Beecham Motors Pty Ltd v General Motors Holden Australia NSC Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST

S ECI 2020 04789

BEECHAM MOTORS PTY LTD (ACN 010 580 551)	Plaintiff
v
GENERAL MOTORS HOLDEN AUSTRALIA NSC PTY LTD (ACN 603 486 933)	Defendant

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JUDGE:	Nichols J
WHERE HELD:	Melbourne
DATE OF HEARING:	26–28 September 2023; 8–10 November 2023
DATE OF JUDGMENT:	20 March 2025
CASE MAY BE CITED AS:	Beecham Motors Pty Ltd v General Motors Holden Australia NSC Pty Ltd
MEDIUM NEUTRAL CITATION:	[2025] VSC 125

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CONTRACT — Contractual interpretation — Express terms — Where plaintiff alleged obligation to ensure supply — Text of contractual clause passive and non‑imperative — Alleged obligation expressed without any qualification — No express supply obligation found.

CONTRACT — Contractual interpretation — Express terms — Where plaintiff alleged ‘endeavour’ to supply obligation — Language of contractual clause promissory — Meaning of reasonable endeavours and best endeavours — Express ‘endeavour’ obligation found — Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 — Electricity Generation Corporation v Woodside Energy Ltd [2014] 251 CLR 640 — Re Iceland Cold Storage Australia Pty Ltd [2023] VSC 206 — Altis PropCo2 Pty Ltd v Majors Bay Development Pty Ltd [2022] NSWSC 403 — Joseph Street Pty Ltd and Others v Tan and Others (2012) 38 VR 241.

CONTRACT — Contractual interpretation — Textual implications from express words and nature of contract — Realestate.com.au Pty Ltd v Hardingham (2022) 406 ALR 678 — H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170.

CONTRACT — Contractual interpretation — Contra proferentum — Rule of last resort to resolve ambiguity — Applicable only where there is real doubt as to correct construction — No real doubt in contractual clauses in issue — Insurance Commission of Western Australia v Container Handles Pty Ltd (2003) 218 CLR 89 — LCA Marrickville Pty Ltd v Swiss Re International SE (2022) 290 FCR 435.

CONTRACT — Contractual interpretation — Implied terms — Business efficacy — BP Refinery criteria — No term implied by business efficacy found — BP Refinery (1977) 180 CLR 266 — Grocon Constructors (Vic) Pty Ltd v Apn Df2 Project 2 Pty Ltd [2015] VSCA 190 — AHG WA (2015) Pty Ltd v Mercedes‑Benz Australia/Pacific Pty Ltd [2023] FCA 1022.

CONTRACT — Contractual interpretation — Implied terms — Custom or usage — Australian new motor vehicle retailing industry — No term implied by custom or usage found — Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 — Byrne v Australian Airlines Ltd (1995) 185 CLR 410 — Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48.

BREACH OF CONTRACT — Whether breach of ‘endeavour to supply’ obligation — Onus of proof — No breach of ‘endeavour’ obligation — Jones v Dunkel (1959) 101 CLR 298 — Blatch v Archer (1774) 98 E.R. 969 — HQ Café Pty Ltd v Melbourne Café Pty Ltd [2023] VSCA 200.

DUTY OF GOOD FAITH — Franchisor and franchisee — Statutory duty of good faith — Duty of good faith implied at common law — Application of Franchising Code s 6(1) — Franchising Code does not enable a general claim of failure to act in good faith — Plaintiff did not establish defendant failed to act in good faith — Competition and Consumer Act 2010 (Cth) ss 51AE, 51ACB — Franchising Code s 6(1) — AHG WA (2015) Pty Ltd v Mercedes‑Benz Australia/Pacific Pty Ltd [2023] FCA 1022 — Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199.

CONTRACT — Damages — Breach of contract — Onus of proof — Assessment of damage — Counterfactual scenario — Whether evidentiary onus on plaintiff met — Where the plaintiff’s pleaded counterfactual case confined to an obligation that the Court found did not exist — Not a case of mere difficulty in estimating damages — Pleading fell short of what is required for a counterfactual damages contention — Plaintiff’s evidence did not extend to what would have been necessary to establish damages — Unnecessary to posit alternative contractual construction for determining damages — Unnecessary to answer common question as to damages — Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 — Berry v CCL Secure Pty Ltd (2020) 271 CLR 151 — Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 — RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd [2022] VSCA 216 — Jones v Dunkel (1959) 101 CLR 298 — Blatch v Archer (1774) 98 E.R. 969.

GROUP PROCEEDINGS — Determination of common questions.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Dr C Parkinson KC with Mr H Hill‑Smith	HWL Ebsworth Lawyers
For the Defendant	Mr J Giles SC with Mr A McRobert and Mr L Freckelton	Norton Rose Fulbright Australia

Table of Contents

Part A – Introduction and Factual Background1

Part B – Contractual Terms5

Overview5
Contractual Interpretation – Governing Principles7
Express Terms – Clause 9.1(g) and the Holden Wholesale Standards12
Plaintiff’s submissions13
Defendant’s submissions19
Analysis25

Express Dealer Agreement Clause 10.443

Analysis45

The Contra Proferentum Rule51
Implied Term – Business Efficacy52

Plaintiff’s submissions52
Defendant’s submissions60
Analysis – Implied Term – Business Efficacy65

Custom Implied Term73

Governing principles75
Evidence of Douglas Dickson76
Dealer Agreements – Industry Partipants83
Conclusion87

Part C – Breach of Contract87

Endeavour to Supply – Plaintiff’s Case88
Endeavour to Supply – Defendant’s Case92
Analysis – Breach of Contract – Endeavour to Supply98
Factual findings98
Consideration109

Part D – Good Faith121

Part E – Damages124

HER HONOUR:

PART A: INTRODUCTION AND FACTUAL BACKGROUND

Holden cars were part of the fabric of Australian society for decades. First appearing in 1908, they were manufactured in Australia until 2017. Holden branded cars were sold nationally through Holden’s network of dealers. In February 2020, General Motors Company (GMC), the ultimate parent entity of the Australian‑based Holden company, announced that it was shutting down the Holden brand and exiting the Australian market, and would do so by 2021. The decision was implemented swiftly, and by August 2020, after a wind‑down, no further new Holden cars were available to be sold in Australia. The agreements under which Holden dealers were appointed were not due to expire until the end of 2022. The dealers, who had invested heavily in their Holden dealerships, had expected business as usual until the end of the dealership term.

The plaintiff, Beecham Motors, operated a Holden dealership in Caboolture, Queensland, since 1987. The defendant (Holden)[1] entered into Dealer Agreements dated 1 January 2018 with the plaintiff and each group member, appointing them to its network of authorised dealers to sell and service new Holden branded motor vehicles and to sell authorised parts. The Agreements, which were in a standard form, were in each case for a term of five years, ending on 31 December 2022. They were franchising agreements to which the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Franchising Code) applied.
[1]The relevant Australian entity is General Motors Holden Australia NSC Ltd, which is the defendant. I shall refer to it as ‘Holden’.

Beecham Motors commenced this action as a group proceeding under Part 4A of the Supreme Court Act 1986 (Vic), on behalf of a group of Holden dealers who entered into dealer agreements with Holden commencing on 1 January 2018 for terms ending on 31 December 2022 (the Term).[2]
[2]The group is confined and comprises named entities. The represented class has been closed from the commencement of the proceeding.

The plaintiff settled its own personal claim with Holden in July 2023 but continued as plaintiff as is permitted under s 33D(2) of the Supreme Court Act 1986 (Vic). Once the plaintiff had settled its claim the remaining issues for determination were common questions of fact and law.

The plaintiff alleges that Holden promised to supply group members with new Holden branded vehicles throughout the duration of the term of Dealer Agreements, but, in breach of agreement, ceased that supply in 2020, mid‑term.

Holden is a wholly owned subsidiary of GMC. Through a number of subsidiaries GMC operates a global business which is headquartered in the United States of America and which includes manufacturing facilities.[3]
[3]I will refer to the group of companies headed by GMC, and the business conducted by that group, as ‘General Motors’.

On 26 February 2020, Holden notified its network of dealers that, based on the announcement by GMC to retire the Holden brand, it would cancel and remove any existing ‘un‑preferenced’ orders for new Holden motor vehicles in its electronic ordering system, not accept any orders for additional vehicles after close of business on 3 March 2020 and commence an equitable ‘share of build activity’ for the remaining stock and pipeline to the Holden dealer network. It implemented its actions, as announced.

By 6 March 2020, any vehicles offered to dealers in Holden’s notification to them of their ‘share of build’ but not accepted, were offered to the dealer network in a second and final round of the share of build.

In or about March 2020, the last motor vehicle under the Holden brand was manufactured.

Since 3 March 2020, group members have been unable to place purchase orders for new Holden vehicles.

On 23 April 2020, Holden told its network of dealers that it was not able to order for production any further new Holden motor vehicles and would transition to an after‑sales organisation, without the capacity to import and distribute vehicles.

Between March and August 2020, Holden ran a ‘liquidation allowance’ program, allocating all remaining stock of new Holden cars to its network of authorised dealers and ran an aggressive clearance campaign to liquidate the stock.

In around May 2020, Holden made offers of compensation to all dealers.

By August 2020, the defendant had ceased to supply any new vehicles to the plaintiff and each group member.

The closure of the Holden brand in Australia was exceedingly difficult for Holden dealers, including because of its financial impacts.

Despite the impact on dealers, on the proper construction of the Dealer Agreements, the answers to the questions for determination do not support their contractual claims.

The common questions for determination, and the answers to them, are as follows:

1.   Do the Dealer Agreements contain:
a.   the Business Efficacy Implied Term;
Answer: No.
b.   the Custom Implied Term;
Answer: No.
c.   the Implied Good Faith Term?
Answer: unnecessary to decide.

2.   In relation to the supply of new Holden brand motor vehicles or a substitute thereto, has the Defendant breached any or all of:
a.   cl 9.1(g) of the Dealer Agreements, by failing to comply with cl 7.17.14.1 of the Manual?
b.   cl 9.1(g) of the Dealer Agreements, by failing to comply with cl 7.17.14.2 of the Manual?
c.   cl 9.1(g) of the Dealer Agreements, by failing to comply with cl 7.17.14.3 of the Manual?
d.     cl 9.1(g) of the Dealer Agreements, by failing to comply with cl 7.17.14.4 of the Manual?
e.   cl 10.4(a) and (c) of the Dealer Agreements?
f.    the implied terms in question 1?
g.   the Statutory Good Faith Obligation?
Answer:
Clause 9.1(g) the Dealer Agreements and clause 7.17.14.3 of the Manual were promissory, and imposed an obligation on Holden to endeavour to supply a sufficient quantity of new Holden vehicles (as defined in that clause). It has not been established that Holden breached that obligation.
The other provisions relied upon did not impose the obligation alleged, and I have not found the implied terms. The question of breach of those terms does not arise.
The statutory good faith obligation, in the circumstances, goes no further than the contractual obligations. It has not been established that Holden breached its statutory obligation.

