Whanganui Wheel Magician franchise holder Jason White needed High Court assistance to amend a court injunction, intended to be temporary but unlimited in time, with delays in a follow-up court hearing stopping him from otherwise setting up business in competition with Wheel Magician.
What began as a dispute between Mr White and Wheel Magician Ltd over suitability of a mobile workshop Wheel Magician supplied for his Whanganui wheel repair business, saw the District Court order him not to offer wheel services in the district until their franchise dispute came to a full court hearing.
Delays in preparing for a hearing and in getting a court fixture date meant he would be court-barred from resuming work for well beyond the twelve month stand-down required by a restraint of trade clause in his disputed franchise agreement.
Mr White signed up as Whanganui Wheel Magician franchisee in 2017, supplied with a Wheel Magician van to repair customers’ wheels at customers’ premises.
Franchise terms barred him from setting up in opposition within a twenty kilometre boundary beyond his franchise area for a full twelve month period should their franchise arrangement come to an end.
Restraints of trade are enforced by the courts if reasonable and do no more than protect from immediate competition an existing franchise customer base. Existing customers belong to the franchisor, not the franchisee. Restraints of trade are justified as protecting franchise goodwill; the possibility of return business from existing customers.
The High Court was told Mr White’s Whanganui franchise operated with little difficulty for some four years before a dispute arose over changes he made to the mobile van’s ventilation system. WorkSafe intervened, imposing a make-safe notice.
Wheel Magician gave notice; the franchise was at end. Mr White countered, alleging the van provided did not comply with Health and Safety at Work Act. There has yet to be a full court hearing on this dispute.
In the interim, Mr White complained a temporary court order forcing him to comply with the twelve month restraint of trade was going to over-run the actual twelve month period which would otherwise apply.
In the High Court, Justice Grice ruled the twelve month/twenty kilometre restraint was reasonable, but limited its operation to either end of March 2024 (anniversary of the twelve month restraint start date) or date of any earlier court hearing dealing with their dispute.
Whites96 Ltd v. Wheel Magician Ltd – High Court (31.10.23)
24.003