights to Green Acres and required ACL “to take all reasonable steps to transfer or otherwise enable the transfer of any telephone and or facsimile numbers and any directories covering the territory under the name Green Acres”.

[11]     Green Acres pleads that:

(a)      These failures have caused loss of an opportunity to reasonably retain the contractors to operate in the particular franchise area.

(b)      Its goodwill has been damaged.

(c)       By retaining the Green Acres‟ telephone number ACL has sought to

misappropriate Green Acres‟ goodwill.

(d)Wasted  costs  have  been  incurred  in  trying  to  stop  ACL  from continuing to use the Green Acres website.

[12]     Affidavits have been filed for both parties.  They express the understanding of each about what was agreed by the mediation settlement.   The affidavits also address matters raised by Green Acres‟ statement of defence.

[13]     In  my  assessment  it  is  immediately  clear  that ACL‟s  case  for  summary judgment cannot succeed. There is an arguable claim of defence and by way of cross claim or set off.  I conclude:

(a)      That notwithstanding that in clause 1 of the mediation agreement the parties agreed that all obligations under the licence would cease on 30

June 2010, that the provisions of the franchise agreement arguably continued to apply in particular to prescribe obligations to give effect to the termination of the franchise agreement.   This included a requirement to hand over property including telephone numbers associated with the operation of the Green Acres franchise.

(b)There is evidence of communications in breach of clause 9 of the mediation agreement which prohibited disparagement by a party of the other.  Arguably the communications of Mr McDonald for ACL, Mr Banbook, (ACL‟s then counsel), and Mr Lyon (ACL‟s solicitor) were in breach of clause 9.

(c)      ACL was  also  arguably  in  breach  of  clause  11  of  the  mediation agreement by which it was required forthwith to supply to Green Acres all contractors contact details and copies of contractors agreements.  ACL said it withheld 20 contractors‟ agreements (a little less than half of them) because the contractors concerned had not provided authority for their disclosure.   Thereby clause 11 was not complied with.  Also there is evidence Green Acres thereby may have been prevented from pursuing an opportunity to engage the future services of those contractors.

(d)That Mr McDonald of ACL may have completely misunderstood his obligations as a franchise holder and his continuing ability to operate after  30  June  2010  when  his  franchise  was  terminated.     ACL continued  to  use  the  same  telephone  number  it  had  used  in  its operation of the Green Acres franchise.  It also continued to use the same Green Acres website address.   It continued to promote Green Acres franchises for sale post 30 June 2010.  It is clearly arguable that ACL continued to use the trademarks and the intellectual property of Green Acres in a manner and at a time when it no longer had that right to do so.   Usually in a commercial context, when a licence is relinquished, all rights associated with the operation of that licence, cease.

Summary

[14]     Green  Acres  have  clearly  arguable  defences  to  ACL‟s  claim.    Although specifics of damages claimable have not been formulated on behalf of Green Acres, it can reasonably be expected that the amount of damages claimed will significantly exceed ACL‟s claim.

[15]     Once the statement of defence had been filed and all the affidavit evidence was available from Green Acres it should have been clear this was not a proper case to proceed to summary judgment.  Nonetheless, I propose that costs be fixed in the resolution of the proceeding.

Decision

[16]     The application for summary judgment is dismissed. [17]      Costs are reserved and are to be fixed in the cause.

Associate Judge Christiansen