Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2)
[2024] VSC 262
•24 May 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 00813
BETWEEN:
| BRIGHTON AUTOMOTIVE HOLDINGS PTY LTD (ACN 150 926 480) AS TRUSTEE FOR THE BRIGHTON HONDA UNIT TRUST | Plaintiff |
| and | |
| HONDA AUSTRALIA PTY LTD (ACN 004 759 611) | Defendant |
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JUDGE: | Matthews J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21–23, 26-27 February, 6 March 2024 | |
DATE OF JUDGMENT: | 24 May 2024 | |
CASE MAY BE CITED AS: | Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2024] VSC 262 | (First Revision 30 August 2024) |
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CONTRACTS – Dealership agreement repudiated and subsequently terminated prior to conclusion of its term – Damages for breach of contract for loss of profits for remaining contractual period – Liability conceded by defendant – Dispute as to quantum of damages – Findings on key disputed integers in the assessment of damages – Amount of damages to be calculated by experts retained by the parties in accordance with the findings.
CONTRACTS – Contractual power of non-renewal - Claim for damages for loss of opportunity for a renewal of contract – Whether plaintiff has established loss of chance of some value – Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 applied – Claim not established.
COMPETITION AND CONSUMER LAW – Unconscionable conduct – Whether conduct unconscionable in contravention of s 21 of the Australian Consumer Law – Claim for compensation of loss of goodwill – Claim not established.
COMPETITION AND CONSUMER LAW – Misleading or deceptive conduct – Representation by silence – Duty to disclose – Claim not established.
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APPEARANCES: | Counsel | Solicitors |
| For Brighton Automotive | Mr N De Young KC and Mr J Claridge of counsel | HWL Ebsworth |
| For Honda Australia | Mr M Borsky KC, Mr B McLachlan, Mr C O’Bryan and Ms M Salinger of counsel | Arnold Bloch Leibler |
TABLE OF CONTENTS
A. Introduction.................................................................................................................................. 1
B. Background................................................................................................................................... 2
C. Procedural background............................................................................................................... 5
D. The pleadings............................................................................................................................... 5
D.1. . Breach of contract................................................................................................................ 5
D.2. . The MDC Claim................................................................................................................... 6
D.3... The UC Claim....................................................................................................................... 8
E... Relevant law and key contracts................................................................................................. 9
E.1... Australian Consumer Law................................................................................................. 9
E.2... The Franchising Code....................................................................................................... 12
E.3... The Dealer Agreement...................................................................................................... 13
F. . The evidence............................................................................................................................... 16
F.1. . Witnesses and court book................................................................................................. 16
F.2. . Assessment of witnesses................................................................................................... 19
F.2.1. . Mark Avis............................................................................................................... 19
F.2.2. . Carolyn McMahon................................................................................................. 19
F.2.3. . Stephen Collins...................................................................................................... 19
F.2.4. . Michael Smith......................................................................................................... 19
F.2.5. . Dawna Wright........................................................................................................ 20
G. The Remaining Contract Period Claim.................................................................................. 20
G.1. . Legal principles.................................................................................................................. 20
G.2. . The counterfactual............................................................................................................. 22
G.3... Key issues arising in respect of the Remaining Contract Period Claim.................... 22
G.4. . Vehicle volume.................................................................................................................. 23
G.4.1.. Role of the Agency Model.................................................................................... 24
G.4.1.1.... Brighton Automotive’s submissions................................................. 24
G.4.1.2.... Honda Australia’s submissions......................................................... 24
G.4.1.3. .. Consideration....................................................................................... 24
G.4.2. Reduction in actual vehicle sales and supply.................................................... 25
G.4.2.1.... The evidence......................................................................................... 25
G.4.2.2.... Brighton Automotive’s submissions................................................. 28
G.4.2.3.... Honda Australia’s submissions......................................................... 29
G.4.2.4.... Brighton Automotive’s reply submissions...................................... 30
G.4.2.5. .. Consideration....................................................................................... 31
G.4.3. COVID-19 and global supply shortages............................................................ 34
G.4.3.1.... The evidence......................................................................................... 34
G.4.3.2.... Brighton Automotive’s submissions................................................. 36
G.4.3.3.... Honda Australia’s submissions......................................................... 38
G.4.3.4. .. Consideration....................................................................................... 39
G.4.4. Brighton Automotive's market share.................................................................. 41
G.4.4.1.... The evidence......................................................................................... 41
G.4.4.2.... Brighton Automotive’s submissions................................................. 42
G.4.4.3.... Honda Australia’s submissions......................................................... 42
G.4.4.4. .. Consideration....................................................................................... 43
G.4.5.. Summary of conclusions on volume.................................................................. 44
G.5. . Gross profit per vehicle.................................................................................................... 45
G.5.1.. The evidence........................................................................................................... 45
G.5.2.. Brighton Automotive’s submissions................................................................... 48
G.5.3.. Honda Australia’s submissions........................................................................... 49
G.5.4. Consideration......................................................................................................... 50
G.6. . Lost profits from servicing and parts............................................................................. 52
G.6.1.. The evidence........................................................................................................... 52
G.6.2.. Brighton Automotive’s submissions................................................................... 54
G.6.3.. Honda Australia’s submissions........................................................................... 54
G.6.4.. Consideration......................................................................................................... 54
G.7. . Date of assessment............................................................................................................ 54
G.8... Mitigation........................................................................................................................... 55
G.8.1.. The evidence........................................................................................................... 55
G.8.2.. Brighton Automotive’s submissions................................................................... 57
G.8.3.. Honda Australia’s submissions........................................................................... 57
