Soyo Investment Holding Pty Ltd v AL Brands Management Group Pty Ltd

1. [1]

   Before the Court is an application for two interlocutory injunctions in the form set out in a summons filed in Court on 17 March 2025, paragraphs 10 and 11.

2. [2]

   The first plaintiff is a company, Soyo Investment (Soyo), that is controlled by the second and third plaintiffs. Soyo has been in the business of operating soup shops under a trade mark, “No. 1 Malatang”. Soyo was operating various shops before meeting the second and third defendants, who control the first defendant (AL Brands).

3. [3]

   The plaintiffs seek interlocutory injunctions on the basis Soyo had an agreement or agreements with AL Brands to the effect set out in an affidavit of Jiachen Fan dated 17 March 2025.

4. [4]

   It was said that a conversation occurred on 20 January 2022, wherein the second defendant asked to operate more of "your restaurants", and also stated:

5. [5]

   The evidence demonstrates that the suggested goal was, in fact, reached and exceeded by AL Brands in 2023.

6. [6]

   Further conversations took place, and it is apparent that some form of agreement/s were entered into. This is evident from the fact that money was paid by AL Brands to Soyo, and various soup shops were placed under the control of AL Brands. Various sums of money were paid for the shops in different sums, ranging from $50,000 to $1.8 million for a shop at Burwood.

7. [7]

   In addition, the evidence indicates that AL Brands has been paying Soyo a percentage of profits in the sum of about three or five percent of profits. AL Brands has also opened other shops using Soyo the “No. 1 Malatang” trade mark and get-up.

8. [8]

   There is very little by way of documentary evidence to support the particular terms of any agreement. In relation to a particular shop at Liverpool, there are various WeChat messages dated October 2021 that indicate what is identified by the third defendant as a “franchise fee” of $50,000 (plus GST), royalties for the next five years, and “permanent franchise rights for the same location”.

9. [9]

   That alleged agreement was then referred to in more detail by the second defendant in a further WeChat message, which was entitled 'Purchase Agreement'. That agreement appeared to relate to other shops, and indicated there would be the purchase of 100 percent of the shares in five companies, operating stores in Rouse Hill, Bondi, Chatswood, Hurstville and Eastwood for AUD $1,000,000. One paragraph was that there would be “no franchise fee permanently”. Another was that royalties would be paid at a rate of three percent, with no specified end date.

10. [10]

    The second defendant indicated that a lawyer would draft an agreement based on the WeChat message contents. It appears that a document was drafted and provided to Soyo entitled “The Grant Of Master Licensee Agreement”. That document, which runs to some 16 pages, left place for execution by Soyo and AL Brands. That agreement concerns the grant of a licence or an assignment, as opposed to the “purchase” of shares as referenced in the WeChat message. The background to the agreement stated:

11. [11]

    The agreement proffered by AL Brands was not executed. However, it appears that the $1 million referenced in the WeChat message was paid, and the identified shops were thereafter managed by AL Brands.

12. [12]

    The plaintiffs instructed lawyers to create a different form of contract, entitled 'Master Franchise Agreement', which included various disclosure documents one might find in franchise agreements governed by the Franchising Code, a Deed of Non-compete Agreement, and guarantees. Those documents appear to span approximately 120 pages.

13. [13]

    Those documents were received by AL Brands but not executed. However, AL Brands continued to use the “No. 1 Malatang” trade mark and get-up to run the various stores, and, as indicated, opened new “No. 1 Malatang” stores.

14. [14]

    The plaintiffs also place reliance upon further WeChat messages, sent in March and June 2023. On 30 March 2023, the following exchange occurred:

15. [15]

    On around June 2023, the third defendant wrote to the second plaintiff:

16. [16]

    The second plaintiff responded:

17. [17]

    On 8 June 2023, the second defendant sent a message on the same chat group stating:

18. [18]

    Recently, AL Brands started changing the get-up of all of the stores, rebranding them as “Master Malatang”.

