THE long drawn out legal battle between Honda Australia and Brighton Automotive, the owner of the former Astoria Honda, is seeking around $22 million in damages over early termination of its dealer agreement, has concluded in the Supreme Court of Victoria. 

The court heard that the $22 million was independently assessed by Brighton Automotive as the financial damage Brighton Automotive suffered when Honda Australia terminated its dealership contract after just two and a half years of a five-year agreement. 

Honda countered that its independent expert said the possible loss for breach of contract was up to $1.7 million.

Brighton Automotive was alleging breach of contract and unconscionable conduct. An allegation of misleading or deceptive conduct was withdrawn early in the trial.

Justice Matthews has reserved her decision in the dispute which relates to Honda Australia’s decision to change its business model in 2021 from a dealership model to an agency model, while simultaneously terminating a significant portion of its dealer network halfway into the agreed term of their dealer agreements.  

The decision has caused a turbulent few years for the Honda brand down under which led to Brighton Automotive taking action. The proceeding was filed in March 2022.

Closing arguments were made before Justice Matthews on March 6, 2024.

While Honda Australia has admitted that the termination notice sent to Brighton Automotive was an unlawful repudiation of the dealer agreement, a substantial part of the trial focused on whether Honda also contravened the Australian Consumer Law by acting unconscionably against Brighton Automotive. Honda denied that it acted unconscionably.

A key aspect of Brighton Automotive’s unconscionability claim against Honda Australia relates to the allegation that Honda Australia failed to disclose to its dealer network that it was considering a radical change of business model involving the early termination of the dealer agreements prior to those agreements being signed.

Senior Counsel for Brighton Automotive, Nicholas De Young KC, submitted to the Court that to date Honda Australia has failed to make a single open offer of compensation to Brighton Automotive despite acknowledging its liability for breaching the dealer agreement.*

Mr De Young KC also argued that Honda Australia breached its obligations of good faith** owed to Brighton Automotive by undermining the deal that was made between the parties in 2018.

He argued that Honda Australia chose to focus on its own commercial interests and put to the court it did so by unlawfully attempting to capture the goodwill that its dealer network had built up over many years without giving Brighton Automotive the opportunity to reap the benefits of that network until the end of the term of the dealer agreement.

Honda Australia’s current and former directors, Carolyn McMahon and Stephen Collins were extensively cross-examined by Mr De Young KC about Honda Australia’s restructuring plans prior to the signing of the dealer agreement in June 2018.  

Ms McMahon said under cross examination that the option to terminate dealers ‘was at that point just an idea, it was an option, we hadn’t actually studied it to determine whether it was even … whether it was realistic or not’.

But Mr Collins conceded under cross-examination that this option would not have been put to a ‘very’ senior executive of Honda Motor Company if it were not possible or if it were unrealistic.

GoAutoNews Premium has been told that the fact that Honda Australia has admitted to the court that it was acting unlawfully in respect of its contractual obligations*** means that Brighton Automotive will receive a compensation order from the Supreme Court, but the question is going to be how much?

The only witness cross-examined on behalf of Brighton Automotive was one of its directors,  Mark Avis, who defended the position of the damages claim in favour of Brighton Automotive in the region of $22m.  

Mr Avis said that the damages figure was assessed by an independent expert and outlined the ‘sugar hit’ in profits that motor vehicle dealers across Australia have enjoyed since COVID.  

Mr Avis told the court that constrained supply during 2020 caused by COVID lockdowns resulted in a never-seen-before-level of demand from consumers. This drove the price of motor vehicles up and significantly increased dealer gross profit margins on the sale of new motor vehicles.  

Mr Avis also explained that Brighton Astoria, which was the top Honda dealer at the time of termination by number of vehicles sold, no longer needed to discount the sale price of its vehicles in order to continue selling a high volume of vehicles during COVID.

Brighton Automotive, represented by the automotive team at HWL Ebsworth Lawyers, is the last dealer in dispute with Honda Australia. All of the other Honda dealers who commenced legal proceedings have since reached settlements with Honda Australia.

Honda Australia additional responses:

* Honda Australia has told GoAutoNews Premium that evidence was given to the court (both from Astoria including Mark Avis and his partner Ron Klein as well as Honda witnesses) that offers of compensation have been made to every exiting dealer, including Astoria.

** Honda said Astoria does not argue that Honda attempted to capture the network’s goodwill – it only makes arguments in respect of the goodwill built up by Astoria.

*** Honda said it has only admitted that it engaged in breach of contract. It has not admitted that it engaged in unconscionable conduct. Given the above paragraphs focus on unconscionability, the description of Honda admitting it has acted unlawfully could be misleading, suggesting it has admitted all causes of action alleged by Astoria.