G.8.4.. Consideration......................................................................................................... 57
G.9... Summary of conclusions as to the Remaining Contract Period Claim...................... 60
H. The Further Contract Period Claim........................................................................................ 61
H.1.. Introduction........................................................................................................................ 61
H.2.. Brighton Automotive’s submissions............................................................................... 62
H.3.. Honda Australia’s submissions....................................................................................... 64
H.3.1.. Honda Australia would have implemented the Agency Model with effect from 1 July 2023.......................................................................................................................... 64
H.3.2.. Brighton Automotive would not have been appointed as a Honda agent at 1 July 2023.................................................................................................................................. 66
H.4.. Consideration..................................................................................................................... 67
H.4.1.. Relevant legal principles...................................................................................... 67
H.4.2.. Consideration......................................................................................................... 68
I. .. The MDC Claim......................................................................................................................... 73
I.1.... Status of the MDC Claim.................................................................................................. 73
I.2. .. The evidence....................................................................................................................... 73
I.3. .. What the witnesses say..................................................................................................... 75
I.4.... Brighton Automotive’s submissions............................................................................... 76
I.5.... Honda Australia’s submissions....................................................................................... 78
I.6.... Brighton Automotive’s reply submissions.................................................................... 80
I.7. .. Consideration..................................................................................................................... 81
J.... The UC Claim............................................................................................................................. 87
J.1. .. Establishing unconscionable conduct............................................................................. 87
J.1.1.... The evidence........................................................................................................... 87
J.1.2. .. What the witnesses say......................................................................................... 87
J.1.3.... Brighton Automotive’s submissions................................................................... 89
J.1.4.... Honda Australia’s submissions........................................................................... 92
J.1.5.... Consideration......................................................................................................... 96
J.1.5.1...... Misleading or deceptive conduct...................................................... 96
J.1.5.2...... Deliberate breach of contract............................................................. 96
J.1.5.3...... Termination rights............................................................................... 99
J.1.5.4...... Good faith........................................................................................... 100
J.1.5.5...... Position of dominance...................................................................... 102
J.1.5.6...... Goodwill............................................................................................. 103
J.1.6.... Summary of conclusions.................................................................................... 107
J.2.... Quantifying loss............................................................................................................... 107
K.. Conclusion................................................................................................................................. 108
HER HONOUR:
A. Introduction
In early 2020, the defendant (Honda Australia) decided to change its business model for selling Honda cars in Australia from a network of dealers (Dealership Model) to utilising agents it would appoint (Agency Model). The plaintiff (Brighton Automotive) was one of Honda Australia’s dealers. This change in business model led Honda Australia to give notice in March 2020 to its dealers that it would be terminating all of its dealership agreements with effect from 1 July 2021 and that not all dealers would be appointed as agents under the Agency Model. This resulted in the dealership agreements being terminated prior to the end of their term, which was 30 June 2023.
Honda Australia accepts that by these actions it breached its dealer agreements and that dealers are entitled to damages arising from the breach of contract. Honda Australia and Brighton Automotive were unable to reach agreement as to the compensation which Honda Australia should pay to Brighton Automotive.
In this proceeding, Brighton Automotive makes the following claims against Honda Australia:
(a) damages arising from breach of contract during the period 30 January 2021[1] to 30 June 2023 (Remaining Contract Period);
[1]It is common ground that the effective termination date for Brighton Automotive’s dealership agreement was 29 January 2021, which will be explained later.
(b) damages arising from breach of contract during the period 1 July 2023 to 30 June 2028 (Further Contract Period); and
(c) contraventions of the Australian Consumer Law (ACL) in Schedule 2 to the Competition and Consumer Act 2010 (Cth), namely:
(i) Misleading or Deceptive Conduct (MDC Claim); and
(ii) Unconscionable Conduct (UC Claim).
Honda Australia admits liability for damages for breach of contract in respect of the Remaining Contract Period (Remaining Contract Period Claim), however, the parties disagree as to quantum.
Honda Australia denies liability for damages for breach of contract in respect of the Further Contract Period (Further Contract Period Claim), the MDC Claim and the UC Claim. If such claims are established by Brighton Automotive, the parties disagree as to their quantum.
B. Background
Brighton Automotive was incorporated in 2011 after its directors Mark Avis (Avis) and Ron Klein (Klein) purchased an existing Honda car dealership which had been operating out of Brighton and East Brighton for many decades.
Honda Australia is a wholly-owned subsidiary of Honda Motor Co Ltd (Honda Motor Co), a company based in Japan. Honda Motor Co’s global subsidiaries are largely autonomous within their allocated territories but operate subject to the ultimate direction of the parent company. Honda Australia is treated by Honda Motor Co as operating within its Asia and Oceania regional unit, with the corporate entity directly responsible for the performance of that unit being Asian Honda Motor Co Limited (Asian Honda). Asian Honda is also a subsidiary of Honda Motor Co. On some matters (budgets, forecasts and strategic directions), Honda Australia reports to Asian Honda, but is not a subsidiary of Asian Honda.
In mid-2011, Brighton Automotive entered into a dealership agreement with Honda Australia for a term of five years. During this period, Brighton Automotive introduced new brands of motor vehicles and became a multi-franchise dealership. However, according to Brighton Automotive, Honda vehicles remained the mainstay of its business, representing over 50% of its total revenue.
In June 2018, following the expiry of all national Honda dealership agreements, Honda Australia executed new dealer agreements with its network of authorised dealers, including Brighton Automotive, on terms that were largely identical to the previous agreements. The agreement between Brighton Automotive and Honda Australia (Dealer Agreement) was executed on 27 June 2018. The Dealer Agreement is subject to Schedule 1 of the Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Franchising Code), which sets out the rights and obligations of the parties involved in the franchising relationship, and is administered and enforced by the Australian Competition and Consumer Commission.
In August 2018, Honda’s declining profitability in the Australian market was considered at a meeting of Asian Honda and Honda Motor Co executives, and the need to ‘stop the bleeding’ became a priority for the global business. A presentation at that meeting contained a proposal to undertake a feasibility study in the short-to-mid-term, with a view to setting the business direction from 2025. The majority of Honda vehicles sold in Australia during the relevant period were manufactured in Thailand, such that Honda Australia’s financial performance was significantly affected by exchange rate fluctuations between the Australian dollar (AUD) and the Thai bhat (TBH).
