Court Ruling: Distributor’s RMB 100,000 Deposit Cannot Be Withheld for Failed Evaluation; Appeal Uph

In a tweet earlier this February titled "To Return the 100,000 RMB After Going Through Three Courts? The Difficulty of Returning Deposits for Leading Brands," we shared a civil judgment between YueK and a distributor. The case involved whether the deposit could be returned due to a failed evaluation that led to the termination of cooperation.

At that time, the judgment showed that QingL Technology's claims were threefold:

1. Ningbo W Core should return the 100,000 RMB deposit;

2. Ningbo W Core should pay overdue interest;

3. Ningbo W Core should bear the litigation-related costs.

In the facts and reasons submitted by QingL Technology, they argued that according to the distribution agreement, the cooperation period had expired and the handover was completed, but Ningbo W Core refused to return the deposit.

Ningbo W Core argued that all claims by QingL Technology should be dismissed, stating:

1. The agreement period was from December 31, 2020, to April 30, 2021;

2. The agreement period was a trial period for QingL Technology, and after the trial period ended, they needed to pass an evaluation by Ningbo W Core to sign a formal one-year distribution agreement;

3. QingL Technology had issues such as breach of contract during the trial period and failed to pass it;

4. The 100,000 RMB deposit had already been applied to offset the breach of contract penalty and could not be returned.

The judgment recorded many breach details submitted by Ningbo W Core, including online sales, false sales points, false sales data, and sales in unauthorized areas, along with multiple operational indicators not meeting management standards. According to Ningbo W Core, the 100,000 RMB deposit could no longer offset the penalties owed by QingL Technology. How did the court rule?

1. The court confirmed the authenticity of the distribution agreement and electronic bank receipts;

2. The court found that the other evidence submitted by Ningbo W Core was insufficient to prove the facts in question and could not be verified, thus not accepted;

3. Ningbo W Core could claim losses caused by QingL Technology's breach in a separate case.

The first-instance judgment ordered Ningbo W Core to return the 100,000 RMB deposit and bear the litigation-related costs. However, Ningbo W Core did not accept this judgment and subsequently appealed. Recently, we learned that the second-instance result has been issued: the appeal was dismissed, and the original judgment was upheld. This judgment is final.

The second-instance result largely supports some of GeWu's previous viewpoints:

1. The breach evidence provided by the brand may not meet the acceptance standards;

2. The brand's direct application of the deposit to offset penalties may not be supported.

In other words, if there are still distributors facing such historical issues, they may find satisfactory resolutions.