Background
Nonna’s Bakehouse, a well known wholesale bakery supplying major supermarkets such as Woolworths, Aldi, and Harris Farm, brought proceedings in the Supreme Court of New South Wales against its long term flour supplier, Ben Furney Flour Mills. The bakery alleged that the flour supplied between 2021 and 2022 was inconsistent and caused defects in its baked bread, including sticky texture and water absorption issues.
Nonna’s claimed over $2.5 million in damages for breach of contract and misleading or deceptive conduct. In response, Ben Furney filed a cross-claim for approximately $800,000 in unpaid invoices following a cessation of payments by Nonna’s in May 2022.
Key Legal Issues
The court was asked to consider:
- Whether the flour supplied was defective or inconsistent;
- Whether any misrepresentations had been made by Ben Furney;
- Whether Nonna’s Bakehouse was entitled to damages or whether Ben Furney was entitled to be paid for outstanding invoices.
Findings of the Court
Justice Rees found in favour of Ben Furney Flour Mills. The court concluded that the issues experienced by Nonna’s were not caused by the flour, but rather by internal changes to recipes and production practices, particularly following the departure of the head baker in late 2021.
The evidence showed that Nonna’s had changed its production formula by removing added gluten and malt flour. This adjustment was identified as the most likely cause of the bread quality concerns. Importantly, the court noted that despite complaints, Nonna’s had experienced strong commercial growth. Sales increased by 45% between 2019 and 2023, thus undermining its claims of financial loss.
Additionally, the flour underwent various tests and factory inspections, none of which identified defects. The court concluded that there was no breach of contract or misleading conduct on Ben Furney’s part.
Judgment and Orders
The court dismissed Nonna’s claims and ordered the bakery to pay:
- $783,178 in outstanding invoices;
- Interest at 10% per annum;
- Legal costs incurred by Ben Furney.
Legal and Commercial Lessons
- Internal Factors Can Defeat Supplier Claims
This case illustrates how internal changes to manufacturing processes can be determinative in commercial disputes. Courts will closely examine whether quality issues originate internally before attributing blame to suppliers.
- Business Performance Undermines Loss Arguments
Nonna’s robust growth in sales over the relevant period weakened its claims for damages, showing that performance data can significantly influence the assessment of harm.
- Reliable Supplier Records Are Vital
Ben Furney’s ability to show consistent testing and lack of defects was central to its successful defence. This case reinforces the importance for suppliers to maintain quality control documentation and open communication when issues are raised.
- Dispute Management and Contractual Clarity
A breakdown in payments and communication can rapidly escalate into litigation. Clear contract terms regarding quality standards, testing methods, and dispute resolution procedures could help mitigate such disputes.
- Causation Is Key in Misleading Conduct Claims
Even where a product is alleged to be faulty, the claimant must prove that their losses were directly caused by the supplier’s conduct. In this case, Nonna’s could not demonstrate a causal link.
Practical Guidance for Clients
Businesses in the manufacturing and wholesale sectors should:
- Document all changes to production processes;
- Maintain transparent communication with suppliers;
- Ensure payment practices are aligned with contractual obligations;
- Establish dispute resolution protocols to avoid court proceedings.
How We Can Help
Our firm advises manufacturers, wholesalers, and suppliers on commercial contracts, product liability, and dispute resolution. We can assist in:
- Drafting robust supply agreements;
- Managing performance issues and complaints;
- Navigating breach-of-contract disputes;
- Negotiating and enforcing commercial debts.
If you are facing a dispute with a supplier or customer, or wish to strengthen your commercial agreements to avoid such issues, our commercial law team is ready to assist.
About the Author: This article has been authored by Steven Brown. Steven is a Perth lawyer and director and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
