Jewellery retailer Michael Hill has been ordered to pay $2.259 million in damages, following a dispute over packaging supply with paper bag supplier Gispac. Costs and interest have also been awarded.

The companies signed two separate agreements for Australia and New Zealand on May 5, 2014, under which Gispac would supply small and large paper bags to Michael Hill for the two markets.

On May 8, 2015, the companies signed another agreement where Gispac would supply small and large bags for Emma & Roe, Michael Hill’s recently launched business back then, for Australia.

Gispac alleged that Michael Hill violated certain clauses such as its take or pay obligation over the second term of 24 months of the sales agreements; the obligation to purchase the annual quantity over the four years of the agreements; and exclusively obtaining the products specified in the agreements for its Australia and New Zealand retail stores.

The NSW Supreme Court ruled that Michael Hill breached its three sales agreements with Gispac.

Michael Hill said it is considering its appeal options for the judgment.

Last month, Michael Hill reported a “challenging” first half of FY24 with group sales up only 4.1 per cent year on year.

The company had to shut down six underperforming Michael Hill stores and cut a number of senior management roles to reduce operating costs. However, four new Bevilles locations were opened during the period.