Honda Australia’s controversial switch to an agency model didn’t breach Australian Consumer Law, but the carmaker may still have to fork out almost $10 million in damages to one of its former dealers.
Honda Australia moved to an agency model in July 2021, in which the manufacturer took ownership of the cars sold through its dealers – who subsequently became agents rather than franchisees.
Of the 36 dealers which had their existing contracts with Honda terminated prematurely, all but three reached settlements with the carmaker for compensation.
Former dealers Brighton Automotive Holdings Pty Ltd (Astoria) and Tynan Motors Pty Ltd (Tynan) subsequently took Honda Australia to the Supreme Court of Victoria, though Astoria later became the only party in the legal action after Tynan received a confidential settlement offer.
Astoria challenged Honda’s compensation offer and claimed it had engaged in unconscionable conduct by not disclosing to dealers plans to terminate them as part of the agency switch prior to updating existing franchise agreements.
Justice Matthews handed down her judgement in the Supreme Court of Victoria on May 24, finding Honda Australia hadn’t contravened Australian Consumer Law by engaging in misleading or deceptive conduct or unconscionable conduct after failing to disclose its planned sales model changes to dealers.
However, Justice Matthews didn’t agree with Honda’s claim that Astoria Brighton suffered a loss of only $1.6 million, instead agreeing with the former dealer’s financial assumptions which were assessed to be more than $10 million.
“Justice Matthews has now directed that Astoria Brighton’s final damages entitlement be calculated by the accounting experts used by each side during the trial having regard to her factual findings favouring Astoria Honda,” said Evan Stents of HWL Ebsworth Lawyers, the law firm representing Astoria Brighton.
“Based on the parameters set by the Court in Justice Mathews’ judgement, Astoria Brighton estimates that its damages entitlement will likely exceed $10 million.”
Honda Australia acknowledged the Supreme Court judgement, and the fact it will owe Astoria Brighton compensation.
“Honda Australia acknowledges the judgement handed down by the Supreme Court of Victoria in relation to the legal proceeding with Brighton Automotive Holdings,” a Honda Australia spokesperson said.
“We welcome the Court’s findings that Honda Australia has not engaged in misleading or deceptive conduct or unconscionable conduct under the Australian Consumer Law.
“This case related to Brighton Automotive Holdings’ termination as a Honda dealer as part of Honda Australia’s restructure of its business model in mid-2021. We have always acknowledged that compensation would be owed to Astoria for breach of contract.
“Honda Australia remains committed to supporting its Honda Centres and customers moving forward.”
The final ruling is to be heard at a later date.
It’s the latest in a series of legal cases stemming from Honda Australia’s switch to an agency model.
In November 2023 reports suggested multiple former Honda Australia dealers, including Astoria Brighton, intended to sue Deloitte Motor Industry Services (a division of Deloitte Australia) claiming the firm had a conflict of interest when assisting Honda in deciding compensation offers.
At the time, Deloitte was the auditing and tax partner for fewer than 10 franchised Honda dealerships around Australia, with Astoria Brighton co-owner Mark Avis telling the AFR “they used our own figures against us” to make lower offers based on worse sales years.
In December 2023, a Federal Court ruled Honda Australia would have to pay $6 million in penalties after making false or misleading representations to customers of Astoria, Tynan and Burswood between January and June 2021.
The Australian Competition and Consumer Commission (ACCC) had alleged Honda Australia represented these three dealerships would be closing or had closed and were no longer capable of servicing customers’ vehicles.
For example, call centre employees used wording like “that dealership is closing down”, while reminder text messages about vehicle servicing said “your previous service dealer has closed”.
Honda subsequently cooperated with the ACCC throughout the process, and its $6 million in penalties was divided between $5.5 million for the misleading service reminder communications, and $500,000 for the 17 misrepresentations made by its call centre.
Last month, Honda Australia committed to the agency model despite posting its two weakest sales years on record in Australia since the switch.
Its annual sales dropped from 29,040 in 2020 (the last full year before going to non-negotiable prices) to 14,215 sales in 2022, and 13,734 sales in 2023.
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