At a meeting in Bangkok in February 2019, Honda Australia board members put forward to various Asian Honda representatives a proposal to introduce an agency model as a means to improve Honda’s profitability. Honda Australia’s proposal was to retain the full dealer network until the expiration of the existing dealer agreements in June 2023, gradually reduce vehicle volumes and the size of the dealer network after the expiration of those dealer agreements, and appoint the remaining dealers as agents from 2025.
In March 2019, Honda Australia informed its senior management team that a strategic review would begin.
In May 2019, Honda Australia informed its dealer network of the strategic review. At that time, Honda Australia did not give any details about the strategic review but told its dealers that it expected to be in a position to provide further information by the end of 2019. Honda Australia also told dealers that it would not be enforcing special conditions in the dealer agreements (for example, requiring owners to make investments in their dealerships) in the meantime, and that given the uncertainty, they should not undertake any significant investments in their dealerships.
In June 2019, Honda Australia commenced a feasibility study into a business restructure with the assistance of external consultants.
In February 2020, Honda Australia sought and obtained the approval of Asian Honda to restructure its business model.
On 5 March 2020, Honda Australia resolved to implement a new business model (Agency Model), which included:
(a) the adoption of an agency model;
(b) selling a narrower model range and reducing overall national sales volumes to 20,000 units;
(c) reducing the number of dealers and the size of the dealer network; and
(d) realigning and consolidating existing areas of responsibility for dealers.
This decision resulted in the early termination of 36 dealer agreements with ‘exit dealers’ — ie, dealers who were not offered the opportunity to become Honda agents under the Agency Model.
On 23 March 2020, Klein and Avis were informed by Hiroyuki Shimizu (Shimizu-san), who was then the Managing Director of Honda Australia, and Carolyn McMahon (McMahon), who was and remains a director of Honda Australia, by telephone that Brighton Automotive would not be appointed as an agent under Honda Australia’s new Agency Model.
Shortly after this phone conversation, Honda Australia sent a written notice to Brighton Automotive by which it purported to terminate the Dealer Agreement with effect from 30 June 2021 (Termination Notice). It is common ground that the conduct of Honda Australia in sending the Termination Notice to Brighton Automotive constituted a repudiation of the Dealer Agreement.
On 24 December 2020, Brighton Automotive accepted Honda Australia’s repudiation of the Dealer Agreement. By agreement between Honda Australia and Brighton Automotive, the Dealer Agreement came to an end on 29 January 2021 (Termination Date).
C. Procedural background
This proceeding was commenced by writ and statement of claim on 15 March 2022.
At that time, the plaintiffs were:
(a) Brighton Astoria (Brighton Automotive), an authorised Honda dealer operating in Bentleigh and Brighton East in the State of Victoria;
(b) Tynan Motors, an authorised Honda dealer operating in Sutherland and Miranda in the State of New South Wales; and
(c) Bentleigh Astoria, an authorised Honda parts and service dealer operating in Bentleigh East in the State of Victoria and a related entity of Brighton Automotive within the meaning of the Corporations Act 2001 (Cth).
However, the claims against Honda Australia by the second and third plaintiffs were dismissed by consent, with no orders as to costs, on 1 June 2023 and 15 May 2023 respectively, and they ceased to be parties to the proceeding.
D. The pleadings
D.1. Breach of contract
Brighton Automotive alleges that by reason of Honda Australia’s repudiation of the Dealer Agreement, Brighton Automotive has suffered loss or damage as follows:
(a) loss of opportunity to derive revenue and earn profit by operating as an authorised Honda Dealer or authorised Honda Parts and Service dealer (as applicable) for the term of the Dealer Agreement until 30 June 2023;
(b) loss of opportunity to derive revenue and earn profit by operating as an authorised Honda dealer or authorised Honda Parts and Service dealer (as applicable) for any extended or hold over term after 30 June 2023;
(c) further or alternatively, loss of the opportunity to sell its business as an authorised Honda dealer or authorised Honda parts and service dealer as a going concern.[2]
[2]Brighton Automotive did not pursue this aspect of its breach of contract claim at trial.
Honda Australia admits that Brighton Automotive is entitled to compensation for loss or damage arising from the loss of opportunity to operate as an authorised Honda dealership or authorised Honda parts and service dealer for the balance of the term of the Dealer Agreement (being from 30 January 2021 to 30 June 2023).
However, Honda Australia denies that Brighton Automotive has any entitlement to:
(a) damages in respect of any period after the expiry of the term of the Dealer Agreement; or
(b) damages in respect of any loss of opportunity to sell its business as a going concern.
D.2. The MDC Claim
Brighton Automotive alleges that Honda Australia was undertaking or contemplating a strategic review of its business operations and dealer network in Australia (the Alleged Review) from as early as 6 June 2018. As part of this review, Honda Australia was considering or contemplating reducing the number of authorised Honda dealers in Australia (the New Dealer Strategy), something that would require the early termination of many existing dealer agreements.
Brighton Automotive alleges that Honda Australia did not disclose to Brighton Automotive, at any time prior to them entering the Dealer Agreement:
(a) the existence of its Alleged Review;
(b) the existence of its New Dealer Strategy; or
(c) that it was considering or contemplating the early termination of dealer agreements with authorised Honda dealers in Australia.
Brighton Automotive alleges that it was reasonable for it to expect that these matters would be disclosed by Honda Australia to Brighton Automotive at some time prior to their entry into the Dealer Agreement, and that Honda Australia failed to disclose these matters.
Brighton Automotive alleges that had these matters been disclosed, it would not have entered into the Dealer Agreement and instead would have sought to sell its business as a going concern.
It is on this basis that Brighton Automotive alleges that Honda Australia has engaged in conduct in trade or commerce that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL.
