Kym Ellery is back in the Victorian Supreme Court today as the fashion designer’s legal stoush with department store Myer continues.
The hearing began on Monday with Myer claiming the 29-year-old designer abandoned her exclusive contract with Myer and entered an arrangement with its rival, David Jones, 18 months before the end of her contract.
The department store is seeking an injunction preventing Ellery from supplying any more clothing from her Ellery and L’America labels to David Jones.
Myer is also claiming damages from Ellery for breach of contract and failing to deliver an order from her autumn and winter collection.
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Peter Murdoch QC, for Myer, said Ellery was negotiating with David Jones while her clothes were being promoted by Myer.
“The reason for the exclusivity agreement is because the time and energy and expense is something that reveals a benefit after a period of time,” Murdoch said.
Ellery’s legal team claimed exclusivity agreements could be voided if a better offer was received.
Ellery also disputes the value of Myer to her label, claiming Ellery was only stocked in four of Myer’s 67 stores.
Myer spokesperson Jo Lynch told SmartCompany the department store considers it has an enforceable exclusivity agreement in place with Ellery and is seeking that this be upheld.
“We have invested significantly in Ellery and the Ellery brand as we saw the potential for this budding Australian designer,” she says.
“We have spent a substantial amount of time, effort and expense to nurture the brand, promote the brand, grow the brand and build goodwill in the brand.”
Lynch says Myer has never done anything contrary to the agreement it has in place with Ellery.
“Until the court determines this matter, we do not have Ellery in stock, which is disappointing for our customers. We still want the Ellery brand and for our relationship to continue. We want Ellery to honour the contract we have in place.”
Partner at law firm Hall and Wilcox, Sally Scott, told SmartCompany in cases of a contract between two businesses it is very difficult to prove there has been some sort of unconscionable conduct.
“If you have a written contract the starting point is that the contract is enforceable,” she says.
Scott says parties can generally contract with each other on whatever terms they choose and while one party may have struck a better deal, if the other party agreed to it, then the deal will usually be enforceable.
“The party wanting to rely on the terms of a contract will generally be in a better position than a party that wants to deviate from a contract,” she says.
Scott says Ellery will have to rely on laws such as the Australian Consumer Law, which specifies a number of provisions that, if available, could be used to avoid obligations under a contract.
These include unconscionable conduct, unfair contract terms, and misleading and deceptive conduct.
Contracts which are anti-competitive could provide another avenue to provide a contract.
She says the lesson for SMEs is that they must be very careful when entering into a contract.
“There are often reasons why parties may not take sufficient care to review terms when entering into a contract, including time pressures and excitement about the broader deal and opportunities,” she says.
“However, the Myer/Ellery case shows how it can all go wrong.”
Scott warns once a contract is signed, it can be very difficult getting out of it.
“At the time a contract is entered, parties are often excited about the relationship and they generally expect nothing will go wrong,” she says.
“However, I’ve been handling commercial disputes for nearly 20 years and I’ve seen how it can all go wrong.”
Scott says the vast majority of the parties in the disputes she has handled over the years had a good relationship with the other party at the outset of the commercial deal.
“No one ever expects a deal will end up in court. So it is best to assume that it will when analysing a contract.”
It’s not all bad news for Ellery though.
“Incidentally, whilst most people would dread being sued, there is a very definite silver lining for Ellery with this case,” Scott says.
“Two major department stores wanting to stock your brand, with one willing to go to court over it, can’t be bad for public relations.”