Partial victory for internet franchisees

Thirteen New Zealand franchisees have won a partial victory against Worldsites International, a Canada-based franchisor they say ripped them off. In the High Court at Auckland last week, Justice Ronald Young varied the terms of a gagging order Worldsites had obtained against the group and said a dispute between the parties would be heard in Auckland, not the United States as Worldsites wanted.

The Independent New Zealand
August 22, 2001

Partial victory for internet franchisees
Jon Stephenson

Thirteen New Zealand franchisees have won a partial victory against Worldsites International, a Canada-based franchisor they say ripped them off.

In the High Court at Auckland last week, Justice Ronald Young varied the terms of a gagging order Worldsites had obtained against the group and said a dispute between the parties would be heard in Auckland, not the United States as Worldsites wanted.

Justice Young also refused Worldsites’ application to have the franchisees’ counter-claim stuck out.

The group alleges Worldsites breached the Fair Trading Act by misrepresenting its system for developing marketing of internet web pages – a system it franchised here.

One of the franchisees claimed to be more than $100,000 out of pocket.

Worldsites obtained the gagging order from Justice Robert Chambers in March, claiming that, by accusing the company of misrepresentation and poor management, the franchisees had breached their agreements.

Most of the critical comments complained of were published on the internet.

However, at a hearing two weeks ago the franchisees asked Justice Young to vary or rescind the injunction.

Grove Darlow partner Phillip Rice told the judge the gagging order should not have been granted because his clients maintained they could justify their claims.

Citing several unsuccessful bids for prior restraint of the press, he said the right to free speech was paramount.

In a reserved decision, Justice young agreed that, where a defendant intended to justify alleged defamatory statements, the courts should restrain publication only “for clear and compelling reasons.”

But this case differed from those where attempts have been made to restrain media organisations from providing information to their public.

Worldsites was saying the franchisees had breached the franchise agreement by alleging Worldsites had “carried out a scam,” “had a worthless and seriously defective product,” and “did not care about and did not support its franchisees.”

“This case is, therefore, fundamentally based on, and is defined by, the contractual rights of the parties,” the judge said.

That the franchisees had initially consented to the injunction was also a problem, although Justice Young acknowledged the group did not accept what had happened as genuine consent.

Furthermore, it appeared the franchisees now resiled from some of the more emotive terms they had used in their allegations against Worldsites.

The defendants had not convinced him the injunction should be rescinded, but Justice Young said its terms were too wide. The franchisees had argued it was practically impossible for them to brief witnesses without being able to explain the essence of their case, but the injunction prevented them doing this.

Essentially, their complaints were that Worldsites had misrepresented some of the overheads of the franchise, and that it had failed to support the franchisees in the way it said it would.

Amending the injunction, the judge said the franchisees should be able to discuss these complaints while preparing their case for trial.


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Risks: Hacktivism: internet social justice activism, No franchisor support, Misrepresentations, Freedom of speech, Hates publicity, Gag order, court-mandated, Internet, information sharing, Disputes heard on franchisor’s home turf, Canada, New Zealand, 20010822 Partial victory

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