Brighton Automotive claims that it has suffered loss and damage in the form of:
(a) loss of the opportunity to sell its business as an authorised Honda dealer or authorised Honda parts and service dealer as a going concern; and
(b) loss of the opportunity to generate greater revenue and profit through other automotive dealership opportunities.
Honda Australia denies the Alleged Review. It denies that it was undertaking a strategic review of its business operations and dealer network in Australia on or around 6 June 2018, but admits that around this time one of a number of potential future options for its business operations involved reducing the number of authorised Honda dealers in Australia.
Honda Australia says that it did decide to undertake a strategic review in early 2019 and that it informed Brighton Automotive of this on or about 9 May 2019. Honda Australia admits that it did not, prior to entering into the Dealer Agreement, disclose to Brighton Automotive that it was contemplating a reduction in the number of authorised dealers in Australia but says that it had no obligation to make such a disclosure.
Honda Australia otherwise denies the allegations contained in the MDC Claim.
After opening submissions at trial, Brighton Automotive informed the Court that it no longer pressed its claim for loss and damage arising from the MDC Claim, but that it still pressed its allegation of misleading and deceptive conduct as it was an ‘ingredient’ of the UC Claim.
D.3. The UC Claim
Brighton Automotive alleges that Honda Australia’s breach of the Dealer Agreement was intentional, and carried out with the knowledge that Brighton Automotive would suffer loss and damage as a result. In doing so, Honda Australia breached its obligation to act in good faith in contravention of the Dealer Agreement and the Franchising Code.
Brighton Automotive alleges that Honda Australia was in a dominant position compared to Brighton Automotive and used its position to exert undue influence or pressure on Brighton Automotive and/or use unfair tactics against Brighton Automotive. The opening and closing submissions of Brighton Automotive make no reference to exerting undue influence or using unfair tactics, and so it appears that these aspects were no longer pressed. It alleges that Honda Australia knew and intended to acquire the goodwill of Brighton Automotive’s business, including the value of its relationships with its Honda customers, which had been built up by Brighton Automotive over many years at the request and encouragement of Honda Australia, without any compensation.
On this basis, Brighton Automotive alleges that Honda Australia engaged in conduct in trade or commerce that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL.
Brighton Automotive claims that it has suffered loss and damage in the form of:
(a) the loss and damage outlined in paragraph 24 above; and
(b) further or alternatively, the value of the goodwill in its business as an authorised Honda dealer or authorised Honda parts and service dealer (as applicable), including the value of their relationships with its Honda customers.
In regards to its UC Claim, Brighton Automotive claims that it has suffered the loss and damage described at paragraph 32 above.
Honda Australia denies the allegation contained in the UC Claim and says that:
(a) regarding the allegations that it did not comply or seek to comply with cl 36 of the Dealer Agreements and cl 28 of the Franchising Code, both clauses are inapplicable on their terms; and
(b) regarding the allegation that it intended to acquire Brighton Automotive’s goodwill without compensation:
(i) any goodwill or other value generated by use of the Honda trade mark by Brighton Automotive vests solely with Honda Australia as per the terms of the Dealer Agreement; and
(ii) on termination of the Dealer Agreement, Brighton Automotive would not receive any payment or compensation from Honda Australia for any goodwill in connection with the dealership.
E. Relevant law and key contracts
E.1. Australian Consumer Law
Section 18 ‘Misleading or Deceptive Conduct’ provides that:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 21 ‘Unconscionable conduct in connection with goods or services’ provides that:
(1) A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person; or
(b)the acquisition or possible acquisition of goods or services from a person;
engage in conduct that is, in all the circumstances, unconscionable..
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3)For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
Section 22(1) ‘Matters the court may have regard to for the purposes of section 21’ provides that:
Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened subsection (1) in connection with the supply or possible supply of goods or services to another person (the consumer), the court may have regard to:
(a)the relative strengths of the bargaining positions of the supplier and the customer; and
(b)whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c)whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e)the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f)the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and
(g) the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i)the extent to which the supplier unreasonably failed to disclose to the customer:
(i)any intended conduct of the supplier that might affect the interests of the customer; and
(ii)any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j)if there is a contract between the supplier and the customer for the supply of the goods or services:
(i)the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii)the terms and conditions of the contract; and
(iii)the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv)any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l)the extent to which the supplier and the customer acted in good faith.
E.2. The Franchising Code
Clause 6 ‘Obligation to act in good faith’ provides that:
(1)Each party to a franchise agreement must act towards another party with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to:
(a) the agreement; and
(b) this code.
This is the obligation to act in good faith
Civil penalty: 300 penalty units.
(2)The obligation to act in good faith also applies to a person who proposes to become a party to a franchise agreement in respect of:
(a) any dealing or dispute relating to the proposed agreement; and
(b) the negotiation of the proposed agreement; and
(c) this code.
(3)Without limiting the matters to which a court may have regard for the purpose of determining whether a party to a franchise agreement has contravened subclause (1), the court may have regard to:
(a) whether the party acted honestly and not arbitrarily; and
(b)whether the party cooperated to achieve the purposes of the agreement.
(4)A franchise agreement must not contain a clause that limits or excludes the obligation to act in good faith, and if it does, the clause is of no effect.
(5)A franchise agreement may not limit or exclude the obligation to act in good faith by applying, adopting or incorporating, with or without modification, the words of another document, as in force at a particular time or as in force from time to time, in the agreement.
(6)To avoid doubt, the obligation to act in good faith does not prevent a party to a franchise agreement, or a person who proposes to become such a party, from acting in his, her or its legitimate commercial interests.
(7) If a franchise agreement does not:
(a) give the franchisee an option to renew the agreement; or
(b) allow the franchisee to extend the agreement;
this does not mean that the franchisor has not acted in good faith in negotiating or giving effect to the agreement.