3. Does the force majeure clause at cl 26.9 of the Dealer Agreements relieve the Defendant from liability?
Answer: unnecessary to decide.

4.   In relation to the damages counterfactual:
a.   would the Defendant have supplied Trailblazer and Colorado vehicles to the dealership network for the balance of the Term?
b.   would the Defendant’s supply of Holden vehicles to the dealership network have been affected by manufacturing and supply chain disruptions caused by the COVID‑19 pandemic, and if so, to what extent?
c.   what volume of Holden vehicles would have been supplied to the dealership network for the balance of the Term?
d.     would GMC’s decision to retire the Holden brand at the end of the Term, and the announcement thereof, have occurred in or about February 2020 or in or about June 2022?
e.   would General Motors have ceased producing vehicles for sale in Australia around June 2022 in accordance with an intent by Holden that all remaining new Holden vehicles would be sold to end‑customers by the end of the Term?
f.    would the Defendant, pursuant to clause 19.5(b), have excluded from cancellation any order(s) for special vehicle(s) that Holden had commenced to process so as to continue to supply vehicles after the Term of the Dealer Agreements?
Answer to each question: unnecessary to decide.

PART B: CONTRACTUAL TERMS

Overview

The plaintiff said that in order to give business efficacy to the Dealer Agreement it was necessary to imply a term that the defendant would ensure the availability for supply of new Holden branded motor vehicles or a substitute thereto[4] for the Term. Substantively the same term, that the defendant was and remains obliged to ensure the availability for supply of new passenger vehicles to the plaintiff for the Term of the Agreement, was said to have been implied by reason of the custom and usage in the Australian new motor vehicle retailing industry. Recognising the fine line that may exist between contractual expression and implication, the plaintiff construed certain express terms of the Agreement to impose a substantively similar ‘supply obligation’. Separately, one express term was said to require the defendant to ‘endeavour to supply’ dealers with a sufficient quantity of new Holden branded vehicles. I will use the expression ‘supply obligation’ for convenience, without meaning to detract from the importance of the contractual language. The plaintiff also relied on the statutory good faith obligation imposed by s 6(1) of the Franchising Code. Each of the terms was alleged to have been breached by Holden ceasing to supply any new vehicles to the plaintiff and group members from August 2020 and in providing an ‘inadequate’ supply of new vehicles from early March 2020.
[4]The plaintiff did not press a case addressing the obligation to provide a substitute for Holden‑branded vehicles.

The plaintiff’s overarching case was that whether for interpretation or implication purposes, the Dealer Agreement was commercially nonsensical if Holden had no obligation to supply any Holden branded vehicles during the term. It was said that the whole point of the appointment of a dealer was the sale and service of Holden branded vehicles (to which the sale of parts and servicing of vehicles was an adjunct). Without a supply of new vehicles, the commercial purpose of the relationship expressed by the Agreement was wholly undermined. A Holden dealership was, under the Dealer Agreement, obliged to assume and did in fact assume a very significant financial burden for the sole purpose of selling and servicing new Holden branded vehicles, and without an ongoing supply of new Holden vehicles that burden was both unsustainable and commercially irrational. A dealership was required to establish and maintain a dealership premises of an approved size that was built or renovated to Holden’s specifications. These bespoke premises could not be used for another purpose without Holden’s permission and could not be cheaply or quickly converted to another economic use. The dealership could not operate another motor vehicle franchise without Holden’s permission. There were minimum staffing and staff training requirements. The benefit that dealers bargained for and in return for which they assumed those onerous obligations, was security of supply of the product that they were appointed to sell, namely Holden branded vehicles. The plaintiff emphasised the principle that a commercial contract is construed so as to avoid making commercial nonsense or working a commercial inconvenience.[5]
[5]LCA Marrickville Pty Limited v Swiss Re International SE (2022) 290 FCR 435, [57]–[60].

The defendant said that the Dealer Agreement was not (as the plaintiff contends) commercially nonsensical if Holden had no obligation to ‘ensure’ supply. They were premised on an expectation and not a promise of a mutually beneficial business relationship for the term. Each matter on which the plaintiff relies in support of its construction and implied terms is explained by an expectation (not a promise) of supply. In entering their Dealer Agreements, group members made the commercial judgment that Holden would continue to supply them with Holden vehicles during the term of their agreement, assuming and expecting that it was in Holden’s commercial interests and their own interests for that to occur. But that was not the contractual bargain that was struck. The contractual bargain did not require Holden to ensure that vehicles were available for supply throughout the term of the Agreements, when one applies the orthodox principles of contractual interpretation. Whilst an obligation on Holden to ensure a supply of vehicles would be commercially attractive to a dealer, one can immediately see that such an obligation would be a commercial anathema to Holden. It did not build cars in Australia. It was a distributor of products that had a complex supply chain. It was in no position to ensure the supply of vehicles, especially in circumstances where there was only one source of supply of Holden branded vehicles. The plaintiff’s view of business common sense just happens to coincide with its own commercial interests.[6] The defendant said that in various ways, the submissions do not engage with the actual language of the agreement.
[6]See Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280, [64]–‍[67], [84]–[95].

Contractual Interpretation – Governing Principles

The meaning of particular words in a contract must be determined in light of the context provided by the contract as a whole and the circumstances in which it was made.[7] The whole of the contract has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must, if possible, be construed so as to render them all harmonious with one another.[8] A court will strain against an interpretation that renders parts of a contract ineffective unless it is impossible to reconcile conflicting parts.[9]
[7]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 64 (Gibbs CJ) (Hospital Products).
[8]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 (Australian Broadcasting Commission).
[9]See for example, Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402, 411.

Words and expressions in a commercial contract should be given a ‘business sense’, that is, the sense which a reasonable businessperson in the context of the contract would give them.[10] What a reasonable businessperson would have understood those terms to mean requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. An appreciation of the commercial purpose and objects is facilitated by an understanding of the genesis of the transaction, the background, context and market in which the parties are operating.[11] Unless contrary intention is indicated, a court is entitled to approach the task of interpreting a commercial contract on the assumption that the parties intended to produce a commercial result. A commercial contract should therefore be construed so as to avoid making commercial nonsense or working commercial inconvenience.[12] If contractual language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable inconvenient or unjust.[13] Whilst a court should construe a commercial contract to avoid absurdity, it is not part of its role to construe an agreement that otherwise has an explicable commercial result in a manner that increases the commercial benefits to one party to the agreement.[14] It does not constitute a licence to alter the meaning of a term to achieve a result the court may think to be reasonable.[15]
[10]Bergl (Australia) Ltd v Moxon Lighterage Co Ltd (1920) 28 CLR 194, 199.
[11]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, [35] (Woodside Energy).
[12]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [46]–[51].
[13]Australian Broadcasting Commission, 109–110.
[14]Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280, 343; adopted in PCCEF Pty Ltd v Geelong Football Club Ltd [2019] VSCA 144, [55].
[15]Great Union Pty Ltd v Sportsgirl Pty Ltd [2012] VSCA 299, [32], citing Amcor Ltd v Barnes [2021] VSCA 6, [648].

A contractual term may be implied on the basis of implications contained in the express words of the contract, implications from the nature of the contract itself as expressed in the words of the contract, implications from considerations of business efficacy and implications from usage (for example, in mercantile contracts). The different forms of implication are generally understood to exist on a spectrum.[16]
[16]Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, [31] (Brambles), citing Carlton & United Breweries Ltd v Tooth & Co Ltd (1986) 7 IPR 581 at 605–60.

Textual implications from the express words and nature of the contract are the result of construing the text of the contract as a whole in accordance with ordinary principles of construction.[17] This type of implication is not subject to the five BP Refinery[18] criteria which apply where a term is implied to give business efficacy to the contract. The line between textual implication from an express term and the implication of a term under the BP Refinery principles may be a matter of impression.[19] As Edelman and Steward JJ said in Realestate.com.au Pty Ltd v Hardingham:

As to express terms, since language is imperfect, the meaning of many express terms will include implications, such as explicatures arising from the words expressed and implicatures supplementing the words expressed: “language itself could not function if it did not sit atop a vast infrastructure of tacit knowledge about the world”. Nevertheless, the term, as a whole, remains an express term: the implication, from the words in their context, is “included in and part of that which is expressed”, is “contained in the express words of the contract”, or is a necessary supplement to the words of the term.[20]

[17]Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, [28].

[18]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (BP Refinery).

[19]Realestate.com.au Pty Ltd vHardingham (2022) 406 ALR 678, [105] (Hardingham).

[20]Hardingham, [103]–[105] (citations omitted).

In H Lundbeck A/S v Sandoz Pty Ltd,[21] Edelman J said (in separate reasons concurring with the majority) that the different modes of drawing implication from express words are best understood as existing on a continuum. Where the content of an implication is properly regarded as a new and separate term, the five factors in BP Refinery must be satisfied before that term is implied.[22] His Honour relevantly said,

At one end of the continuum, an implication beyond the literal meaning of express words might be slight and in contractual interpretation the inference of that implied meaning can be readily drawn if that was the meaning that would have been intended by a reasonable person in the position of the parties. It does not matter if the inference is described as inserting new words. As Lord Eldon LC said in Wight v Dickson, “[i]t had been said that it was too strong to insert a word; but the answer was, that the other words in the [contract] could not have their proper effect without it”.
At the other end of the continuum, a contractual implication beyond the literal meaning of the express words might be large, requiring a high level of satisfaction by the court that the implication would have been intended by a reasonable person in the position of the parties. Hence, if the implication is properly characterised as a new, and separate, term of the contract, the present state of the law is that a court will require satisfaction of all five of the factors endorsed in Codelfa before the implication is recognised.’[23] (citations omitted)

[21]H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170 (Sandoz).

[22]Sandoz, [94]–[99] (Edelman J).

[23]Sandoz, [97]–[99] (Edelman J).

It is only once the express terms of a contract have been identified and interpreted, including with all the implications they contain, that the second task of identifying any implied terms is to be undertaken.[24]
[24]Hardingham, [110] (Edelman and Steward JJ), see also [74] (Gordon J).

A term may be implied to give business efficacy to a contract where the parties have failed to provide for a matter that they have not stated but are taken to have agreed would form part of the contract. A term implied in this way is implied in fact, to give effect to ‘the presumed intention of the parties to the contract in respect of a matter that they have not mentioned but on which presumably they would have agreed should be part of the contract’.[25] Five criteria must be satisfied in order to imply a term so as to give business efficacy to a contract. The term must:
[25]Breen v Williams (1996) 186 CLR 71, 102.

(a) be reasonable and equitable;

(b) be capable of clear expression;

(c) not contradict the express terms of the contract;

(d) be necessary to give business efficacy to the contract; and

(e) be so obvious that it goes without saying.[26]

[26]BP Refinery, 283; Hardingham, [18] and [113].