19. [19]

    On 14 March 2025, the third defendant sent the second plaintiff a letter purporting to terminate the business relationships and usage of the “No. 1 Malatang” trade mark. That letter relevantly reads:

20. [20]

    AL Brands has also posted on social media an announcement to customers:

21. [21]

    The evidence indicates that two shops in Burwood and the Sydney CBD have been rebranded in terms of logos, signage, fit-outs, decor, and promotional materials. Those shops no longer contain any references to “No. 1 Malatang”. However, in relation to the other shops identified in the summons, it is not apparent that there has been any change to date. However, based on the social media advertising, and the letter of termination, it would appear that AL Brands intends to change the get-up in the very near future.

22. [22]

    In resisting the application for injunctions, the defendants did not lead any evidence. There are two types of injunctions being sought:

    1. (1)

       The first is to stop the defendants acting contrary to an alleged agreement, or by way of passing off.

    2. (2)

       The second is to restore stores that have been already rebranded back to the trade mark and get-up of Soyo (in effect a mandatory injunction).

23. [23]

    The test for any interlocutory injunction is the same. The application, however, may be different.

Legal principles

1. [24]

   In deciding whether to grant an interlocutory injunction, the Court must consider whether there is a serious question to be tried. The inquiry then turns to whether the balance of convenience, and questions of hardship and related factors, warrant the grant of an interlocutory injunction: see eg Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 at [20] (Campbell JA, Tobias and Macfarlan JJA agreeing).

2. [25]

   The plaintiff must prove a serious, not a speculative case which has a real possibility of ultimate success, and that property or other interests might be jeopardised if no interlocutory relief is granted.

3. [26]

   The plaintiff must show a sufficient likelihood of success to justify the preservation of the status quo pending a trial: see eg Harjai v Fraser [2015] NSWCA 415 at [28] (Beazley P), citing Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] (Gummow and Hayne JJ).

4. [27]

   It becomes a matter of analysing if, in all the circumstances before the Court, considering the balance of convenience and issues of hardship, the Court should exercise its discretion to grant an interlocutory injunction: see eg Minister for Immigration and Multicultural Affairs v MZAPC [2025] HCA 5 at [23]-[24] (Gageler CJ, Gordon, Gleeson and Jagot JJ).

5. [28]

   Factors to which the Court will have regard include the adequacy of damages, the possibilities of alternative remedies, whether there has been any delay, the strength of the grounds of defence, and what, if any, undertakings a defendant is prepared to give.

Application

1. [29]

   Based on the submissions and the evidence, I consider that there is a serious issue to be tried concerning whether the terms of the agreement/s between the parties protect Soyo’s goodwill and whether AL Brands is obliged to use Soyo’s get-up and trade mark. It is evident that the parties considered that there was an agreement, which is demonstrated by the preparation of lawyer-drafted documents, but more significantly, the transfer of significant amounts of money, and the operation of various shops, and the use of Soyo’s get-up and trade mark, and payment of a percentage of profits to Soyo.

2. [30]

   I consider it arguable that, as suggested by the plaintiffs, there was a type of joint venture agreement. The defendants' counsel accepted that the original intention was that AL Brands would exploit Soyo’s trade mark by running existing shops and setting up new stores for mutual benefit. However, he submitted that AL Brands was entitled to terminate any arrangement, because there was no clear obligation to continue to use Soyo’s trade mark.

3. [31]

   I consider that proper construction of the various conversations and documents, including the conduct of the parties, will determine the actual rights and obligations of the parties at a final hearing.

4. [32]

   In relation to the claims for passing off or misleading or deceptive conduct, I consider that Soyo has demonstrated it had a reputation in the market and that reputation was recognised by AL Brands. For that reason, AL Brands made agreement/s, and paid significant sums of money. It remains to be determined if the plaintiffs are correct, and that misleading or deceptive conduct, or passing off, has caused damage. However, I consider it arguable.

5. [33]

   Moving to the next question of the balance of convenience, the defendants did not submit that there were any particular issues of hardship. The defendants’ submission was that the balance of convenience favoured the defendants, because AL Brands was entitled to cease using the mark without any cost or consequence.