Clause 28 ‘Termination--no breach by franchisee’ regulates the termination rights of franchisors for breach of a franchise agreement and provides that:
(1) This clause applies if:
(a) a franchisor terminates a franchise agreement:
i. in accordance with the agreement; and
ii. before it expires; and
iii. without the consent of the franchisee; and
(b) the franchisee has not breached the agreement.
(2)For subparagraph (1)(a)(iii), a condition of a franchise agreement that a franchisor can terminate the franchise agreement without the consent of the franchisee is not taken to be consent.
(3)Before terminating the franchise agreement, the franchisor must give reasonable written notice of the proposed termination, and reasons for it, to the franchisee.
Civil penalty: 300 penalty units.
(4)Part 4 (resolving disputes) applies in relation to a dispute arising from termination under this clause.
E.3. The Dealer Agreement
Clause 8.1 ‘Term of Agreement’ provides that:
This Agreement commences on the Commencement Date and continues for the Term.
Note: Items 4-5 of Schedule 1 provide that the Commencement Date is 1 July 2018 while the Term is five years.
Clause 8.2 ‘Notice’ provides that:
(a) Honda Australia will notify the Dealer whether or not it intends to:
(ii) extend this Agreement by offering the Dealer a further term; or
(ii) enter into a new dealer agreement with the Dealer;
as long as possible before the expiration of the Term, and in any event no less than 6 months before the expiration of the Term.
(b)Subject to clause 8.4, if the Dealer is offered a further term or a new dealer agreement, the terms on which such further term or dealer agreement is offered will be at Honda Australia's sole discretion, including as to the PMA,[3] and may be different from the terms and PMA under this Agreement.
[3]In the Dealer Agreement, PMA is defined as the geographical territory or territories specified in the schedule. Thus it means the geographical area assigned to that dealer.
Clause 8.3 ‘Opportunity to Sell’ provides that:
If Honda Australia notifies the Dealer that it does not intend to extend this Agreement or enter into a new dealer agreement in accordance with clause 8.2, the Dealer can offer to sell the Dealership as a going concern provided:
(a)Honda Australia does not intend to change the PMA or the location of the Premises;
(b)Honda Australia consents to the purchaser purchasing the Dealership (which consent will not be unreasonably withheld); and
(c)the purchaser enters into a new dealer agreement on terms that are acceptable to Honda Australia.
For the avoidance of doubt, clause 39.6 will apply to any offer by the Dealer to sell the Dealership pursuant to this clause.
Clause 8.4 ‘Further Term’ provides that:
If this Agreement is subject to a Further Term, then, subject to clause 36 of this Agreement it will be extended for the Further Term if:
(a)the Dealer gives written notice to Honda Australia that it intends to extend this Agreement, at least 6 months and 2 weeks before the expiration of the Term; and
(b)the Dealer has satisfied all of the Further Term Conditions.
Clause 31.2 ‘Indemnity by Honda Australia’ provides that:
Honda Australia indemnifies the Dealer and agrees to keep the Dealer indemnified from and against all claims, losses, damages, taxes, charges, expenses and costs of every description suffered or incurred by the Dealer as a result of:
(a) any breach of this Agreement by Honda Australia;
(b)fraud, negligent or unlawful acts or omissions by Honda Australia or its employees, agents and, where Honda Australia has failed to exercise reasonable care, sub- contractors;
(c)Honda Australia or its employees, agents or sub-contractors acting on instructions from persons other than those authorised by the Dealer under this Agreement; or
(d)any obligations or liabilities the Dealer may have under legislation in respect of Honda Australia or an employee, agent or subcontractor of Honda Australia,
except to the extent that such claim, loss, damage, tax, charge, expense or cost is caused by the Dealer's fraud, negligent or unlawful acts or omissions.
Clause 36.2 ‘Termination - Breach by Dealer’ provides that:
If the Dealer has breached this Agreement, Honda Australia can only terminate this Agreement in accordance with the relevant Standard (which as at the date of this Agreement is the Performance Management Standard).
Clause 36.3 ‘Termination - Special circumstances’ provides that:
Honda Australia may immediately terminate this Agreement by written notice to the Dealer if the Dealer:
(a)no longer holds a licence that the Dealer must hold to carry on the Dealership;
(b)becomes bankrupt, insolvent under administration or an externally administered body corporate;
(c) voluntarily abandons the Dealership or the franchise relationship;
(d) is convicted of a serious offence;
(e) operates the Dealership in a way that endangers public health or safety;
(f) is fraudulent in connection with the operation of the Dealership; or
(g) agrees to termination of this Agreement and the Dealership.
Clause 37.1 ‘Dealership comes to an end’ provides that:
On expiry or termination of this Agreement:
(a) the Dealership comes to an end;
(b) the Dealer must:
(i) immediately cease to operate the Dealership;
(ii) cease using the Intellectual Property;
(iii)not represent itself as an Authorised Honda Dealer or otherwise hold itself out as being associated with Honda Australia or Honda Motor; and
(c)this Agreement (other than this clause 37 and clauses 9.49.4(e), 29, 30, 31, 38 and 43) is at end as to its future operation, except for the enforcement of any right or claim which arose on or before expiry or termination.
Clause 37.6 ‘Goodwill belongs to Honda Australia’ provides that:
The Dealer acknowledges and agrees that at the end of this Agreement, the Dealer will not receive any payment or compensation from Honda Australia for any goodwill in connection with the Dealership or the Premises or any reputation developed by the Dealer in connection with the Dealership or the Premises.
Clause 43.5 ‘Good faith’ provides that:
The parties must perform their obligations and exercise their rights under this Agreement in good faith.
It is common ground that the Dealer Agreement does not contain any provision allowing for termination for convenience.
F. The evidence
F.1. Witnesses and court book
The following persons were called as witnesses by Brighton Automotive:
(a) Avis, a director of Brighton Automotive;
(b) Klein, the other director of Brighton Automotive; and
(c) Michael Smith (Smith), a corporate finance specialist with CFAS Advisory.