These criteria serve to answer the ultimate question: what would have been intended by a reasonable person in the position of the contracting parties?[27] ‘Business efficacy’ in this context has been described as commercial or practical coherence.[28]
[27]Hardingham, [115], [116] and [119].
[28]ASC AWD Shipbuilder Pty ltd v Ottoway Engineering Pty Ltd (2017) 129 SASR 122, [5].

In Grocon Constructors (Vic) Pty Ltd v Apn Df2 Project 2 Pty Ltd,[29] the Victorian Court of Appeal said that the five criteria are ‘cumulative and import different considerations’ and explained the application of the criteria as follows,[30]

In relation to the condition that an implied term “must be reasonable and equitable”, we note that the High Court has refused to imply a term that would operate in a partisan fashion. The application of the condition will often require consideration of the matrix of facts in which a contract was agreed.
The condition that an implied term ‘must be necessary to give business efficacy to the contract’ requires consideration of whether the term is necessary for the purposes of “giving to the transaction such efficacy as both parties must have intended that at all events it should have”, making the agreement work or avoiding an unworkable situation. Where the express terms of an agreement are sufficient to give it the business efficacy the parties intended it to have, it will not become necessary to imply the additional terms. However, a term may be commercially necessary, in order for the contract to be workable in a business sense, notwithstanding that it can operate without the term. In Commonwealth Bank of Australia v Barker, French CJ, Bell and Keane JJ stated that the requirement that a term implied in fact be necessary “to give business efficacy” to a contract can be regarded as a “specific application” of the criterion of necessity which also supports the implication of a term in law. They also said that “[i]mplications which might be thought reasonable are not, on that account only, necessary”’.
The condition that an implied term ‘must be so obvious that “it goes without saying”’ requires consideration of whether, at the time that the parties were making their bargain, the suggestion of insertion of the implied term into the agreement by an “officious bystander” would have been met “with a common, “Oh, of course”” from the parties.
In relation to the condition that an implied term “must be capable of clear expression”, it is worth noting the observation of Gibbs J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth that the “width and lack of precision” of a term supplied an argument against implying it. Mason J in Codelfa refused to imply a term into a contract on the basis that, had the parties explored the term at the time that they entered into the contract, negotiation about the term “might have yielded any one of a number of alternative provisions, each being regarded as a reasonable solution”. It has been observed by this court that it is elementary that a contractual party who is to be subjected to an additional obligation by reason of the implication of a term into a contract should be “left in no doubt of the extent of the obligation” and, accordingly, a term that would leave a party in a “state of speculation” as to the extent of its obligations would not be implied.
Conflation of the “reasonable and equitable” and the “necessity” conditions of the BP Test may lead a court into error. This follows from the statement at [142] above in Barker and also from Mason J’s earlier statement in Codelfa that it is not enough that it is reasonable to imply a term, it must also be necessary to do so to give business efficacy to the contract.
However, the authorities acknowledge that the conditions in the BP Test may overlap….Einstein J in New South Wales v Banabelle Electrical Pty Ltd observed that the condition that an implied term ‘must be so obvious that “it goes without saying”’ involves a consideration degree of overlap with the condition that a term “must be necessary to give “business efficacy” to a contract”.[31] (citations omitted and emphasis added)

[29]Grocon Constructors (Vic) Pty Ltd v Apn Df2 Project 2 Pty Ltd [2015] VSCA 190 (Grocon).

[30]Grocon, [140].

[31]Grocon, [141]–[146], cited to with approval in Masters Home improvement Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 190, [58] and ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd (2017) 129 SASR 122, [73].

Courts are slow to imply a term, for reasons which include not rewriting the contract for the parties.[32] The party alleging that a term should be implied bears the onus of proof.[33] The more detailed and comprehensive the contract, the less ground there is for supposing that the parties have failed to turn their minds to address the question in issue.[34]
[32]Pilbara Iron Ore Ltd v Ammon [2020] WASCA 92, [88] (Pilbara), citing Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 346 (Codelfa).
[33]Pilbara, [88], citing Heimann v Commonwealth (1938) 38 SR (NSW) 691, 695.
[34]Pilbara, [88], citing Codelfa, 346.

Express Terms – Clause 9.1(g) and the Holden Wholesale Standards

Within the context of the entire agreement, the plaintiff relied on clause 9 of the Dealer Agreement which is entitled, ‘Holden’s Obligations’. Read with the chapeau to clause 9.1, sub‑clause 9.1(g) reads,

Holden agrees to comply with Holden’s Wholesale Standards as contained in the Manual.

The ‘Manual’ was defined to mean,

the manual(s) provided by Holden[35] to the Dealer (including by online access) containing the policies, procedures and guidelines relevant to the performance of this agreement as varied by Holden from time to time.

[35]The Dealer Agreement refers throughout, to ‘Holden’, which is a reference to General Motors Holden Australia NSC Ltd, i.e. the Defendant.

Clause 7.17 of the Manual sets out the ‘Holden Wholesale Standards’. The plaintiff relies on four sub‑clauses within the Standards, as follows:

Clause 7.17.14 — Holden product and supply
7.17.14.1 Holden provides a broad range of world class products.
7.17.14.2 Holden will endeavour to distribute new vehicles among Holden dealers in a fair and equitable manner.
7.17.14.3 Holden will endeavour to supply dealers with a sufficient quantity of vehicles that will allow achievement of sales evaluation guide (SEG) or meet reasonably anticipated demand.
7.17.14.4 Holden delivers new vehicles to dealerships in a time scale which satisfies both dealers and customers subject to capacity and logistic constraints.

The plaintiff’s pleaded case in relation to the Wholesale Standards was that the defendant has failed to comply with its obligations under the Standards by failing to ensure the availability of vehicles for supply. The express terms relied upon were identified in the pleading by setting out the words of the Wholesale Standards, although the implication to be drawn from them was not. The plaintiff described this part of its case as concerned with express terms. The case was, however, more accurately described as concerned with terms implied from the language of the express terms and the nature of the Agreement.

The central dispute between the parties concerned whether those provisions of the Manual, read with clause 9.1(g) of the Agreement, were indeed contractual promises and if so, what was their proper construction. Although the common questions (formulated before trial) addressed only whether in relation to the supply of new Holden branded motor vehicles the defendant breached clause 9.1(g) by failing to comply with the relevant parts of the Manual,[36] there was no dispute that the question whether those clauses were contractual promises to ensure a supply of vehicles, was to be determined.

Plaintiff’s submissions

[36]Common questions 2(a), (b), (c), (d).

The plaintiff made the following submissions.

First, the Wholesale Standards on which the plaintiff relies are promissory.

The language of clause 9.1(g) (‘Holden agrees to comply …’) is promissory. There is no warrant for reading it down. It is true that the Manual was a 650 page document, subject to amendment from time to time, that described a variety of policies and procedures for dealers on an array of subjects. However, by clause 9.1(g) of the Dealer Agreements Holden promised to comply with the Holden Wholesale Standards which comprised only 6 pages of the 650 paged Manual. That the Standards were confined and readily identifiable is contextually and linguistically a strong indicator that when read with clause 9.1(g), they were promissory. Holden, who drafted the Dealer Agreement, elected to promise that it would comply with that one confined part of the Manual. It must be accepted that the Wholesale Standards contain some statements that are descriptive and ‘non‑promissory’. The plaintiff focuses only upon the four standards concerned with ‘Holden product and supply’, which are promissory (as discussed below). The sub‑clauses within clause 7.17.14 each contain obligations capable of breach.

The defendant’s submission that its ability to amend the Manual (under clause 26.15 of the Dealer Agreement) points against the wholesale standards being promissory, is erroneous. Properly construed, the amendment power does not apply to the Holden Wholesale Standards. Holden agreed to comply with the Wholesale Standard as contained in the Manual, as they were at the time of contracting. Having promised to comply it was not entitled to change those standards during the Term. Even if it had the power to amend the Wholesale Standards, its powers were expressly limited and was confined to the purposes identified in the clause and would be subject to the good faith obligation under the Franchising Code and the implied good faith term. The power could not be exercised to eliminate Holden’s obligations under clause 7.17.14.

Second, a supply obligation emerges from the clause 7.17.14 standards because ongoing supply by Holden is a ‘necessary supplement’ to those provisions and is implied in their express words.[37] The obligation of Holden to have new Holden vehicles available for the Term arises from the nature of the contract itself and from its words. The obligations of both parties[38] cannot operate without a supply of new Holden vehicles for the Term. Furthermore, the nature of the agreement itself being a fixed term agreement for the supply and sale of vehicles implies that there will be a supply of vehicles for the Term. The implication arises most forcefully from the objectives stated in clause 1 of the Dealer Agreement and from the appointment under clause 2.1(1) pursuant to which Holden appointed the dealership to ‘actively promote, sell and service the Products’. Textual implications arising from the express terms of a contract are the result of construing its language in accordance with the ordinary principles of construction,[39] as distinct from the implication of a term for business efficacy.[40] Doctrinally this is a form of construction, but it is recognised that in a given case the line between this type of implication and BP Refinery implication may be a matter of impression.[41]
[37]Hardingham, [103]–[105] (Edelman and Steward JJ).
[38]As more particularly set out below (see under Implied Term).
[39]Brambles Holdings Ltd v Bathurst City Council [2001] 53 NSWLR 153, [28].
[40]Boreland v Docker [2007] NSWCA 94, [100]–[111]; Rankin Investments (Qld) Pty Ltd v CMC Property Pty Ltd [2021] QCA 156, [78]–[80].
[41]Hardingham, [105] (Edelman and Steward JJ).

The sub‑clauses within clause 7.17.14 can and should be read together, coherently. The first sub‑clause within clause 7.17.14 imposed an obligation on Holden to provide a broad range of new vehicles for the Term. An available supply of new Holden branded vehicles throughout the Term of the Dealer Agreement was a necessary incident and predicate of the performance by Holden of the obligations in the remaining clauses. The second sub‑clause imposed obligations regarding how that supply of vehicles would be distributed amongst dealers. The third concerned the number of vehicles that would be supplied by Holden and the fourth concerned the timing of vehicle delivery.

It will be noticed that clause 7.17.14.3 required Holden to endeavour to supply dealers with a sufficient quantity of vehicles by two stated measures – to allow achievement of the sales evaluation guide (SEG[42]) or reasonably anticipated demand. The other clauses of the Wholesale Standards (and clause 10.4(a) of the Dealer Agreement[43]) impose on Holden an obligation to ensure the availability for supply of new Holden brand motor vehicles for the Term. As the plaintiff put it, those terms ‘say nothing about the volume that had to be supplied and how that volume related to the SEG target or reasonably anticipated demand’. Read that way, clause 7.17.14.3, which imposes an ‘endeavours’ obligation, is not inconsistent with provisions (express and implied) imposing an unqualified supply obligation.
[42]Discussed below.
[43]The implied term is relied upon in the event that an obligation to ensure the availability of supply of new vehicles throughout the Term is not found to have been expressly agreed.

