La Donna Pty Ltd v Wolford Aktiengesellschaft [2005] VSC 174
In an interlocutory ruling, the Supreme Court of Victoria held that the balance of convenience favoured continuing an injunction until trial against a supplier seeking to end a distributorship for a missed turnover target, leaving orders to be settled.
What the court decided
Wolford Aktiengesellschaft appointed La Donna Pty Ltd its exclusive distributor for Australia and New Zealand, except Melbourne and Sydney, under an agreement dated 23 June 2003 (the 2003 agreement) [6]–[7]. Wolford could end the 2003 agreement at any fiscal year end if La Donna missed the minimum annual turnover targets in Annexure 1 [8]. In March and April 2005 Wolford gave notices purporting to terminate for La Donna's failure to meet one target [1]. Wolford called this non-compliance with the current target [16]. On 29 April 2005 Harper J granted an interim injunction restraining Wolford until 5 May 2005 from enforcing the current target, terminating for that failure or acting on those notices, since extended [2]. Hollingworth J heard La Donna's application for interlocutory injunctive relief until trial or further order [3].
La Donna alleged false pre-contractual representations, including that the targets assumed permission to open Wolford boutiques in Toorak and Double Bay [9]–[10]. It also alleged a July 2004 agreement not to enforce the targets until Wolford decided who would operate those two boutiques [11]. Wolford generally denied both, relying also on Article XI(3), which requires written, signed amendments [16]. La Donna further relied on estoppel and a statutory claim of unconscionable conduct [12].
It was common ground that La Donna had fallen well short of the current target; the real dispute was whether it was obliged to comply with it [17]. Wolford did not dispute that there were serious questions to be tried about what was said, which her Honour could not resolve without discovery and cross-examination [18]. Her Honour rejected a submission for Wolford that the representations could support only damages, not an injunction [19]. With La Donna's claim not yet fully pleaded or particularised, it was "not entirely clear" which relief the representations supported [20]. Her Honour concluded it "cannot be said that there is not a serious question to be tried" on La Donna's entitlement to remedies beyond damages [20].
Damages were not shown to be inadequate for La Donna's expected lost sales if it won at trial [21]. Nor was there enough material to conclude that damages would not cover its unitemised outlay of about $500,000 [22]. La Donna said that unless an interlocutory injunction were granted it would have to close its business, having dealt only in Wolford products since it became the distributor [23]. Her Honour accepted possible loss of goodwill and damage to La Donna's relationship with David Jones, which it had contracted to supply, losses that "may be difficult to quantify" [25]. She accepted that, if the agreement were wrongfully terminated, La Donna could lose its goodwill and outlay, losses which "may be very difficult to prove" [26].
Wolford said it would lose sales and profits if restrained and La Donna then lost at trial, but its projection of about $825,000 a year in distributor sales for the next two years was unexplained and its profit margin unproven [27]. No evidence showed Wolford might suffer loss that damages could not compensate, though it questioned whether La Donna's undertaking as to damages was adequate [29]. Her Honour could not conclude that the undertaking was likely to be worthless [30]. Her Honour proposed an undertaking from La Donna to prosecute with all due expedition, and directions for referral to the Listing Master within a couple of months [31]. She held that the balance of convenience favoured interlocutory injunctive relief until trial [32]. She would hear the parties on the form of the injunction and other orders [33].
Why it matters
The ruling leaves for trial the real dispute, whether La Donna was obliged to meet the current target [17]–[18]. For a party opposing an injunction, evidence counts: her Honour's assessment of La Donna's undertaking as to damages rested on the absence of evidence from Wolford quantifying its possible lost profits; she agreed that more recent financial information would have been desirable [29]–[30].
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.