The following persons were called as witnesses by Honda Australia:
(a) McMahon, a current director of Honda Australia involved in the day-to-day running of the business;
(b) Stephen Collins (Collins), a former director of Honda Australia whose employment concluded in November 2022; and
(c) Dawna Wright (Wright), a forensic accounting and valuation specialist with FTI Consulting.
Each of the lay witnesses made witness statements prior to the trial of the proceeding. At trial, the parties relied on the following documents:
(a) Witness Statement of Ron Klein made on 18 May 2023.
(b) Witness Statement of Mark Avis made on 22 May 2023.
(c) Supplementary Witness Statement of Mark Avis made on 14 November 2023.
(d) Witness Statement of Stephen John Collins made on 6 October 2023.
(e) Witness Statement of Carolyn Ann McMahon made on 6 October 2023.
Prior to each witness being called, objections to aspects of their witness statements were heard and determined. The court book, which contained all of the witness statements relied upon, was subsequently updated so as to contain the post-objection versions of the statements, which versions were subsequently adopted by the witnesses.
All of the witnesses, except for Klein, were cross-examined at trial. Klein’s witness statement was tendered but Honda Australia did not require him for cross-examination.
Each of the expert witnesses made a report prior to the trial of the proceeding:
(a) Affidavit & Expert Report of Michael Smith dated 18 May 2023 (Smith Report).
(b) Expert Report of Dawna Wright dated 6 October 2023 (Wright Report).
Smith and Wright also produced a joint report dated 1 February 2024 (Joint Report). The experts agree on the following points regarding methodology:
(a) To assess the loss under the Termination Claim, both experts adopted the following methodology:
(i) The loss is the difference between the but for profit and actual profit.
(ii) ‘Variable expenses’ should be included in the assessment of loss.
(iii) Costs that would be incurred in any event (with or without the Honda business trading) should not be included in the assessment of loss on the basis that they do not represent incremental costs.
(b) To assess the loss under the MDC Claim, both experts assess the value of the Honda business as at 30 June 2018 by adopting the CFME Method (by applying an appropriate earnings multiple to the future maintainable earnings, FME).
(c) To assess the loss under the UC Claim, both experts quantify the loss as the value of the goodwill in the Honda business as at 22 March 2020 (adopting the CFME Method), less the value of the goodwill in the Honda business as at 29 January 2021.
Smith and Wright gave their oral evidence concurrently, and were taken to sections of their individual reports as well as the Joint Report. The focus of the experts’ oral evidence was on the issues where they differed.
Brighton Automotive submitted that Honda Australia did not call Igarashi-san from Asian Honda or Shimizu-san, the third director of Honda Australia who was centrally involved in the decision-making to give evidence and that no explanation has been given for that failure, particularly when they are still employed in the Honda group and in Honda Australia’s ‘camp’ for the purposes of the rule in Jones v Dunkel.[4] Brighton Automotive submitted that the Court should infer that their evidence would not have assisted Honda Australia. This issue is dealt with below, where relevant.
F.2. Assessment of witnesses
F.2.1. Mark Avis
[4](1959) 191 CLR 298.
I found Avis to be an honest witness. He has been working in car sales for almost 40 years and was seemingly very knowledgeable about the industry in Australia. Avis is clearly passionate about his business, as well as the well-being of the staff he employs, and presents as aggrieved by the loss of the Honda brand, which is understandable. While Avis was generally forthcoming, often providing extensive answers and explanation where he felt it appropriate, he was at times unwilling or unable to engage in hypotheticals, preferring instead to focus on what actually unfolded in the months and years after the Dealer Agreement came to an end.
I do not regard Honda Australia’s cross-examination of Avis as to how changes came to be made to Brighton Automotive’s financial statements, particularly to the FY2019 ones, as detracting from Avis’ credibility at all. The changes were mentioned in Avis’ witness statement and were explained in more detail in Klein’s witness statement. The changes made were explained and adequately justified.
F.2.2. Carolyn McMahon
I also found McMahon to be an honest witness. Her answers were well-considered, albeit at times they lacked detail. McMahon was at times overly careful when providing answers, however, I do not believe that this was evidence of her seeking to avoid the question or tailor her evidence to suit Honda Australia’s case. Brighton Automotive’s submission that McMahon was ‘not prepared to give an inch’ cannot be accepted.
F.2.3. Stephen Collins
Collins was also honest and forthright. He gave direct answers under cross‑examination which were consistent with the contemporaneous documentary evidence.
F.2.4. Michael Smith
Smith was appropriately careful in his answers, including by making sure he understood the questions and any assumptions he was to make correctly. He did appear, at times, to be trying to find a basis to adhere to the opinions expressed in his reports. Nonetheless, Smith made concessions where appropriate.
F.2.5. Dawna Wright
Wright made concessions where appropriate and sought to assist the Court. She was careful to indicate where assumptions had been made or instances when she needed to qualify her opinion.
G. The Remaining Contract Period Claim
G.1. Legal principles
It is not in dispute between the parties that the ‘ruling principle’ with respect to damages for breach of contract is that, ‘where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’.[5] This requires the Court to compare the actual position of the party who sustains a loss by reason of the breach to what that party’s position would have likely been in a counterfactual scenario in which the contract was performed.
[5]Robinson v Harman (1848) 1 Exch 850, 855. The applicability of the ‘ruling principle’ has been confirmed by the High Court of Australia on numerous occasions. Eg, Wenham v Ella (1972) 127 CLR 454, 460; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 286.
Brighton Automotive’s submissions helpfully set out some of the key principles concerning onus, proof and calculating damages, which I set out below.