Clauses 7.17.14.2 and 7.17.14.4 (addressing equitable distribution of new vehicles between dealers and ‘time scale’ for the delivery of new vehicles to dealerships) would not be capable of performance where there was a ‘permanent non‑supply of vehicles’.

Turning to the language of each sub‑clause of the relevant Wholesale Standards, clause 7.17.14.1 states that, ‘Holden provides a broad range of world class products’.

A term can contain a contractual promise or warranty even if promissory words are not used. The standard is expressed as a statement of fact but if promissory words are needed they are provided by clause 9.1(g). Complying with the standard that Holden provides a broad range of world class products means that Holden must have available for supply, a broad range of new Holden vehicles during the Term. As the plaintiff put it, this clause combined with clause 9.1(g) creates an obligation on Holden ‘for there to be Holden vehicles provided for the Term’.

Clause 7.17.14.1 is not puffery or non‑promissory but is a fundamental obligation in the section which is then expanded upon in the remaining parts of clause 7.17.14. Construing it as promissory is consistent with a commercially sensible approach to interpretation that avoids working commercial nonsense or inconvenience. If the clause is open to two constructions, one promissory and the other non‑promissory, the court should avoid a construction that permits Holden to cease supply mid‑Term which is a construction that is capricious, unreasonable, inconvenient and unjust. The expression ‘world class products’ is given content by clause 7.17.23 of the Holden Wholesale Standards. That clause (entitled ‘Product quality’) describes (albeit briefly) the standards Holden says it maintains in designing and manufacturing vehicles.

Clause 10.4(d) of the Dealer Agreement provides that, all purchase orders are subject to acceptance by Holden; Holden is not bound to accept any purchase order. On Holden’s case that that clause is inconsistent with a construction of any part of the agreement as imposing an obligation on it to ensure the availability for supply of new vehicles for the Term, is misconceived. Clause 10.4(d) is not in fact inconsistent with Holden agreeing to ensure a supply of new vehicles. Whilst Holden was not bound to accept any purchase order for a particular vehicle, it was nevertheless obliged to provide a broad range of vehicles for the Term. Under clause 10.4(d) it could refuse individual orders that it was unable to fulfil (such as an order for ‘200 pink Colorado utes’) but it was not entitled to provide no vehicles. That clause did not entitled it to retire the Holden brand mid‑Term. The same is true of clause 10.1(a), which permits Holden to ‘change the new Vehicles and Demonstrator Vehicles that the Dearer is authorised to sell at any time by reasonable prior written notice to the Dealer.’ By failing to provide a broad range of new vehicles from early 2020 or any new vehicle products from in or about August 2020 until 31 December 2022, Holden breached clause 9.1(g) of the Agreement.

Holden’s contention that construing the clause as a promise to provide a ‘broad range of world class products’ would render it a warranty which would in turn be inconsistent which clause 16.1(b) of the Agreement, should be rejected. Clause 16.1(b) provides Holden makes no express warranties to the dealer or its customers with respect to the Products or parts other than those give in clause 16. Clause 16.1(a) makes clear that the warranties the subject of clause 16 are those provided to customers and dealers. The Agreement is referring to repair warranties for individual vehicles.

Clause 7.17.14.2 provides that ‘Holden will endeavour to distribute New Vehicles among Holden dealers in a fair and equitable manner’. ‘New Vehicles’ picks up the expression as defined in the particular terms of the Dealer Agreement, which refers to those vehicles that Holden provides or says that the dealer will be buying from it. The clause necessarily contemplates that there will be a distribution of new vehicles for the duration of the Term; that Holden has new vehicles to distribute. This is a term implied by the express words of the contract.

Clause 7.17.14.3 provides that, ‘Holden will endeavour to supply dealers with a sufficient quantity of vehicles that will allow achievement of Sales Evaluation Guide (SEG) or meet reasonably anticipated demand’. The context for this standard is given by clause 13.1 of the Dealer Agreement by which the dealer was required to comply with the ‘performance criteria’ set out in the Manual. Clause 13.1 provides that,

Holden will establish SEG Objectives for the Dealer collectively or by model in relation to the dealer’s expected sales performance. Holden may change the SEG Objectives at any time following consultation with the Dealer where in the Dealers’ view the Dealer’s market circumstances support a bona fide cause of change to the SEG Objectives.

The SEG Objectives were elaborated upon in the Manual which described in detail how the objectives and other metrics were set. The SEG was expressed as single numerical value for each dealership, broken down into ‘carlines’ (e.g., Astra, Trailblazer) or model types (e.g., SUV, passenger). It was set by vehicle model in relation to each dealer’s expected sales performance and calculated using a weighted index of market data and sales data.[44] The SEG formed part of the performance criteria against which the dealer’s performance was evaluated. The dealer was obliged, by clause 13 of the Agreement, to operate the dealership business to meet or exceed the performance criteria for specified items including ‘promoting and selling the Products and Parts’. It was agreed that Holden would periodically evaluate the dealer’s performance, providing yearly performance reports, and that performance criteria failure[45] identified by Holden constitutes a breach of the Agreement. Under the Agreement the dealer acknowledged[46] that its compliance was fundamental to the agreement. For context, the plaintiff tendered examples of the notices given to it specifying its own yearly SEG Objectives. The 2017 notice explained that,

Holden establishes SEG’s by model to set a base line for performance expectations, with the total and carline SEG’s based on Holden 2017 forecast sales volumes. Individual Dealer SEG’s represent a fair share of the total National SEG and are calculated for your area of primary responsibility (“APR”) based on industry registrations and Dealer sales data over the prior 2 years and nine months to smooth out fluctuations and ensure a more accurate and relevant calculation.

[44]Manual, clause 2.7.2.

[45]To which notice, discussion and rectification provisions applied.

[46]Dealer Agreement clause 13.3.

As to the ‘endeavours’ obligation, although the parties did not use the words of ‘reasonable endeavours’ or ‘best endeavours’, the Court should conclude that the word ‘endeavour’ imposed a best endeavours or alternatively a reasonable endeavours obligation. The obligation is more extensive than Holden submits. It required Holden to ‘resolve conflicts between the obligation to use reasonable endeavours and its own business interests, by the standard of reasonableness’.[47] The nature and extent of the obligation depends upon the contract in question. The nature, capacity, qualifications and responsibilities of the person upon whom the obligation is imposed, viewed in light of the contract are factors to be taken into account in measuring the standard of endeavour required.[48] In circumstances where GMC was Holden’s ultimate parent the endeavours obligation would have required Holden to endeavour to supply sufficient vehicles to meet reasonably anticipated demand.
[47]Tyro Payments Ltd v Kounta Pty Ltd [2023] NSWSC 1384; plaintiff’s reply submissions [6].
[48]Re Iceland Cold Storage Australia Pty Ltd [2023] VSC 206, [156]; Ha Tinh Pty Ltd v Chin Yin Pty Ltd [2022] QSC 282, [85].

If sub‑clauses 7.17.14.1, 7.17.14..4 (or, as discussed below, clause 10.4(a) of the Dealer Agreement) promised an available supply of vehicles throughout the Term, practically speaking there would be no need to consider whether Holden failed to endeavour to meet the clause 7.17.14.3 obligation.

Holden contends that any obligation in clause 7.17.14.3 could be rendered nugatory by Holden reducing or setting the targets to nil, which is said to indicate that the clause was non‑promissory. That contention disregards the second limb of clause 7.17.14.3 which refers to ‘reasonably anticipated demand’. The obligation could not be satisfied by Holden setting a nil SEG target or endeavouring to supply fewer vehicles than reasonably anticipated demand irrespective of the SEG targets.

Clause 7.17.14.4 provides that ‘Holden delivers New Vehicles to dealership in a time scale which satisfies both dealers and customers subject to capacity and logistic constraints’. The clause necessarily requires that there be new vehicles available for supply. It would not be commercially sensible to construe ‘capacity and logistics constraints’ as including a commercial decision by GMC to cease vehicle supply to Holden.

Defendant’s submissions

The defendant made the following submissions.

Whether a requirement for performance is promissory must be ascertained from the intention of the parties assessed objectively and gained from an examination of the language used.[49] It is an available construction that the words in clause 9.1(g) (‘Holden agrees to comply with ..’) are promissory. As a matter of grammar and from the words used, the expression ‘agrees to comply’ can be and usually is, construed as a promise. However, the words can also be read, grammatically, as a statement of intent or expectation. The latter is the better view in this case.
[49]Re Association for Visual Impairment The Homeless and The Destitute Inc. (in liquidation) [2013] VSC 673, [22].

In this case, that with which Holden agrees to comply ‑ the Wholesale Standards – comprise Part 7.17 of the Manual extending over 70 paragraphs which contain a mixture of statements, some of which are highly aspirational. Some sentences refer to present fact and some to past fact. Some are descriptive and express a statement of believed fact. In some cases the language is capable of being understood as promissory but when one construes it in context it is more sensibly a statement of fact or intention than an enforceable promise (for example, ‘Holden’s team will return calls within 24 hours’). Where there is a constructional choice as to whether a statement is promissory or not the inchoate nature of what is being said tends against it being promissory.

The contractual statement that Holden agrees to ‘comply with’ the Wholesale Standards means that Holden will strive to or aspire to meet those standards. Clause 9.1(g) is a statement of intention or expectation rather than a promise to do something. That interpretation is derived from a combination of the language of the clause and the particular content of the standards. That characterisation can and should be applied to whole of the Wholesale Standards. The plaintiff has selected only four paragraphs of the standards but cl 9.1(g) applies to the whole of the Standards. One thus looks to the whole of the Standards in ascertaining their status and whether a reasonable business person would have understood them to constitute a binding promise by Holden or as standards or aspirations that Holden would strive to achieve.

In the alternative, the agreement by clause 9.1(g) is in its effect, an agreement to comply with those parts of the Standards that are promissory and not merely aspirational or in the nature of a recitals of fact. The defendant accepts that each construction is available, but says the first should be preferred, noting that the second construction provides it with more support when it comes to the implied term on the question of inconsistency.

That the expression ‘agrees to comply with’ should be read as a statement of intent or expectation is supported by the use of like expressions in other parts of the Dealer Agreement. For example the words ‘agrees that’ are often used in the Dealer Agreement as words of acknowledgement — clauses 7.3(a), 17.5(a), 22(d) and 22(f).[50]
[50]The dealer agrees that Holden has the right to give directions to the dealer in respect of certain matters; the dealer acknowledges that clause 17.5(a) is a fundamental term of the agreement and will constitute grounds for termination; the dealer acknowledges that Holden is entitled to a period of time to consider any request for assignment and that the conditions and other requirements specified by Holden in the Manual are without limitation to certain rights of Holden.

