The Supreme Court of Victoria ordered on 6 December 2024 that Honda Australia Pty Ltd (Honda Australia) pay to Brighton Automotive Holdings Pty Ltd (Astoria Brighton) $13,676,972 by way of contractual damages by 10 January 2025 as a consequence of Honda Australia’s unlawful termination of Astoria Brighton’s Honda Dealer Agreement. The Supreme Court also ordered that Honda Australia pay to Astoria Brighton interest on the damages sum levied at a rate of 10% per annum from the date that the proceeding was filed, being 15 March 2022, to the date that the damages sum is paid in full. Assuming Honda Australia pays the damages sum on 10 January 2025, the interest payment will be $3,867,023 meaning the total sum payable by Honda Australia to Astoria Brighton will be $17,543,995 exclusive of costs.
The Supreme Court also ordered that Honda Australia pay Astoria Brighton its costs relating the unlawful termination claim on a standard basis from the commencement of the proceeding until 14 February 2024 and on an indemnity basis from 15 February 2024. Indemnity costs were ordered against Honda Australia because the Court found that Honda Australia unreasonably rejected a settlement offer made by Astoria Brighton which was lower than the compensation amount ultimately ordered by the Court. The Court also ordered that Astoria Brighton pay the costs of Honda Australia on a standard basis for those parts of its claim that did not succeed.
The dispute between Honda and Astoria Brighton has been ongoing for several years and arose after Honda elected to prematurely terminate its dealer network to effect a change in business model from a dealership to agency model. Some Honda dealers were offered new ‘Agency’ agreements but 36 Honda dealers did not receive such an offer and were only offered compensation by Honda Australia.
All of the terminated Honda dealers rejected the offers of compensation from Honda Australia and issued Dispute Notices against Honda Australia pursuant to the Franchising Code of Conduct. This led to a mediation process in which all but 3 Honda dealers accepted confidential offers from Honda Australia to settle their disputes. The remaining 3 Honda dealers commenced the Supreme Court proceeding against Honda Australia and 2 of the dealers accepted settlement offers from Honda Australia earlier this year. This resulted in Astoria Brighton being the sole remaining dealer prosecuting the Supreme Court proceeding against Honda Australia to trial.
The key findings made by the Supreme Court in favour of Astoria Brighton were 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 Astoria 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.
- the volume of vehicles that would have been supplied by Honda Australia to Astoria Brighton had it not terminated the Dealer Agreement would have been similar to the levels of supply prior to termination as opposed to the volumes sold under the agency model (as contended by Honda Australia).
The judgement of the Supreme Court follows the $6 million fine that Honda Australia was ordered to pay by the Federal Court of Australia after the ACCC prosecuted Honda Australia 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 Evan Stents of HWL Ebsworth Lawyers and Mr Nicholas De Young KC and Mr James Claridge of Counsel. Honda Australia was represented by Arnold Bloch Liebler.
This article was written by Evan Stents, Partner and Nick Holt, Senior Associate.