The onus of proving and quantifying loss lies with the plaintiff. However, as Hayne J said in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd,[6] the plaintiff is only required to prove those matters with as much precision as the subject matter reasonably permits.[7] Where precise evidence as to loss is not available, the Court may engage in ‘estimation, if not guesswork’ in assessing the damages to be allowed.[8] Where there has been actual loss, the mere difficulty in estimating damages does not relieve the Court from the responsibility of estimating them as best it can.[9]
[6]Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 (Placer), 266 [38] (Hayne J)
[7]Ibid, 266 [37] (Hayne J).
[8]Ibid, 774 [38]. To similar effect, in Amcor Ltd v Barnes [2016] VSC 707 Sloss J stated at [1046] that where the evidence is uncertain, the court is entitled to take a ‘broad brush’ approach.
[9]Fink v Fink (1946) 74 CLR 127, at 143 per Dixon and McTiernan JJ; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (Amann Aviation), at 83 per Mason CJ and Dawson J; see also Jones v Schiffmann (1971) 124 CLR 303, at 308 per McTiernan J
In Euromark Limited v Smash Enterprises Pty Ltd & Ors (No 3),[10] Lyons J stated:
…the determination of loss of bargain damages involves a degree of uncertainty given that the plaintiff is trying to quantify its loss on the basis of what would have happened in the event that the Agreement had not been terminated (ie, a counterfactual). Indeed many of the comments in the authorities relating to the principles of the assessment of damages referred to above were made in such cases. That does not mean that a plaintiff is relieved from proving the loss by producing relevant evidence as best it can as to the nature and extent of that loss. However, if the Court is satisfied that a loss has been suffered, the Court will do its best to estimate that loss on a broad brush approach in light of the evidence able to be led by the plaintiff.[11]
[10]Euromark Limited v Smash Enterprises Pty Ltd & Ors (No 3) [2023] VSC 490 (Euromark).
[11]Ibid, [16], citations omitted.
Where wrongdoing by a defendant makes it impossible for the plaintiff to prove the precise amount of damage suffered, or where the nature of the wrongdoing results in the plaintiff having to undertake the difficult task of proving a past hypothetical (as in this case), a presumption arises against the defendant.[12] In that regard, in Euromark, Lyons J stated:
… if the Court is satisfied that a loss has been suffered due to a defendant’s wrongdoing, the Court will do the best that it can to estimate that loss in light of evidence able to be led on a broad brush approach, and, where appropriate, the Court will draw inferences or make presumptions in favour of the plaintiff where the defendant’s wrongdoing itself has made the assessment impossible or difficult. [13]
[12]Ibid, [20].
[13]Ibid, [21]. See also: McCartney v Orica Investments Pty Ltd [2011] NSWCA 337.
To similar effect, in Corum Systems Pty Ltd v Fred IT Group Pty Ltd,[14] Justice M Osborne stated:
Questions as to the adequacy of evidence required to establish loss commonly arise in cases where the wrongdoer has prevented the victim from pursuing an opportunity because the wrongdoer ‘has thrust the victim into a difficult task of proving a past hypothetical’.
In such a case, the task of the Court is to adopt a robust approach, ‘relying on the presumption against wrongdoers’. Questions involving the application of the onus of proof and the resolution of doubtful questions should be resolved against the interests of the party ‘whose actions have made an accurate determination so problematic’.[15]
G.2. The counterfactual
[14]Corum Systems Pty Ltd v Fred IT Group Pty Ltd [2023] VSC 208 (Corum Systems).
[15]Ibid, [479]-[480], citations omitted.
It is common ground between the parties that under the counterfactual, Honda Australia would not have terminated its dealers prior to the end of their agreements or implemented the Agency Model in July 2021. Instead, Honda Australia would have continued to operate under the Dealership Model until the end of the term of the Dealer Agreement.
G.3. Key issues arising in respect of the Remaining Contract Period Claim
As already noted, it is common ground that Brighton Automotive is entitled to be compensated for its loss and damage sustained by reason of Honda Australia’s breach of the Dealer Agreement by terminating it before the end of its term. Brighton Automotive contends that Honda Australia’s repudiation of the Dealer Agreement has had a devastating impact on its business. Its revenue streams arising from new car sales, servicing, parts, finance/insurance and other services (such as pre-delivery service, aftermarket accessories and vehicle detailing) are all said to have been affected.
However, the parties disagree as to the amount of loss and damage to which Brighton Automotive is entitled. In order for the Court to determine the quantum in respect of the Remaining Contract Period Claim, five key issues emerged for consideration when comparing Brighton Automotive’s actual position following early termination of the Dealer Agreement with the counterfactual. These are:
(a) the number of new Honda vehicles which Brighton Automotive would have sold, that is, the volume of vehicles;
(b) the gross profit which Brighton Automotive would have made on each new Honda vehicle sold;
(c) the lost profits from servicing and parts;
(d) the appropriate date for the assessment of damages; and
(e) mitigation of loss.
Each of these matters is considered below, in turn. Both parties agree that the matter which has the greatest effect in terms of the difference between them as to the assessment of damages is that of sales volume of new Honda vehicles.
In summary, Smith assessed Brighton Automotive’s damages in respect of the Remaining Contract Period Claim as between $22,138,104 and $22,331,885, whereas Wright assessed these damages as between a loss of $1,648,128 and a gain of $2,678,248.
G.4. Vehicle volume
Smith calculates the counterfactual volumes based on the number of vehicles sold by Brighton Automotive in the twelve-month period prior to receiving the Termination Notice. On this basis, Smith estimates that Brighton Automotive would have sold 643 units in the balance of FY2021 and 1,544 units in each of FY2022 and FY2023. This calculation is based on an instruction that the volume of vehicles Honda Australia would have made available for sale in the Australian market would not have reduced to 20,000 per annum until at least after 30 June 2023.
Wright calculates the counterfactual volumes based on the actual number of vehicles sold by Honda Australia for the balance of the term of the Dealer Agreement multiplied by an estimate of Brighton Automotive’s share of national Honda sales. On this basis, Wright estimates that Brighton Automotive would have sold 290 units in the balance of FY2021, 422 units in FY2022 and 391 units in FY2023.