Concentrating on clauses 9.1 and 9.2, the same words ‘agrees to comply with’ are used in sub‑clause 9.1(h) by which Holden agrees to comply with all applicable laws, regulations and codes. If the expression were construed as promissory in clause 9.1(h), its breach would entitle a dealer to damages. Holden’s compliance with many applicable laws would have little if any impact on the dealer for example council by‑laws, traffic laws and employment laws. Clause 9.1(h) is unlikely to be promissory. Further, where clauses 9.1 and 9.2 contain a contractual promise by Holden that obligation is usually qualified, for example clause 9.1(a) provides that Holden agrees to provide the dealer with such technical product, marketing and like information that it considers necessary to assist the dealer. Other commitments are limited by best endeavours or Holden’s business judgment. There are no such words of limitation in clause 9.1(g). If it were intended to make compliance with the Wholesale Standards obligatory one would expect to see some words of limitation. That is particularly so when the Wholesale Standards contain over 70 numbered paragraphs much of which are expressed in imprecise and non‑imperative language.

As to the word, ‘standards’, for constructional purposes it is, by itself, neutral. The construction exercise is informed by the content of the Standards.

The Wholesale Standards begin with clauses 7.17.1 and 7.17.2. which state,

7.17.1 Holden embraces the Holden Wholesale Standards and develops a culture where all personnel strive to work with and fully support our dealers to deliver vehicles and experiences that inspire passion and loyalty to create customers for life. We are committed to work with our Holden dealers to build Australia’s best network.
7.17.2 Standards Measurement and Reporting.
7.17.2.1 Holden and dealers develop and maintain a process that measures performance relative to Dealer and Wholesaler Standards and communicates results to Holden and dealers.
7.17.2.2 Holden and dealers develop and maintain a process to provide assistance where necessary to enable dealers and Holden to maximise performance and Standards.

The Wholesale Standards are thus standards that Holden is to strive or aspire to in seeking to maximise performance. It is clear from those paragraphs that the Standards do not have the status of a contractual promise, breach of which would entitle a dealer to at least bring a claim for damages. What is required is Holden’s performance ‘relative to’ those standards and that the results of its performance will be considered in developing processes to ‘maximise performance’.

Much of the Wholesale Standards are expressed in language which is non‑imperative. By way of example:

7.17.4.1a: “Holden provides dealers with a trained, competent and enthusiastic field support team …”;
7.15.5.1a: “All dealer enquiries are attended to, with all telephone calls and correspondence being answered in a prompt and courteous manner”;
7.17.7.1: “Holden enables the effectiveness and efficiency of the dealer network, leveraging global processes, standards and best practices underpinned by global communications systems that are made to dealers via Global Connect”;
7.17.8: “Holden Corporate Affairs Department is active in promoting our business interests and works in synergy with Sales and Marketing Department to enhance The Holden Brand Image and relevant Brand Values”.

The fact that the Wholesale Standards contain aspirational statements that are expressed in different language to the promissory obligations contained in the Dealer Agreement itself, supports a non‑promissory construction. One example is clause 7.17.13.1 which states that ‘Holden provides industry competitive warranties on new Holden vehicle and parts’, which may be contrasted with clause 16.1 of the Agreement which provides that Holden makes no express warranties including to the dealer’s customers with respect to the products or parts, other than those described in clause 16.

All four paragraphs of the standards on which the plaintiff relies are aspirational statements, expressed in ‘non‑imperative’ language.

Clause 7.17.14.1 is a statement that describes Holden’s business. It is not a promissory statement. It is expressed in non‑imperative language. It does not say, ‘shall’, ‘will’ or ‘must’ either with the active or passive voice.[51] It cannot be read as a warranty in light of clause 16.1(b) of the Dealer Agreement. The plaintiff does not explain how that clause can impose a freestanding contractual promise of supply when it is clause 7.17.14.3 that actually refers to ‘supply’. Furthermore, an attempt to construe that clause by implication as conferring an obligation to supply new vehicles throughout the Term, encounters some of the same difficulties as discussed in connection with the proposed implied term: its content is vague and it is inconsistent with express terms in the Dealer Agreement including clause 10.4(d).[52]
[51]See New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd (2019) 135 SASR 469, [94]–‍[95]; McTier v Haupt [1992] 1 VR 653, 658.
[52]Those arguments are discussed under Implied Term below.

Clause 7.17.14.2 is expressed in ‘more promissory’ language than clauses 14.1 and 14.4 (it uses the expression, ‘Holden will’). However, the Dealer Agreement includes a promise concerning equitable distribution of new vehicles between dealers that is subject to express carve‑outs.[53] That tends against those being promissory in that there is an existing promise in the Dealer Agreement with carve outs. A contract may contain redundancy but as a matter of construction it is improbable. The clause concerns the equitable distribution of new vehicles between dealers inter‑se and is addressed to the distribution of such vehicles that Holden supplies to dealers. It is not itself a promise of supply. The implication of a requirement of supply does not arise from the language of the provision. The issue of supply is addressed in clause 7.17.14.3. Like the previous clause, attempting to construe the clause in that way encounters the difficulty that the obligation to supply is vague in content and inconsistent with express terms in the Dealer Agreement. Holden fulfilled the obligation in circumstances where it became unable to source new Holden vehicles, where the clause was concerned with the equitable distribution of new vehicles between dealers and did not impose a broader obligation to endeavour to distribute new vehicles.
[53]Dealer Agreement clause 10.2 provides ‘subject to clause 19.3, Holden may determine and may change in what Holden considers a fair and equitable manner: (a) the allocation between dealers of New Vehicles ordered and the relative priority of their allocation between dealers and will provide to the Dealer an explanation of the method used; (b) the source plant for New Vehicles ordered; and (c) the method of delivery of New Vehicles to the Dealership Premises or any alternate delivery destination. (Clause 19.3 applies only where Holden has a right to give notice of termination of the Agreement).

Clause 7.17.14.3 is grammatically capable of being a promise and also grammatically capable of being a statement of intent. The language of endeavours supports the construction that the standards are something that Holden would strive towards.

Further, it was Holden who set the SEG targets. The starting point for the calculation of the SEG was Holden’s own budgeted sales for the relevant year. In effect, a dealer’s SEG was its share of the nationwide number of vehicles that Holden had budgeted to sell in the year. Any obligation imposed by that clause to endeavour to supply dealers with the relevant quantity of vehicles could be rendered nugatory by Holden reducing or setting SEG targets to zero which it would reasonably be entitled to do in circumstances where GMC had decided to retire the Holden brand in Australia and New Zealand. That it could do so indicates that the statement that Holden would make endeavours was not truly promissory. It was an illusory promise because performance was at the promisor’s choice. Promissory language reserving an option as to the performance does not create a contract.[54]
[54]Anglican Development Fund Diocese of Bathurst v Palmer (2015) 336 ALR 372, [348] citing Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353, 356.

The expression ‘Holden will endeavour to’ stands in contrast to the terms ‘best endeavours’ and ‘best efforts’ used in the Dealer Agreement itself. The ‘endeavour to supply’ obligation (if it is promissory) carries a constructional difficulty. There may be a difference between a best endeavours obligation and reasonable endeavours obligation; the extent and basis for the difference is in some respects hard to identify on the reasoning in the authorities. The Dealer Agreement includes reasonable endeavours obligations. Textually, ‘endeavours’ should suggest something less than reasonable endeavours. The defendant’s Senior Counsel accepted that it was difficult to contend that if a promise was to make endeavours, such a promise would not encompass some degree of reasonableness, saying that perhaps there was a graduation of degree. Otherwise, Holden submitted that if a contractual promise is made by this paragraph the standard of performance is meagre.

Clause 14.4 is not grammatically expressed as a promise. Like clause 7.17.14.1, it is in the form of a statement, and it should be read as a statement of fact. It is aspirational because it is subject to capacity and logistics constraints. More fundamentally, it is concerned with the timeframe for the delivery of vehicles that Holden will supply to dealers. It is not a promise of supply. The implication of a requirement of supply does not arise from the language of the provision. Attempting to construe the clause in that way encounters the difficulty that the obligation to supply is vague in content and inconsistent with express terms in the Dealer Agreement.

Separately, a promise which is not truly promissory such as one which is made to perform wholly at the promisor’s choice is not binding and is illusory.[55] Holden was entitled to unilaterally modify or vary the Wholesale Standards from time to time (Dealer Agreement clause 26.15). Its power to do so also speaks against them being promissory.

Analysis

[55]Great Union Pty Ltd v Sportsgirl Pty Ltd [2021] VSCA 299, [32], citing Amcor Ltd v Barnes [2021] VSCA 6, [648]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, [98]; SAS (Vic) Pty Ltd v UrbanEcological Systems Ltd [2021] VSCA 335, [66].

The constructional question is whether by the clauses in issue the parties intended that Holden was obliged to the thing alleged (ensure a supply of new vehicles for the Term), which if not done, would expose it to damages.

A document said to embody a contract or agreement might contain some parts that are promissory, meaning that they impose an obligation of performance capable of breach, while other parts cannot be so construed. To be binding ‘a promise must commit the promisor to a future course of action sufficiently certain to be enforceable.’[56] The expression, ‘Holden agrees to comply’ within clause 9.1(g) is on its face, a promise by Holden that it will comply with the Wholesale Standards. Such language is commonly read as promissory, as the defendant accepted. It does not bespeak mere intent or aspiration. It may be distinguished from the words, ‘agrees that’ which appear elsewhere in the Agreement, as words of acknowledgement.[57]
[56]Anglican Development Fund Diocese of Bathurst v Palmer & Ors (2015) 336 ALR 372, [348].
[57]See clauses 7.3(a), 22(f).

What it means to comply with a standard will depend upon the nature of the standard in question. Some ‘standards’ might be capable of clear and certain satisfaction such that compliance with the standard can be objectively ascertained. The content of other standards might be inchoate or vague, such that an agreement to comply with the standard is not a commitment to a sufficiently certain course of action. Asking in the abstract whether an agreement to comply with a standard is likely to have been intended as promissory, does not greatly assist. As the defendant accepted, the word ‘standard’ by itself is neutral. Plainly enough, an agreement to comply with a standard that itself provides that a party will do something, may be read as a promise by the party to do the thing in question. In this case, any impediment to the conclusion that a particular part of the Wholesale Standards is promissory, arises from the content of the standard rather than from the contractual statement that ‘Holden agrees to comply with the Wholesale Standards’.

The Wholesale Standards are a sub‑chapter within the Holden Dealer Policies and Procedures Manual,[58] comprising six pages. They commence with an introductory paragraph followed by 28 paragraphs each addressing its own topic or subject matter, with most containing sub‑paragraphs. The paragraph in issue in is entitled, ‘Holden Product and Supply’. The Wholesale Standards contain statements of differing kinds. Many statements are expressed very generally and in the passive and are best characterised as descriptive of Holden’s business: for example, ‘Holden implements standards for dealer communication and feedback systems’; ‘Holden supports dealers with a field support and business planning team including dedicated resources to answer queries, prepare annual business plans and budgets, and to give technical and non‑technical training to staff’. Some are best described as stating Holden’s values in respect of its Dealer network and retail business: for example, ‘Holden maintains its brand image and promotes its business interests through its public relations department and adheres to its trademark policy’; ‘Holden and its dealers work together and execute new vehicles sales and marketing strategies which achieve market share objectives’). Statements of that kind are, to adopt the defendant’s language, descriptive statements of believed or asserted fact.
[58]They form a sub‑part of the Retail Standards.

