FIAT Chrysler Automobiles (FCA) Australia appears to be now free to pursue millions of dollars in alleged overpayments following a finding by the High Court of Justice of England and Wales that the dealer web service fees were established in arrangements that were subject to what the court described as a “$2.5 million bribe” paid to its (then) managing director, Clyde Campbell.
The payments to Mr Campbell were revealed in an action where UK-based dealer web services provider Motortrak had taken FCA Australia to court in London.
Motortrak was claiming outstanding invoices relating to the AU$27 million Motortrak contract.
The judgement says that Motortrak was shown to have paid Mr Campbell about $2.5 million in 14 installments between January 2010 and December 2013. The payments were seen by the judgement as relating to securing Motortrak’s contracts with FCA Australia.
The court documents show that Mr Campbell, now living in France according to his LinkedIn account, introduced Motortrak’s digital online services and search-engine optimisation (SEO) expertise to FCA Australia. At the time Mr Campbell was a director of both Motortrak and FCA Australia.
He negotiated a fee for Motortrak’s services that the court heard cost FCA Australia $26.8 million.
The court heard this has since been calculated to be $9.68 million above prices charged by similar companies in other countries.
Comparisons shown to FCA Australia at the time were made between Motortrak, Carsales and Manheim but Motortrak won the contract.
Justice Clare Moulder ruled that Mr Campbell received payments from Motortrak totalling $2.5 million. She found that evidence that the payments were for a licence termination agreement – as claimed to the court by Mr Campbell and Motortrak owner Gary Pask – were false.
Justice Moulder also acknowledged that FCA Australia paid Motortrak $26.8 million.
The payments were made by FCA Australia dealers – comprising dealers selling all or some of FCA products from brands including Chrysler, Dodge, Jeep, Fiat and Alfa Romeo – and charged at $690 per dealer per month.
The payments were struck from January 2011 and revised in May 2012 to $1695 for a second extension, and then to $4100 per dealer per month from January 2013.
The court heard that comparison fees for the same services would cost $500 per dealer per month, $1200 per dealer per month for the second extension and $3000 monthly per dealer for the last extension.
Justice Moulder said FCA Australia was entitled to recover overpayments on the transactions and she accepted the assessment of an independent expert that the loss should be calculated at just under $9.7 million.
FCA Australia argued that had there been a “proper competitive tendering exercise and proper negotiation”, FCA Australia would have concluded that it did not need the full range of services offered by Motortrak.
The court judgement said that: “In particular counsel for FCAA submitted that in relation to the second extension, the vast majority of FCAA’s dealers did not need additional SEO and to the extent that some of the larger urban dealers might have been interested, it would have been for a limited time period only.
“It seems to me that the defendant (FCAA) is entitled to recover the amount of the bribe … (and) it is presumed that Motortrak has gained at least to the extent of the bribe,” Mrs Justice Moulder said in the judgement obtained by GoAutoNews Premium.
In the judgement, it was stated that counsel for Motortrak accepted that in principle FCA Australia was entitled to recover damages for actual loss sustained as a result of entering into a transaction in respect of which a bribe was given.
The judgement partially ends action against Clyde Campbell by FCA Australia.
Action by FCA Australia in Australia against Mr Campbell and improper conduct alleged and bribes received from Mototrak were suddenly dropped in September 2016.
Mrs Justice Moulder also brought up the relationship between Mr Campbell, Motortrak and celebrity couple Shane Warne and Elizabeth Hurley.
“Mr Pask was asked about two invoices which Motortrak submitted in relation to cars purchased by Motortrak at Mr Campbell’s request which were provided to certain celebrities pursuant to the defendant’s Ambassador programme,” the judgement said.
“The description on the invoices stated ‘SWEH Programme update’ and ‘HKSK Programme update’ respectively. Mr Pask’s evidence in cross-examination was that SWEH referred to the cricketer Shane Warne and Elizabeth Hurley the actress.
“He said that it should have said ‘Ambassador programme update’ rather than programme update but it was an ‘update’ to the Ambassador programme that FCAA were running in Australia and Motortrak were asked to assist them in obtaining some vehicles.
“Mr Pask’s evidence was that this was wording he was asked to put on to the invoices and he denied that it was an attempt to disguise the invoices as being for services supplied by Motortrak.
“Mr Pask was also asked about an email sent from Ms (Veronica) Johns to Mr Campbell in February 2013 concerning a replacement car for Elizabeth Hurley whose car had been stolen in the UK. Mr Campbell stated in the email: ‘I can get Gary to buy one and invoice us for IT.’
“Mr Pask in cross-examination stated that the email should be read as though the capitalised term was merely the word “it”. This explanation to the court of the email from Mr Campbell flew in the face of the obvious interpretation (that it referred to IT) and was in my view patently false.”
A future hearing will discuss costs to FCAA.
The timeline for the FCAA action in Australia was:
- May 2015: FCAA instituted proceedings against Mr Campbell alleging that he had acted in breach of duty in relation to a number of contracts with third parties.
- May 2015 and October 2015: Subpoenas were served on Motortrak ordering Motortrak to produce various documents in connection with the Australian proceedings.
- May 2016: FCAA applied to join Motortrak to the Australian proceedings. An order was made in June 2016. However Motortrak issued an anti-suit injunction application in July 2016 relying on the exclusive jurisdiction clause in the Original Agreement and on 5 August 2016 FCAA discontinued the Australian proceedings against Motortrak.
- June 30, 2016: FCAA informed Motortrak through its lawyers that it required Motortrak to cease to provide services under the Agreement.
- July 2016: The claim form and particulars of claim were issued by Motortrak in the UK proceedings.
- September 2016: The Australian proceedings against Mr Campbell were settled.
Timeline for Motortrak and FCAA’s relationship:
- December 23, 2010: An agreement was entered into between Motortrak and FCAA for Motortrak to provide web based services to FCAA for a period of three years from January 1, 2011 (the “Original Agreement”) at a cost of $690 per dealer per month. The services to be provided by Motortrak were dealer websites, dealer vehicle administration system, used car locator and vehicle searches.
- May 16, 2012: The Original Agreement was amended and its term extended to August 31, 2016 (the “First Extension”). Additional services were to be provided to an increased number of dealers and the charges were increased to $1695 per dealer per month.
- August 15, 2012: The Original Agreement was further amended and its term extended to December 31, 2017 (the “Second Extension”). The services were extended to include SEO (search engine optimisation) and the charges increased to $4100 per dealer per month from January 1, 2013.
- April 30, 2013: Mr Campbell resigned as managing director of FCAA and went to run Fiat Chrysler’s New Zealand distributorship. He was replaced by Ms Veronica Johns with effect from May 1, 2013.
- April 1, 2014: The Original Agreement was further amended to include additional services and extended to December 31, 2019 (the “Third Extension”). The charges remained at $4100 per dealer per month.
By Neil Dowling