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  • Clinton Tan Kian Seng

Chatime-Tealive dispute settled out of court!

And so ends the “Great Bubble Milk Tea War” of 2018. Interestingly, this settlement came just a few days before the next court fight on the coming Monday (September 3, 2018).

An "out of court settlement" is where parties successfully reach an agreement on how to settle the lawsuit(s) without a court's involvement. The terms of such settlement agreements are usually kept private and confidential unless the parties themselves wish to record the settlement terms before the court, in which case it becomes a public document.

To briefly recap, La Kaffa International Co Ltd essentially argued that Loob Holding Sdn Bhd had breached its contract in operating the "Chatime" franchise, and that Loob Holding proceeded to set up "Tealive" by using trade secrets from the "Chatime" franchise.

It is unlikely that we will ever know the exact terms of the settlement agreement here. A reasonable guess is that, Loob Holding would have agreed to pay a substantial amount of money to La Kaffa, and in return La Kaffa would allow Loob Holding to continue operating its Tealive business.

This settlement dispute is a good example of how effective legal tactics can help win the war. The primary fight between La Kaffa and Loob Holding, by way of an arbitration, still had a long way to go. Loob Holding was probably not bothered with a long fight because it had already shifted its business to "Tealive" which appeared to be operating smoothly.

However, approximately two months ago, La Kaffa managed to obtain a court injunction to prevent Loob Holding from operating its Tealive business. Although the injunction order was subsequently ‘stayed’ by the court, it was nevertheless still a critical attack to Loob Holding. Loob Holding could no longer afford a long drawn out arbitration fight with La Kaffa and risk having its “Tealive” business shut down in the meantime. It is likely that the injunction obtained by La Kaffa was the decisive battle that ultimately led to the settlement agreement today.

This 'injunction battle' was scheduled for another fight in the Federal Court next Monday (September 3, 2018). It is likely both parties, particularly Loob Holding, did not want to take further risks in court next Monday, and so finally decided to settle the fight at the eve of the next battle.

My guess is that this settlement agreement is more favourable to La Kaffa. If that is correct, then it could be said that with that one battle victory, La Kaffa had won the war.

And all in the kingdom of Malaysia can now sleep easy knowing that peace and stability have finally come to the realm of bubble milk tea.

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