6. [34]

   I accept that that may be the outcome at a final hearing. However, at present, what the defendants intend to do is to change the status quo, which is where the defendants use the plaintiffs' trade mark and get-up. I consider the balance of convenience favours Soyo in terms of restricting AL Brands from changing the get-up and trade mark until further order.

7. [35]

   In relation to the mandatory injunction sought to require the defendants to re-instate the previous get-up in the two shops, I am conscious of various authority where such an order has been considered.

8. [36]

   In Shinetech (Australia) Pty Ltd v Gosford Pty Ltd [2024] NSWCA 174 at [146] it was stated (per Ward ACJ, Leeming and Kirk JJA):

9. [37]

   Therefore, a judge being asked for a mandatory order must exercise the appropriate degree of caution: Mayo Group International Pty Ltd v Hudson Respitatory Care Inc [2005] NSWSC 445 at [58]-[59] (Young J).

10. [38]

    Here, the only evidence about the likely cost to the defendants of re-instating the shops is that it would cost approximately $5,000 per shop. No submission was made that there would be significant hardship for the defendants to change back the shopfronts and related get-up. Further, the possible consequences to the plaintiffs, if the two particular shops are not converted back, may be significant. The parties appear to have agreed that the Burwood shop, which has been rebranded, was the most valuable shop, given that $1.8 million was paid when AL Brands took over operation of the shop, apparently with only an ongoing payment obligation of three percent of the gross revenue.

11. [39]

    The other shop which has been altered is in Sussex Street, Sydney. AL Brands paid Soyo $400,000 in September 2022 and obtained control of that shop around that time. Therefore, the two shops that have been changed appear to have been valued the highest by the parties. That would suggest that the turnover at those shops is the greatest and the customer base for those shops is the greatest, which would then indicate greater goodwill, if it is found, associated with those shops.

12. [40]

    In circumstances where the defendants have not sought an adjournment to lead evidence and have brought forward no evidence of significant hardship or cost in changing back the get-up, I consider, on balance, it is appropriate to order on an interim basis, that the defendants restore the shops. However, in doing so, I am only prepared to take that step if the plaintiff is prepared to give an undertaking in the form similar to that imposed by Powell J in Fletcher Challenge Limited v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196 at 207.

Orders

1. [41]

   Upon the plaintiffs giving:

   1. (1)

      The usual undertaking as to damages; and

   2. (2)

      An additional undertaking to the Court that in the event that they are ultimately unsuccessful in the proceedings, they will pay all costs incurred by the defendants in, or in connection with, compliance with the mandatory injunction to change the shops back to the plaintiffs’ get-up and brand and to change them back again to the defendants’ get-up and brand and to do all such things to enable the defendants to make such changes;

   3. (3)

      Until further order, an order restraining each of the defendants, whether in a personal capacity or as a director, acting directly or indirectly, individually or collectively, or through their servants, agents, or any other persons acting at their direction, from taking or causing to be taken any action that may result in the removal, alteration, substitution, or any other change affecting the appearance of the logo, trade mark, signage, fit-out, decor, promotional materials, menus, packaging, or any other item or object bearing, displaying, or associated with the “No. 1 Malatang” at, or in relation to, any of the restaurants listed below:

   4. (4)

      Order that, in the event that any removal, alteration, substitution, modification or other change affecting the appearance of the logo, trade mark, signage, fit-out, decor, promotional materials, menus, packaging or any other item or object bearing, displaying or otherwise associated with the "No. 1 Malatang" has occurred at any of the restaurants listed above, the defendants shall, within the next five (5) business days, request any necessary permission from the landlord or other person to take necessary measures to restore such items to their original form, condition and appearance as they existed immediately prior to the changes, and within five (5) business days of receipt of such permission or permissions, the defendants will take all those necessary measures, including but not limited to the following restaurants:

   5. (5)

      Grant liberty to the defendants to restore should there be any impediment currently not foreseen that arises in relation with compliance with order (2).

   6. (6)

      Direct that:

   7. (7)

      List the matter on 23 May 2025 for directions.

   8. (8)

      Reserve costs of today.