The court documents allege that Honda Australia knew, or at least considered the possibility, that these Honda dealers would have their dealer agreements terminated just two years into their new five-year terms well before the new dealer agreements were signed. 

The documents say that, by failing to tell dealers Honda Australia intended the five-year dealer agreements to last only two years, or was at least considering this possibility, Honda Australia failed to provide the terminated dealers with the information they needed to reposition their business plans or take up other opportunities available to them before signing the new dealer agreements. 

Under changes made in 2018, all Honda dealers were brought under a new dealer agreement that was to last until June 30, 2023. The new dealer agreements included terms for a renewal of the term ending on 30 June, 2023 and opportunities for the Honda dealers to sell their dealerships.

According to the court documents the company was considering not only the repudiation of the dealer agreements after just two years into their five-year term, but had also calculated the amount that Honda Australia would be willing to pay the terminated dealers for such breach.

All the dealers signed their new agreements on July 1, 2018 but according to the court documents the company was considering not only the repudiation of the dealer agreements after just two years into their five-year term, but had also calculated the amount that Honda Australia would be willing to pay the terminated dealers for such breach.

The court action was brought by Brighton Automotive Holdings and Tynan Motors, as terminated Honda dealers, and Astoria Motors and Body Works, as a related entity to Brighton Automotive Holdings, which had its own parts and services agreement with Honda Australia terminated because of the repudiation.  

The claim says that Honda Australia’s repudiation of the dealer agreements and breach of the applicable parts and service dealer agreements (as applicable), has caused the plaintiffs have suffered loss or damage through:

• Loss of opportunity to derive revenue and earn profit by operating their businesses as authorised Honda dealers or authorised Honda parts and service dealers (as applicable) for the term of the agreements until 30 June, 2023
• Loss of opportunity to derive revenue and earn profit as authorised Honda dealers or authorised Honda parts and service dealers (as applicable) for any extended renewal period or hold over term after 30 June, 2023
• Alternatively, loss of the opportunity to sell their businesses as authorised Honda dealers or authorised Honda parts and service dealers (as applicable) as a going concern.

The court documents allege that, non-disclosure of information that was so pertinent to the five-year dealer agreements, and was so material to the decisions taken by the terminated dealers relating to their operations during that five-year period and beyond, was misleading or deceptive conduct by Honda Australia in contravention of the Australian Consumer Law.

The court documents say that around at least 6 June, 2018, only weeks before all Honda dealers were faced with signing brand new five-year agreement, Honda Australia “was undertaking or contemplating a strategic review of its business operations and dealer network in Australia” called Honda’s Strategic Review. 

It says that “as part of Honda’s Strategic Review … Honda Australia was considering or contemplating reducing the number of authorised Honda dealers in Australia” called Honda’s New Dealer Strategy. 

In making these allegations, the plaintiffs rely on a Honda Australia presentation entitled “AUH Business Direction” dated 6 June, 2018 recording the “need for a long-term, consistent strategy in response to, among other things, fluctuating foreign exchange rates” and “Minutes of a Honda Australia ‘Executive Board Off Site’ meeting held on 15 November, 2017 at Melbourne Airport Qantas Club Meeting Rooms recording that Honda Australia was considering a “New Dealer Strategy” involving: ‘less dealers, more satellite service outlets and a smaller concentration of good owners.”

The court documents say that “Honda’s New Dealer Strategy required the early termination of dealer agreements with authorised Honda dealers in Australia”.

The plaintiffs rely on a Honda Australia presentation dated 23 August 2017 entitled “Road map for ROS 0 at 19-20 Mid-term end” which refers to the need to “exit 27 Dealers” by “breaking existing contracts two years into the five-year period”.

They also rely on the Honda Australia “AUH Business Direction” presentation, under the heading “20,000 unit business – AUH Forecast”, which states: “43 [Dealers] required based on maintaining current sales per outlet. Therefore need to exit 64 Dealers based on breaking contracts at the end of “96ki” (which is March 2020)  – estimated cost $179m”.

The court document claims that Honda Australia did not disclose to the plaintiffs, at any time prior to them entering to their Agreements with Honda Australia:

• The existence of Honda’s Strategic Review
• The existence of Honda’s New Dealer Strategy
• That Honda Australia was considering or contemplating the early termination of dealer agreements with authorised Honda dealers in Australia.

The plaintiffs claim that: “It was reasonable to expect that the non-disclosed matters would have been disclosed by Honda Australia to the plaintiffs at some time prior to their entry into their agreements with Honda Australia”.  

This expectation is said to have arisen from numerous circumstances, including that the plaintiffs were long-term authorised Honda dealers and parts and service dealers (as applicable) and that, aside from expectations created under the new dealer agreements with an expiry date of 30 June, 2023 there were obligations of good faith applicable to the negotiation of and entering into the new agreements.

They say that under that Franchising Code, Honda Australia is required to act towards the plaintiffs in good faith with respect of any dealing relating to the agreements and the negotiation of the agreements. The good faith obligation relating to the performance of the agreements was also included in the agreements themselves.   

The plaintiffs claim that “if Honda Australia had disclosed the non-disclosed matters (or any of them) to the plaintiffs, prior to them entering in to the dealer agreements and parts and services agreement, the plaintiffs would not have entered into the new dealer agreements and would have instead:

• Sought to sell their business as Honda dealers or Authorised Honda parts and service dealer (as applicable) as a going concern
• Pursued other automotive dealership opportunities with respect to their premises.

The document states: “Honda Australia engaged in conduct in trade or commerce that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law (ACL) in Schedule 1 of the Competition and Consumer Act 2010″. 

In addition to the misleading and deceptive conduct claim, the plaintiffs allege that “Honda Australia engaged in conduct in trade or commerce that was, in all the circumstances, unconscionable conduct in contravention of s 21 of the ACL”.

In relation to this claim, the plaintiffs say that by sending the termination notices “Honda Australia knew and intended that it was breaching the terms of its dealer agreements with Brighton Astoria and Tynan Motors and that they would suffer loss and damage as a result.”

The Honda Australia presentation entitled “Road map for ROS 0 at 19-20 Mid-term end”, dated 23 August 2017, records an analysis undertaken by Honda Australia of the amount of compensation that it considered would be payable to each authorised Honda dealer by Honda

Australia in the event of Honda Australia “breaking existing contracts two years into the five year period”.

The court document claims that Honda Australia did not disclose to the plaintiffs, at any time prior to them entering to their Agreements with Honda Australia, compensation that it considered would be payable to each authorised Honda dealer by Honda Australia in the event of Honda Australia “breaking existing contracts two years into the five year period”.

The plaintiffs further allege that Honda Australia, without any compensation, “knew and intended to acquire the goodwill in each plaintiff’s business, including the value of their relationships with their Honda customers, which had been built up by them over many years at the request and encouragement of Honda Australia”.

By John Mellor