Retail giant Woolworths has been ordered to pay more than $11 million to a Victorian property developer for breaking a contract for the construction of a Masters hardware store.

Woolworths and Masters had struck a deal with North East Solution in 2010 to build a Masters store in Bendigo, and then for the retail giant to lease the site for 12 years.

Victorian Supreme Court judge Clyde Croft has ruled that Woolworths unfairly terminated the agreement after deciding to build on a different site in Bendigo, and must compensate the developer for its losses.

“I have found that, on the evidence, Masters and Woolworths did not act reasonably and in good faith to resolve relevant differences that arose, and that they terminated the relevant agreement for reasons that that agreement did not allow,” he said.

“As my reasons show, in my view, and among other reasons, Masters and Woolworths terminated the agreement because the construction costs exceeded an undisclosed budget and because they wanted to pursue an alternative site in Bendigo.”

Woolworths has been ordered to pay $10.875 million to North East Solution, plus interest.

The ruling comes just more than a week after Woolworths decided to abandon the Masters business, which was established to take on hardware giant Bunnings.

Masters has been a drag on the retailer’s bottom line since its beginnings in 2011, and had failed to meet a target of breaking even after five years of trading.

“We are disappointed by today’s Supreme Court decision and will be reviewing the judgment to determine our next steps,” a Woolworths spokeswoman said.

  • I guess the whole bigger Masters experience shows that simply replicating a business model successfully executed by a competitor might not always work.

    That said, Woolies was not necessarily wrong to take a risk on the big bet in hardware that it did. Granted, this bet has cost the company dearly. That said, all ventures into new areas of business involve risk, It might well be argued that whilst this particular bet did not come off, the risk may well have been worth taking at the time.