A Wellington couple caught in the collapse of a popular fast food business are seeking more than $200,000 damages after their plan to open a Mexican burrito franchise turned sour.
Australian businessman Jeff Moss opened the first Original California Burrito Company store in Auckland in 2011 and the business rapidly grew into a 10-store chain and also expanded to Australia and the Netherlands.
But all the New Zealand stores, except two outlets operated by franchisees in Manukau and Ellerslie, have closed in the past few months - at the cost of about 100 jobs - after bank funding dried up and rents went unpaid.
Two Crust Pizza stores owned by Mr Moss have also closed, although another operated by a franchisee in Queen St continues to trade.
In April, Damian and Kathryn Cloeter entered a franchise agreement to open an Original California Burrito Company store in central Wellington's Cuba St.
According to a statement of claim filed in the High Court at Auckland, Mr Moss told Mr Cloeter the business was successful, growing rapidly and the lease on the Wellington property had to be signed immediately because another party had made an offer to the landlord.
The claim says Mr Cloeter was told the fit-out of the store would proceed "very quickly" and the outlet would open in late May or early June.
The couple relied on Mr Moss' representations when selling their Auckland home to move to Wellington, where they leased an apartment and provided a guarantee on the lease of the Cuba St premises, the claim says.
But the document states that on August 26 the Cloeters' company, KDC Holdings, cancelled the franchise contract because the fit-out had not begun and no training in operating the business had been provided.
KDC Holdings is claiming business losses of $211,586, including $158,750 it paid to Barrow and Hudson - the firm that holds the licence to the burrito chain's intellectual property - $10,000 for purchase of a scooter and the $18,975 it cost to be released from the lease on the Cuba St property.
The Cloeters are also claiming personal losses of $33,625.
Mr Moss told the Weekend Herald an application to operate the business was submitted to the Wellington City Council only in April and took eight weeks to be approved.
He said he never claimed the outlet would open in late May or early June, but the Cuba St store could be up and running now if the franchise agreement had not been cancelled.
The Cloeters' lawyer, Andrew Hooker, said the couple "utterly rejected" Mr Moss' comments.
"They have filed court proceedings and will deal with the dispute in that arena," Mr Hooker said.
Mr Moss has blamed a court injunction placed on the fast food business in May for ASB's decision to withdraw an overdraft facility, but the bank declined to disclose its reason for removing funding.
Mr Moss said the chain's creditors were owed about $500,000. Another source claimed up to $1.5 million was outstanding, including rent.
Mr Moss denied the figure was that high.
Auckland law firm behind court injunction
An Auckland law firm was behind a court injunction placed on the Original California Burrito Company.
Jeff Moss and Lisa Krukziener Moss, who are now separated, are the directors and owners of several companies that operated the food chain.
But the shares are held in a blind trust, Food Retail Trustees, by Brookfields Legal Services, a professional trustee company.
According to High Court documents, Brookfields partners Howard Johnston and Deborah Miller claim they were "duped" in April into transferring the ownership of Food Retail Trustees to Moss, who told them urgent steps had to be taken to prevent the business from collapse.
The shares were transferred to Mr Moss, who allegedly "used his effective control of the companies, in the absence of his wife, to remove his wife as a director and take full control of the businesses".
Court documents state the injunction was sought by Brookfields Legal Services, Mr Johnston, Ms Miller and Ms Krukziener Moss.
A mandatory interim injunction, granted by Justice Kit Toogood in May, returned the shares to Brookfields Legal Services and reinstated Ms Miller and Mr Johnson as directors.
Justice Toogood said there was a "seriously arguable case" in support of Brookfields' claims of deceit and "equitable fraud" causing economic loss by unlawful means.
The dispute over the ownership of shares in the fast food business will go to court in February.Christopher Adams