The defendant’s contention that clause 9.1(g) is a statement of intention or expectation rather than a promise to do something, was (as the defendant accepted) derived from a combination of the language of the clause and the particular content of the Standards. Accordingly, to the extent that that interpretation was applied to the whole of the Standards, it rested on an assumption as a whole, the Standards were expressed in aspirational, descriptive, or otherwise non‑promissory language. To make that assumption good it would be necessary to have regard to every part of the Standards, or to conclude that a construction that some parts of the Standards could be read as promissory while others were not read that way, was for some reason unsound. The latter proposition was not made, and if it was intended to be made it was not established. That being so, the correct position is that the contractual statement in clause 9.1(g), when read with a particular part of the Wholesale Standards, might be properly construed as promissory, and when read with other parts, might be properly construed as non‑promissory. The content of the relevant of the part of the Standards will determine whether the promisor is committed to a future course of action that is sufficiently certain to be enforceable. Subject to the further considerations below, I accept the defendant’s alternative construction, namely that clause 9.1(g) is in its effect, an agreement to comply with those parts of the Standards that are promissory in content and not merely aspirational or in the nature of a recitals of fact.

The defendant said that the first two paragraphs of the Wholesale Standards supported its global characterisation of the Standards as merely aspirational. Clause 7.17.1 provides,

7.17.1 Holden embraces the Holden Wholesale Standards and develops a culture where all personnel strive to work with and fully support our dealers to deliver vehicles and experiences that inspire passion and loyalty to create customers for life. We are committed to work with our Holden dealers to build Australia’s best network. This is out service commitment to our Holden dealer network.

I accept that the language of ‘embracing’ the Standards and developing a culture is aspirational. However, the interpretation must account for the language of clause 9.1(g), which states an agreement to comply with the Standards, whose contents are contained in clauses 7.17.2 to 7.17.28. The descriptive language of clause 7.17.1 does not by itself require the agreement to comply in clause 9.1(g) to read as a mere statement of intent. It is necessary to have regard to the content of the Standards themselves, to take the analysis further.

Clause 7.17.2 provides,

7.17.2 Standards Measurement and Reporting
7.17.2.1 Holden and dealers develop and maintain a process that measures performance relative to Dealer and Wholesale Standards and communicates results to Holden and dealers.
7.17.2.2 Holden and dealers develop and maintain a process to provide assistance where necessary to enable dealers and Holden to maximise performance and Standards.

The substance of these clauses is that the performance of dealers on the one hand and Holden on the other, is measured against the Dealer Standards and the Wholesale Standards respectively. The expression ‘relative to’ does not of itself convey that compliance with the standards is satisfied by mere aspiration, or that in this context, clause 9.1(g) was intended as a statement of ‘expectation’. Nor does the fact that sub‑clause 7.17.2, refers to ‘maximising’ performance and Standards. How the measurement or ‘maximisation’ of performance may occur depends on the content of the standard in question. It is relevant to the construction exercise that although clause 7.17.2 is contained within part 7.17 of the Manual (the Wholesale Standards) it applies to both dealers and to Holden. The Manual contains prescriptive standards for dealers, including its dealer operating standards in chapter 2, and its retail standards in chapter 7. The provision in clause 7.17.2 for measurement of performance was not said to indicate that the standards applicable to dealers were not obligatory. Clause 7.17.2 should be read as applying the same way to the Standards applicable to dealers and to Holden. The evident purpose of the clause is to provide that Holden and dealers maintain processes for measuring their respective performances.

Turning to the Agreement itself, clause 9 commences with the words, ‘Holden agrees to …’. The sub‑clauses that follow commence with or include a variety of verbs: provide, consult, inform, use its best endeavours to ensure, and ‘comply with’. The expression ‘comply with’ appears in sub‑clauses 9.1(g) and (h). I do not accept the submission that because it might be hard to conclude that clause 9.1(h) is promissory, that the same conclusion must apply to sub‑clause 9.1(g). An agreement to comply with relevant laws, code and guidelines might be unenforceable for a number of reasons but that is not because the language ‘comply with’ requires that conclusion. Whether by clause 9.1(g) Holden made a binding promise is to be determined by the language of that clause read in combination with the content of the Standards.

I reject the remaining submission addressed to clause 9, which was that where it contains a contractual promise by Holden the obligation is usually qualified, there are no such words of limitation in clause 9.1(g) and so if it were intended to make compliance with the Wholesale Standards obligatory one would expect to see some words of limitation. First, not all other promises contained within clause 9 are conditioned.[59] Second, the sub‑clauses within clause 9 address diverse subject matter and should be construed on their terms. Third, the logic that Holden cannot have made an unqualified promise to do something because its promises were usually qualified, rests on an impermissible, a‑priori assumption about what Holden would have been prepared to agree and requires a reading down of the words of the provision, on that assumption. The absence of a qualification in one clause where it is present in others, rather suggests that the absence is a deliberate choice.
[59]See sub‑clauses 9.2(c) and (e), 9.1(b)(ii).

The defendant submitted that Holden was entitled to unilaterally modify the Wholesale Standards under clause 26.25 and its ability to do so speaks against an intention that they be promissory. The plaintiff said that having promised to comply with the Wholesale Standards as they were at the time of contracting, Holden was not entitled to amend them during the Term, and even if it were so entitled, its power to amend was confined. Speaking generally, the ability of a party to modify a standard (or rule or other undertaking) with which it has agreed to comply might be capable of rendering the agreement to comply discretionary (in the sense that the power to modify could be used to nullify the obligation or otherwise) and thus render the promise illusory. However, the question is what the parties to the particular contract intended, determined objectively. In this case it is necessary to determine the proper relationship between the ‘agreement to comply’ with the Standards and the presence of a power to amend the Standards under a broad power to amend the Manual, in the context of the Agreement as a whole.

Clause 26.15 confers a broad power on Holden to ‘unilaterally’ modify the Manual from time to time during the Term. The power to amend was to be exercised for the purposes set out in the clause (‘in order to’ do those things), which are themselves broadly defined. Although sub‑clause 26.15(a)(ii) refers to the amendment of the Manual in accordance with the ‘requirements of Holden in respect of its authorised network of dealers’, given the breadth of the clause as a whole, the provision should be read as encompassing modification to any part of the Manual including the Wholesale Standards, unless the Agreement otherwise provides. [60]
[60]In respect of dealers, Holden was expressly permitted by clause 13.1 to modify the performance criteria specified in the Manual, save that the SEG Objectives would only be modified in accordance with the criteria in clause 13.1(c).

The plaintiff’s construction reads down the power to modify in favour of the agreement to comply, concluding the parties as having agreed in effect to fix the Standards at a point in time, for the Term. The defendant’s construction renders the agreement to comply, illusory.

Courts should strive to construe contracts to as to render their provisions harmonious with one another, straining against an interpretation that renders parts of a contract that ineffective unless it is possible to reconcile conflicting parts.[61]
[61]See the principles set out earlier.

It is relevant to the constructional exercise that under the Agreement each of Holden and the dealer agreed to comply with relevant parts of the Manual. By clause 9.1(g) Holden agreed to comply with the Wholesale Standards contained in the Manual. By clauses 8.1 and 8.4(a) the dealer agreed to comply with ‘the standards, procedures and guidelines contained in the Manual’ including those relating to the Holden Retail Standards, the Dealer Operating Standards, the sale and service of the Products, accounting and reporting, the preparation of business plans, marketing, customer experience and customer complaints. Several other significant obligations imposed on the Dealer were defined by reference to the Manual, including the obligation to operate the Holden Dealership premises to meet or exceed the performance criteria specified in the Manual (clause 13.1), to establish and maintain dealership premises in accordance with the Manual (clause 7.1(a)) and to place purchase orders with Holden for new vehicles in accordance with the Manual (clause 10.4(a)). The power reposed in Holden to modify the Manual applied to the whole of the Manual, meaning those parts of the Manual that, when read with the Agreement imposed or defined obligations on each party.

A reasonable business person would understand that although the Manual was susceptible to change from time to time at Holden’s instance, both parties had bound themselves to comply with the relevant parts of the Manual as in force from time to time. The dealer intended to bind itself to comply with those parts of the Manual that applied to it as in force from time to time, and Holden intended to bind itself to comply with those parts of the Manual that applied to it, as called out in the Agreement.[62]
[62]As discussed earlier, the performance obligations were subject to the content of the relevant Standards. In the sense discussed, the promise was to comply with the parts that were promissory and not mere statements of fact or aspiration.

That construction does not require the unqualified language of clause 9.1(g) to be read as requiring only a wholly discretionary performance on the basis of the indirect effect of clause 26.15, as the defendant proposes. It does not require clause 26.15 to be read down as the plaintiff proposes. It reads the agreement to comply with the relevant parts of the Manual the same way for both parties. Doing so is consistent with the parties’ stated joint commercial objectives to establish a mutually beneficial business relationship for the Term that the parties said would include the provision to the dealer with a high quality range of motor vehicles and access to best practice commercial and market plans, and the expectation by Holden that the dealer would do the things stated in relation to the dealership business and the marketing of Holden’s vehicles.[63] Those benefits said to accrue to the dealer (the provision of vehicles, and commercial and marketing plans) were the subject of the Wholesale Standards,[64] and those things that Holden expected of the dealer were the subject of the Standards within the Manual applicable to the dealer. Had the parties intended Holden’s agreement to comply with the Standards to be discretionary, they could have said so explicitly. In the circumstances it is improbable that they did so indirectly. That a standard (or other undertaking) with which a party has agreed to comply may change from time to time during the term of the relevant agreement, does not mean it is inherently uncertain. It is evident from the prominence of the Manual in the definition of several substantive parts of the Agreement that the parties, objectively, did not regard the obligations imposed by reference to the Manual as uncertain because they could change from time to time. For these reasons, a reasonable businessperson would not conclude that by the conferral on Holden of a power to modify the Manual and thus the Wholesale Standards, the parties agreed that Holden’s obligation to comply with the Standards was discretionary or otherwise non‑binding.
[63]Agreement clause 1.
[64]Wholesale Standards clauses 7.17.14 (vehicles), 7.17–4; 7.17.8–12; 7.17.16–17 (commercial and marketing plans).

The result of this excursus is that there is no reason to construe clause 9.1(g) and the whole (meaning every part of) the Wholesale Standards as non‑promissory, and to describe clause 9.1(g) as limited generally, to a statement of intention or expectation rather than a promise to do something. The result is to return to the defendant’s alternative proposition that some of the Wholesale Standards, read with clause 9.1(g), may be promissory, depending upon their content. In substance the plaintiff accepted that proposition.

