The long running dealer dispute concerning Honda Australia’s change from a dealership to agency model is now close to being finalised after the Supreme Court of Victoria handed down its judgment on 24 May 2024.
The legal dispute arose after Honda prematurely terminated 36 of its dealers in Australia as part of its move to an agency model. All of the terminated dealers disputed Honda’s compensation offer and all but 3 of the dealers reached settlements with Honda without going to Court. However, three terminated dealers, including Melbourne based dealership, Astoria Brighton, pursued their claims against Honda in the Supreme Court of Victoria. At the time its dealer agreement was terminated, Astoria Brighton was one of the best performing Honda dealers in Australia.
In the legal proceeding, Astoria Brighton challenged the adequacy of Honda’s compensation offer and also argued that Honda engaged in unconscionable conduct by not disclosing to the dealers its plans to terminate dealers as part of the agency model prior to the dealers entering into their (then) current dealer agreements. Honda had argued that Astoria Brighton did not suffer any loss as a result of the termination of its dealer agreement, or if it did suffer a loss, it was only as high as $1.6 million.
The question of whether the termination of the Astoria Brighton’s dealer agreement was unlawful was not challenged by Honda. This is because Honda had conceded in an earlier proceeding in the Supreme Court that its notice of termination to Astoria Brighton was a repudiation of the dealer agreement thus rendering the termination unlawful.
In handing down her judgment, Justice Matthews rejected most of Honda’s financial assumptions in support of its claims that Astoria Brighton did not suffer a loss or only a minimal loss of $1.6 million. Justice Matthews ultimately agreed with most of Astoria Brighton’s financial assumptions which, when finally assessed, are likely to result in a damages award in excess of $10 million.
Importantly, Justice Matthews agreed with Astoria Brighton that the automotive industry in Australia experienced an unprecedented profit ‘sugar hit’ post-COVID and accepted the evidence of Mr Mark Avis, a director of Astroria Brighton, that dealers in Australia were experiencing a record demand for vehicles during that period. Mr Avis testified that this demand meant Astoria Brighton no longer discounted its vehicles and was making significantly higher profit margins than before.
As to the other claims brought by Astoria Brighton, Justice Matthews found that while Honda Australia was considering a reduction in sales volume and changes to its dealer network as early as December 2017, it did not mislead its dealer network by failing to disclose this information prior to its network signing dealer agreements in mid-2018. Therefore, the Court found that Honda’s conduct in not disclosing its agency plans to dealers was not unconscionable. This finding will not affect Astoria Brighton’s right to compensation arising from the unlawful termination of its dealer agreement.
Justice Matthews has now directed that Astoria Brighton’s damages entitlement be calculated by the accounting experts used by each side during the trial having regard to her factual findings favouring Astoria Honda. Based on the parameters set by the Court in Justice Mathews’ judgment, Astoria Brighton estimates that its damages entitlement will likely exceed $10 million.
This Court ruling follows the $6 million fine that Honda was ordered to pay by the Federal Court of Australia after the ACCC prosecuted Honda for engaging in misleading and deceptive conduct towards Astoria Brighton’s customers after its dealer agreement was terminated.
Astoria Brighton was represented in the Supreme Court proceeding by HWL Ebsworth Lawyers and
Mr Nicholas De Young KC and Mr James Claridge of Counsel.
This article was written by Evan Stents, Partner, Nick Holt, Associate and Matthew Carlei, Solicitor.
