A Whangārei butcher is defending an injunction order by Mad Butcher Holdings following the end of his contract with the meat business.
Mad Butcher filed legal proceedings in the Auckland High Court for a restriction of trade against Robert Wightman, the former owner of the Mad Butcher Whangārei store, claiming he allegedly breached his franchise agreement once it ended in January.
Following the end of his five-year agreement with the 23-store franchise, Wightman closed the store and a few weeks later opened a butchery business called The Meat Man, operating from the same store. He had negotiated a month-to-month lease of the premise from Foodstuffs, which owns the property.
Foodstuffs would not offer an extension of lease to Mad Butcher.
Mad Butcher, which is owned by Michael Morton and his partner Julie Leitch, claims Wightman breached his franchise agreement by starting The Meat Man.
The company says a clause in the agreement stated he could not work as butcher or operate a butcher store in the area for two years following termination.
However, Wightman's defence lawyer Mark O'Brien told the court his client did not breach the contract as the purpose of the clause was to restrict trade of competition - he argued there was no competition as Mad Butcher had not secured a new franchisee or new premise to operate a store in the area.
He claims a restraint of trade is unreasonable as there is no competition for the business to interfere with.
"There's no risk of damage to the Mad Butcher business," said O'Brien.
Mad Butcher only had one store in the Whangārei region.
Justice Ian Gault heard of the demise of the butcher business under its previous ownership under NZX-listed Veritas, and that during its heyday there had been 40 stores spread across the country.
Morton and Leitch, daughter of original founder Sir Peter Leitch, bought back the business from Veritas for $8 million in July - a fraction of the $40m the company purchased it for in 2013. When the pair bought back the business there were 29 Mad Butcher stores.
Mad Butcher is also seeking damages from Wightman for continuing to operate a similar business, which it alleges Wightman was not permitted to do.
Mad Butcher's lawyer Stephen Hunter said by operating a butcher business, Wightman had hindered the company's ability to secure a new franchisee for Whangārei.
But O'Brien told the judge that Mad Butcher had not opened any new stores since 2014, though he acknowledged existing franchises had changed hands in that time.
He alleged the company had not made a reasonable attempt to find a new operator so Wightman had not hindered its chance of operating in competition.
The court heard Mad Butcher head office had posted on Mad Butcher Whangārei's Facebook page without Wightman's permission on his last day of trade, which said the business had sold its last sausage and the store was closing down, which he said indicated the franchise was not interested in finding a new franchise for the area.
Hunter said the clause of a two-year stand-down period was lenient when compared to other franchise clauses, adding Wightman was free to operate his business outside of Whangārei or operate a different kind of business in the area.
"There is competition in the sense that Mr Morton has said in his affidavit that he was a couple of weeks away from a home-delivery business ... that is going to be competing for customers, selling Mad Butcher-branded meat in the Whangārei area," Hunter told the court.
"The suggestion that somehow there is no damage caused to the plaintiff because it is simply not competing with customers, I say, is not correct."
Among his claims, Wightman alleges the Mad Butcher collected franchise advertising money which was never spent, and that it used money to sponsor a Porsche racing team.
Hunter disputed these claims and gave evidence of the franchise spending around $60,000 on advertising with MediaWorks last year.
Wightman, who had been running Mad Butcher Whangārei for more than 20 years, also alleged Morton favoured certain franchisees. He said there was no consultation or support offered when setting prices and specials for meat each week.
He said he found it significantly hard to make a profit operating the store.
Hunter said granting an injunction would send a message to and benefit New Zealand's franchising industry, while O'Brien said it would "kill" the Meat Man business.
Justice Gault reserved his decision.