Wholesale Standards Clause 7.17.14.1

The plaintiff read clause 9.1(g) and sub‑clause 7.17.14.1 of the Wholesale Standards as imposing an obligation on Holden to supply new vehicles and submitted that compliance with that clause required that ‘Holden must have available for supply, a broad range of new Holden vehicles during the Term.’ That interpretation was expressed in substantially the same terms as the alleged implied term, that ‘Holden would ensure the availability for supply of new Holden branded motor vehicles for the Term.’

The clause is expressed in non‑imperative language. It does not say, ‘shall, ‘will’ or ‘must’, either with the active or passive voice. While expressly promissory language will not always be required, when contracting parties adopt passive language it may contra‑indicate an intention to making a binding promise.[65] In this case, taken together with the otherwise non‑specific language of the clause, it tends against the conclusion that the parties intended the statement to be promissory. The plaintiff said that the expression, ‘world class products’ is given content by clause 7.17.23 of the Holden Wholesale Standards, which meant that the sub‑clause should not be taken as puffery. Clause 7.17.23 (comprising four short paragraphs) refers to Holden’s Quality Management System, its ‘GM 4‑Phase Vehicle Development Process’ and ‘GM Holden Continuous Improvement Process’. It states that Holden vehicles and components are engineered and manufactured in compliance with GM Holden Quality Standards and that Holden will acknowledge, investigate and resolve all product problems promptly and effectively. There is nothing about that part of the Standards that suggests that sub‑clause 7.17.14.3 is addressed to a supply obligation. If anything, it draws attention to the quality or attributes of that which Holden provides.
[65]See for example, New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd (2019) 135 SASR 469, [94]–[95].

The plaintiff’s case implicitly accepted (as it must) that the taking of such steps that a reasonable person would take to achieve the contractual objective, does not require engaging in what would amount to a futile exercise. Doing what is reasonable does not require doing that which is not objectively likely to achieve the intended object.[129] The endeavours obligation must take its content from that which can be done, reasonably. The question whether the steps that it is said the obligor ought to have taken would have ‘made a difference’, is not (as the plaintiff suggested in parts of its submissions) an impermissible causation analysis. It is addressed to whether acting as a reasonable person would act, required acting in the way alleged.
[129]Re Iceland Cold Storage Australia Pty Ltd [2023] VSC 206, [180]; Altis PropCo2 Pty Ltd v Major Bay Development Pty Ltd [2022] NSWSC 403, [104]; Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135, 150–2.

In HQ Café Pty Ltd v Melbourne Café Pty Ltd, the Court of Appeal summarised the relevant principles governing proof and inferential reasoning in this way:[130]

… [T]he burden of proof will be discharged ‘by adducing evidence of some fact the existence of which, in the absence of further evidence, is sufficient to justify the drawing of an inference that it is more likely than not that the event occurred or that the state affairs exists’. This process of inferential reasoning is informed by the fundamental principle established in Blatch v Archer that ‘all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted’.
In Ho v Powell, the New South Wales Court of Appeal explained the operation of the principle in Blatch v Archer where there is only limited evidence available:
[I]n deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision …
In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so.
Indeed, there may be cases where the facts required to be proven by the plaintiff are peculiarly within the knowledge of the defendant. In such a case, ‘if the plaintiff provides sufficient evidence from which the matter may be inferred, the defendant then comes under an evidential burden’. In other words, ‘slight evidence of that fact may suffice to prove the fact unless that evidence is explained away by the party with the knowledge of the fact’.

[130]HQ Café Pty Ltd v Melbourne Café Pty Ltd [2023] VSCA 200, [168]–[171], citations omitted.

Slight evidence of a fact in issue may suffice, particularly where that evidence is not contradicted by the party who is in a position to contradict it but chooses not to do so. But a party on whom the legal burden of proof rests, must nevertheless adduce sufficient evidence of the facts alleged. The fact that a witness has not been called cannot ‘gap fill’, converting suspicion to inference.[131] ‘Where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence, is properly to be taken into account as a circumstance in favour of drawing an inference.’[132]
[131]Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13, [1993]; Jones v Dunkel (1959) 101 CLR 298, 313 (Menzies J).
[132]Jones v Dunkel (1959) 101 CLR 298, 312 (Menzies J).

The plaintiff bore the onus of establishing by sufficient evidence that what it alleged the defendant ought to have done, was required of a reasonable person in the circumstances. It did not discharge that burden by merely asserting that attempts by Holden to persuade GMC to defer or change its decision might have made a difference, and that the only evidence about that issue could come from decision makers within GMC or from Holden’s Kristian Acquilina. The plaintiff did not discharge its burden of proof by adducing evidence of some fact the existence of which, in the absence of further evidence, was sufficient to justify the inference that it was more likely than not that entreaties by Holden would have ‘made a difference’ (being objectively likely to achieve the continuation of a supply of vehicles to meet the business as usual requirements under the Dealer Agreements). It did not shift the evidential burden of proof to the defendant. There is also considerable force in the defendant’s submission that it was not called on to answer the case that it breached its endeavour to supply obligation, by failing to make entreaties to GMC. That case was not pleaded. That is a matter to be taken into account when assessing the inferences that may properly be drawn from the available evidence.

To summarise without repeating the factual findings set out earlier,

(a) GMC decided to exit its retail operations in Australia. It was the owner of the Holden brand, the parent entity of entities contracted to supply vehicles to Holden. Unsurprisingly, Holden did not seek to challenge in this proceeding, GMC’s entitlement to make the decision it made.

(b) According to its briefing materials GMC made that decision after an extensive assessment of the levels of investment required for the Holden brand to be competitive and sustainable for the long term and after reviewing all realistic options. Its assessment was that the investment case for Holden could not generate sufficient returns. What GMC said about its decision was consistent with the evidence about the years‑long decline of Holden’s market share and the broad and deep decline in its forecast sales, despite an extensive program, supported by GMC, to reinvigorate the brand and Holden’s market position.

(c) GMC said in its briefing materials to the Holden directors, that it had made the exit decision having regard to its global investment priorities and criteria for return on investment. It is not in any way inherently improbable that it did so.

(d) At the same time as deciding to exit the Australian market, GMC sold its Rayong manufacturing plant in Thailand, where Holden’s two most important vehicles were manufactured. In the announcement of the Australia‑New Zealand exit decision, GMC said that it had signed a binding terms sheet with Great Wall Motors to purchase the facility. GMC’s statement that the Thai facility was unsustainable because of low plant utilisation and forecast volumes was consistent with the evidence given about the Thai plant. It is unnecessary to address the counterfactual question (arising on the plaintiff’s damages case) as to whether, if the Holden business continued until the end of 2022, GMC would have decided not to close Rayong because Colorado and Trailblazer models were made there for sale to Australia. The fact was, that in reorganising part of its manufacturing and retail footprint in pursuing its global investment priorities, it suited GMC to retire the Holden brand and close the Rayong facility, at the same time, and that is what it did.

(e) Against those considerations, it was not said that Holden could or should have presented an alternative business case for GMC to consider, to satisfy its requirements for return on investment. There was no evidence that it could do so. Holden’s entreaties, had they occurred, would only have concerned the necessity or desirability of maintaining a supply of vehicles for the remainder of the Term of the Australian Dealer Agreements. The representation that the plaintiff implicitly contended that Holden ought to have made to GMC, was that GMC’s investment in Holden should continue despite its assessment that Holden could not generate sufficient returns, because if it did not continue, Holden would breach the contractual promises it had made to its dealers. For the reasons given earlier, Holden had not in fact promised to continue to supply its dealers absolutely, for the five year term. It promised only to endeavour to do so. The plaintiff’s analysis assumes (again without being explicit) that Holden would have had a real chance at persuading GMC to continue the Australian business despite its conclusion that the business could not deliver sufficient returns, because of the need to perform a supply obligation that it had not made explicitly. In submissions the plaintiff described Holden’s failure to make endeavours as a failure to negotiate with GMC. It may be accepted that the significant consequences visited upon those affected by the decision, especially dealers, made the exit decision a difficult one (as GMC said in its public statements and briefing material). However, it was not shown that Holden would have any real power in a negotiation or any compelling commercial case to make, had it attempted to persuade GMC to decide differently or to defer the implementation of its decision. GMC was prepared to make the decision in fact, despite it being, on its own assessment, difficult, and according to its public statements, financially costly to implement.

As the defendant submitted, the notion that it is more likely than not that entreaties from Australia would have changed anything, is singularly unlikely. Holden did not have to call a decision maker to answer an inference to the opposite effect (by counter‑factual evidence about whether a different decision might have been) when regard is had to the objective facts. The plaintiff did not establish that it was necessary, acting as a reasonable person in Holden’s position would act, to seek to persuade or negotiate with Holden in late 2019 and early 2020, to change or defer its decision to exit the Australian market.

Third, the plaintiff has not established that a reasonable person in Holden’s position would have sought to enforce supply to it under the Distribution Agreements. It has not shown (or even attempted to show) that GMC having made the decision to retire the Holden brand, it would have been commercially realistic for Holden to seek to compel enforcement of the supply agreements from another GMC subsidiary. As discussed earlier, the cessation of supply occurred because GMC decided to shut down the Holden brand, not because GMOD decided for its own reasons not to comply with the Distribution Agreement. On the objective facts, GMOD continuing to supply Holden (on a business as usual basis) would have entailed subverting the GMC decision to exit the brand and accept no new orders for new vehicles after March 2020. The plaintiff did not establish that a reasonable person ought to have regarded the prospect of compelling supply in those circumstances as something that was objectively likely to achieve supply, commercially or legally[133], or was even a remote possibility. No such proof was attempted.
[133]The plaintiff said that it was not required to show that the Distribution Agreements could be or would likely be specifically enforceable.

Generally speaking, a subsidiary is entitled to take direction from and act in the interests of its immediate or ultimate holding company.[134] Holden acting in accordance with GMC’s wishes was not unreasonable, in circumstances where the steps it might have taken to seek to persuade GMC against its investment analysis or to subvert GMC’s decision by trying to enforce supply from another GMC subsidiary, were unlikely to achieve supply. Holden’s inaction as it were, did not amount to a failure to endeavour to supply in breach of clause 9.1(g) of the Dealer Agreement.
[134]Mercedes‑Benz, [219].

The defendant contended that after the decision to retire the brand, Holden oversaw the ‘share of build activity’ for the remaining stock, all of which was an ‘endeavour’ to meet reasonably anticipated demand, noting that demand would reduce to zero because there would be no vehicles available and nor would there be any SEG targets beyond 2021.

For the reasons discussed, Holden had made endeavours before 2020 to achieve the supply of new cars to dealers as required by clause [.14.3] (to allow them to achieve SEG or meet reasonably anticipated demand) which had satisfied the contractual obligation, although the endeavours failed in the face of GMC’s decision. On the evidence, what Holden did in 2020 was to distribute what it accepted was very limited remaining stock in accordance with its policies for equitable distribution. After March 2020 the ‘endeavours’ obligation was attenuated, as the defendant submitted.

