Koffels take action against Gloria Jean’s on behalf of US coffee exporter in Contract Dispute

The Australian Financial Review

Broadcast:Thursday 18 February 2010

A 1996 deal is at the centre of a row between the coffee chain and a US exporter, writes Alex Boxsell.

A US-based coffee exporter is suing the Sydney Company behind the global Gloria Jean’s Coffees franchise for up to $56 million in damages and unpaid commissions claiming it broke a joint venture agreement that provided for the exclusive supply of coffee beans.

Western Exports Services claims Gloria Jean’s owner, Jireh International, breached a 1996 joint venture deal, but Jireh has cross-claimed, alleging that agreement was invalid and seeking damages against Colorado based Western and its directors. The matter is due to return to the NSW Supreme Court today.

Jireh is owned and run by two entrepreneurs with a close connection to Pentecostal church, Hillsong. Executive chairman Nabi Saleh in one of eight church elders while co-owner Peter Irvine is former managing director of the controversial women’s shelter Mercy Ministers, which was supported by Hillsong but closed in October amid allegations that it denied its patients proper medical care.

The pair have transformed Gloria Jean’s into a worldwide coffee franchise with 917 stores across 35 countries and more than half of those in Australia. Total global sales are estimated to be $US 450 million ($500 million) per year.

Hillsong’s website says of My Saleh: “His strong business acumen and godly wisdom have also enabled him to sit on several boards of directors for many large non-profit organisations.”

Western claims Jireh breached a letter of agreement signed by Mr Saleh and Mr Irvine with its directors, Daivd Cisneros and Steven Meier, in March 1996 to establish a joint venture between the two companies.

Western’s lawyers Ross Koffel of Koffels Solicitors & Barristers said the matter was “a serious claim that must are profound effect upon Gloria Jean’s Coffees and its franchisees worldwide” But Jireh said it was vigorously defending the matter and denies the allegations contained in the claims.

Originating in the US, Gloria Jean’s was opened in Australia in 1995 by Mr Saleh and Mr Irvine, became a franchise in 1997 and Australian-owned in 2004 after Jireh bought the majority of the international rights.

The 1996 letter of agreement said Western “have provided and will provide contract negotiation assistance, logistical support and export services” to Jireh which at that time was trying to become Gloria Jean’s master franchisee for Australia.

It also said Western would be the “sole and exclusive supplier and exporter” of Gloria Jean’s products from the US and would receive a commission of 5 percent “of the ex-factory price”.

Western claims it exported Brothers brand coffee to an Australian company, Maranatha Import Export from about June 1994 to about May 2001. Mr Saleh’s is a director and beneficial owner of Maranatha.

On August 5 1995, Western claims Mr Cisneros attended a meeting with Mr Saleh, Mr Irvine and Gloria Jean’s US executives who agreed to grant to Western Mr Saleh and Mr Irvine the Australian master franchise and the right to roast Gloria Jean’s coffee in Australia.

Western said Jireh ordered and paid for its goods under the agreement until 2001, when Jireh began to source products from other US suppliers, and claims breach of good faith and breach of contract of unjust enrichment.

Jireh has filed a defence and cross-claimed alleging that Mr Cisneros and Mr Meier breached their fiduciary duty, as Jireh’s lawyers, by securing agreements with Jireh against its interests. In a defence to the cross-claim, Western, Mr Cisneros and Mr Meier admit to giving business advice to Jireh but deny acting as its lawyers