The plaintiff’s claim was concerned with what I have called ‘business as usual’ supply. Steps taken in 2020 could not amount to an attempt to achieve business as usual supply, because consequent upon GMC’s exit decision, ongoing supply was to end. Consistent with Holden’s primary case, what occurred in 2020 was beside the point.

Mr Beecham’s evidence was (to summarise it very generally) that consumer demand for both new and used vehicles was very high from the beginning of 2020 and in effect, he could sell significantly more vehicles than he was able to supply. It is also true that once new Holden vehicles were simply not available, consumer demand would cease. It is unnecessary to determine the point at which demand actually ceased, having regard to the conclusions I have already reached. Holden’s point about the cessation of demand to zero, and the fact that SEG targets would be inutile once no supply was available, is technically correct, although it is not addressed to the substance of the plaintiff’s case and is unnecessary having regard to the conclusions otherwise reached.

The answer to common question 2(c) is No.

PART D: GOOD FAITH

The Franchising Code is prescribed as a mandatory industry code for the purposes of s 51AE of the Competition and Consumer Act 2010 (Cth) (CCA), contravention of which is a contravention of s 51ACB of the CCA. Holden was obliged by s 6(1) of the Franchising Code to act towards the plaintiff and group members with good faith within the meaning of the unwritten law, in respect of any matter arising under or in relation to the Dealer Agreement.[135] It was alleged that Holden was also subject to a duty of good faith implied as a term of the Dealer Agreement at common law.
[135]Section 6 of the Franchising Code applies obligations of good faith to every franchise contract, and prevents the exclusion of such an obligation as a matter of interpretation of a particular contract: Mercedes‑Benz, [3063].

The conduct alleged to have been contrary to the obligation was the same conduct as that relied upon for the other contractual breaches, framed in the same way. The plaintiff’s case was that in breach of the statutory obligation (and the good faith term) Holden failed to ensure the availability for supply of new Holden branded motor vehicles for the Term, and refused to accept or consider purchase orders for new vehicles. By way of particulars, the plaintiff said that the core purpose of the fixed term agreement was to ensure the security of supply and commercial certainty for the parties; that any interruption or cessation of the supply of new vehicles during the term would have significant adverse consequences for the plaintiff and group members; that Holden did not have in place sufficient contractual arrangements for the security of supply of new vehicles for the Term, or failed to enforce its contractual arrangements. Accordingly, it did not act with fidelity to the bargain represented by the Dealer Agreements, but undermined it, not acting reasonably nor with fair dealing. The plaintiff relied upon the absence of evidence from the defendant about whether or why Holden failed to have in place sufficient contractual arrangements for the security of supply or failed to enforce such arrangements that it had (the same evidence as relied upon for the breach of endeavours obligation).

Clause 6(1) of the Franchising Code provides that each party to a franchise agreement must act towards another party with good faith, in respect of any matter arising under or in relation to the agreement and the Franchising Code. In its written submissions the plaintiff relied upon the analysis of the statutory obligation in Mercedes‑Benz, to the effect that because of the language in the opening words of clause 6(1) of the Franchising Code (‘in respect of any matter arising under or in relation to’) the statutory duty is not limited strictly to the matters arising under the franchise agreement but applies more broadly to the whole of the dealings between a franchisor and a franchisee.[136]
[136]Mercedes‑Benz, [3074].

However, in closing, the plaintiff’s Senior Counsel conceded that the good faith claim ‘does not provide a separate or alternative route home’ if the Court were otherwise unpersuaded to find for the plaintiff on its primary contractual claims.

The concession was well‑founded. As the defendant submitted, the application of clause 6(1) of the Code requires the identification of the matter arising under or in relation to the franchise agreement or the Code in respect of which there has been a failure to act in good faith by one party towards the other. It does not enable a general claim that there has been a failure to act in good faith. Fundamentally ‘it is good faith or fair dealing between the parties by reference to the bargain and its terms that is called for’.[137] As the Full Court of the Federal Court said in Paciocco, the notion of good faith ‘is rooted in the bargain and requires behaviour to support it, not undermine it’.[138] This case does not raise for consideration, on its facts, conduct that might be characterised as arising ‘in relation to’ the Dealer Agreement or the Franchising Code, but not ‘under’ the Agreement or the Code. It is unnecessary to explore the legal significance of the opening words of s 6(1), in this case.
[137]Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199, [289] (Paciocco).
[138]Paciocco, [289].

The usual content of an obligation to act in good faith at common law is a requirement to act honestly and with fidelity to the bargain, not to act dishonestly, and not to act to undermine the bargain or the substance of the contractual benefit bargained for, and to act reasonably and with fair dealing. It includes considerations of whether a party has acted honestly and not arbitrarily and whether the party has co‑operated to achieve the purpose of the bargain. Conduct which is dishonest, arbitrary, or motivated by a purpose which is antithetical to the evident object of a contractual provisions, or which is otherwise motivated by bad faith will not meet the standard.[139] Where the subject conduct is objectively unreasonable, the absence of reasonableness may inform the evaluation of whether there has been a lack of good faith but objective unreasonableness is not sufficient by itself to amount to lack of good faith.[140] There are no closed categories of conduct that might constitute acting without good faith. The evaluation of any conduct said to amount to a breach of a duty to act in good faith is undertaken with regard to the substance of the bargain. In Overlook v Foxtel, Barret J observed that,

The implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self‑interest entirely which is the lot of the fiduciary. … The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.[141]

[139]Mercedes‑Benz, [3077] and the authorities cited there: Australian Competition and Consumer Commission v Geowash Pty Ltd (No 3) (2019) 368 ALR 441, [746]; Ali v Australian Competition and Consumer Commission (2021) 394 ALR 227, [194].

[140]Mercedes‑Benz, [3077] and the authorities cited there.

[141]Overlook v Foxtel [2002] NSWSC 17, [67]; see also Mercedez‑Benz, [3087].

The normative standard adopted by the Franchising Code by reference to the written and unwritten law is concerned to protect against the exploitation by franchisors of positions of economic or contractual strength as against franchisees who may be in positions of particular economic or contractual vulnerability.[142]
[142]Mercedez‑Benz, [3069].

The plaintiff in this case did not rely, for example, on the cynical exercise of a contractual power, dishonesty, acts motivated by bad faith or on particular conduct undermining the bargain, as distinct from a failure to perform the bargain itself. As the defendant submitted and the plaintiff ultimately accepted, the crux of the claim was that Holden failed to support and not undermine the parties’ contractual bargain by failing to ensure continuity of supply of new vehicles for the Term. The claim could, then, rise no higher than the primary contractual claims in establishing that to which fidelity was required. If the bargain did not require continuity of supply in an absolute sense then good faith could not require it.

As the plaintiff accepted, whether or not an implied term of good faith were recognised in addition to the statutory obligation, would make no difference to the outcome, save possibly in respect of the assessment of damages (according to the plaintiff) which was not an issue requiring determination.

Because of the way the case was put, it follows from the conclusions reached earlier in these Reasons, that it has not been established that the defendant failed to act with fidelity to the bargain, or otherwise failed to act in good faith, contrary to its statutory obligation to do so.

PART E: DAMAGES

Even if, contrary to the foregoing conclusions, the defendant in fact breached the ‘endeavour to supply’ obligation, the plaintiff did not establish any causal consequence of the breach, and only nominal damages would follow.

Damages for breach of contract are awarded with the object of placing the plaintiff in the position in which it would have been had the contract been performed, so far as money can do it.[143] In ascertaining damages for loss of bargain, the Court is required to compare the actual position of the claimant with the position in which it would likely have been, in a counterfactual scenario in which the defaulting party performed its obligation. The plaintiff must plead all material facts upon which it relies to constitute the counterfactual scenario.[144] The defendant is also expected to plead any different counterfactual on which it seeks to resist the plaintiff’s case.[145] The plaintiff bears the onus of proving and quantifying the loss claimed and must prove these matters on the balance of probabilities with as much precision as the subject matter reasonably permits.[146] A mere difficulty in estimating damages does not relieve a court from the responsibility of estimating damages as best it can.[147] Where the evidence is uncertain the Court is entitled to take a ‘broad brush approach’ and ‘something short of certainty may suffice’.[148] When evaluating the evidence available in support of any counterfactual scenario, the Court ought to have regard to the considerations derived from Jones v Dunkel and Blatch v Archer.[149]
[143]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80 (Mason CJ and Dawson J) (Amann Aviation).
[144]Berry v CCL Secure Pty Ltd (2020) 271 CLR 151, [72] (Gageler and Edelman JJ) (Berry).
[145]Berry, [72].
[146]Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, [37] (Hayne J, with whom Gleeson CJ, McHugh and Kirby JJ agreed) (Placer).
[147]Amann Aviation, 83 (Mason CJ and Dawson J); Placer, [38].
[148]Euromark Ltd v Smash Enterprise Pty Ltd & Ors (No 3) [2023] VSC 490, [15] and the authorities there; Amcor Ltd v Barnes [2016] VSC 707, [1042]–[1045]; Amann Aviation, 83 (Mason CJ and Dawson J).
[149]See RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd [2022] VSCA 216, [27], [31]–[33].

This is not a case of a mere difficulty in estimating damages. The plaintiff’s pleaded counterfactual case was concerned with and confined to, those parts of its case by which it alleged that the defendant had an obligation to ensure a supply of new Holden vehicles for the Term (its implied terms case). The plaintiff did not plead any counterfactual concerning a breach of clause 7.17.14.3 of the Wholesale Standards. In addressing its alleged breach of endeavours obligation the plaintiff made the submissions discussed earlier. But its pleading fell well short of what is required for a counterfactual damages contention. It did not allege what Holden would have done to endeavour to obtain supply of new vehicles where GMC had decided to exit the Holden brand. Nor did the pleading engage with the likelihood or otherwise that any such endeavours by Holden would have resulted in it obtaining supply of new Holden vehicles. It did not articulate what SEG targets, if any, Holden would have set in that counterfactual or what reasonably anticipated demand would be in that counterfactual. On the evidence, its damages case was addressed only to a counterfactual scenario in which Holden performed an obligation to ensure the availability of supply of new Holden vehicles to group members. The plaintiff’s evidence addressed to the breach of the endeavour to supply obligation (which was insufficient to establish that breach) did not extend to what would have been necessary to establish damages for breach of that obligation.

The plaintiff did not formulate a common question in relation to the damages counterfactual that was addressed to a breach of clause 9.1(g) of the Dealer Agreement and clause 7.17.14.3 of the Wholesale Standards.

It is unnecessary to answer the questions that were formulated (common question 4, sub‑paragraphs (a)–(f)). I have considered the parties’ evidence and submissions but it would not be productive to answer the questions on a hypothetical basis. Doing so would require positing a contractual construction contrary to the construction I have determined, and would involve a number of assumptions, given the uncertain content of the supply obligation.

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[2025] VSC 125

20 March 2025