Various factors were considered by the experts as having affected these calculations. I will assess each of these in turn.
G.4.1. Role of the Agency Model
G.4.1.1. Brighton Automotive’s submissions
Brighton Automotive submits that the vast majority of the actual sales achieved by Honda Australia during the Remaining Contract Period occurred after the implementation of the Agency Model. However, it is agreed that the counterfactual involves ‘business as usual’ under the Dealership Model rather than the Agency Model. Brighton Automotive submits that the Agency Model was ‘radically different’ from the Dealership Model, as it involved replacing dealers with agents, the termination of a number of Honda dealers across Australia, and a contraction of Honda retail sites and new vehicle sales volume targets. As such, Brighton Automotive submits that the actual sales volumes achieved by Honda Australia during the Remaining Contract Period could not possibly be reflective of the counterfactual sales volumes that would have been achieved by Brighton Automotive.
G.4.1.2. Honda Australia’s submissions
Honda Australia submits that the decline in its actual sales volumes was not caused by the implementation of the Agency Model but was due to the effects of COVID-19 and semi-conductor shortages. These submissions are outlined in section G.4.3 below.
G.4.1.3. Consideration
It is hard to see how the actual sales volumes achieved by Honda Australia under its new Agency Model could be used to calculate the counterfactual sales volumes that Brighton Automotive would have achieved had the Dealership Model remained in place for the Remaining Contract Period. As Brighton Automotive submits, the Agency Model was radically different from the Dealership Model and involved replacing dealers with agents, the termination of various Honda dealers across Australia, a contraction of Honda retail sites, and significantly reduced new vehicle sales volume targets. It is highly likely that this affected sales volumes. To think otherwise requires me to accept that the change in model, with the consequences just described, had no impact at all on actual sales volumes in the Remaining Contract Period. I do not accept this. Therefore, I agree with Brighton Automotive’s submission that there is no foundation in the evidence to conclude that the actual sales during the Remaining Contract period would be reflective of sales in the counterfactual.
I accept Honda Australia’s submission that Beach J’s ruling in Mercedes Benz supports the conclusion that any goodwill enjoyed by Brighton Australia with respect to the sale of new Honda vehicles was lost when the Dealer Agreement came to an end. Brighton Automotive submits that Mercedes Benz can be distinguished given that Mercedes Benz waited until the relevant dealership agreements had ended before switching to an agency model. However, based on my analysis at paragraphs 377 to 380 above, I considered that little turns on this factual distinction. Pursuant to cl 37.1, the Dealer Agreement came to an end when Brighton Automotive accepted Honda Australia’s repudiation of the Dealer Agreement. As such, on a natural and proper interpretation of cl 37.6 Brighton Automotive is not entitled to be compensated for the value of its goodwill, despite Honda Australia’s early termination of the Dealer Agreement.
That being the case, I also do not accept that Honda Australia’s early termination of the Dealer Agreement, even if that constitutes unconscionable conduct, caused Brighton Automotive to lose the value of its goodwill in its Honda business as at 30 June 2023. If Honda Australia had not repudiated the Dealer Agreement and it had instead terminated at the end of its term, without being renewed, then Brighton Australia would have had no Honda business to sell, let alone any goodwill arising from it.
Further, it was never properly explained or established that the appropriate measure of damage for the UC Claim was the value of Brighton Automotive’s goodwill in its Honda business as at 30 June 2023.
J.1.6. Summary of conclusions
In summary, for the reasons set out above, I conclude the following in regard to the UC Claim:
(a) Honda Australia’s conduct in repudiating the Dealer Agreement, thus leading to its termination before the end of its term, does not constitute unconscionable conduct; and
(b) even if it did amount to unconscionable conduct, that did not cause the loss claimed by Brighton Automotive, being the value of its goodwill as at 30 June 2023.
For the above reasons, the UC Claim is not made out.
J.2. Quantifying loss
Given the finding that the UC Claim is not made out, it is unnecessary for me to deal with the quantification of the damages claimed by Brighton Automotive as a consequence. In the circumstances of this case, especially those identified in paragraph 383 above, there is no utility in me expressing any view as to what that quantification may be.
My position that to attempt a quantification would be quite arbitrary is fortified by a matter discussed in Brighton Automotive’s oral closing address. It was stated that the UC Claim was an alternative to the Further Contract Period Claim, which was how the case was opened. But it was conceded during closing address that because Brighton Automotive had quantified its loss and damage arising from the UC Claim in the way that it had, based on a premise that there was an agency contract in place, if the Court finds that there was no real chance that an agency contract would have been arrived at then the quantification evidence will necessarily fall away for unconscionable conduct. In other words, because of the way Brighton Automotive has quantified its UC Claim, if it fails on the Further Contract Period Claim, then it would fail on the damages claim for unconscionable conduct even if there is a finding of unconscionable conduct. This was how I understood the submission and I put it squarely in these terms to counsel, who confirmed that I had understood it correctly.
K. Conclusion
For the above reasons:
(a) the amount of Brighton Automotive’s damages in respect of the Remaining Contract Period Claim should be calculated by the experts in the manner set out in paragraphs 218 and 220 above, to be presented to the Court;
(b) Brighton Automotive’s Further Contract Period Claim is not made out, and therefore Brighton Automotive is not entitled to any damages for loss of an opportunity to derive revenue and earn profit from being a Honda agent from 1 July 2023;
(c) Honda Australia did not engage in misleading or deceptive conduct by not disclosing to Brighton Automotive before entering into the Dealer Agreement that it was considering or contemplating the early termination of dealer agreements with authorised Honda dealers in Australia. Thus, Brighton Automotive’s MDC Claim has no role to play in its UC Claim;
(d) Brighton Automotive’s UC Claim is not made out and will be dismissed.
I will list the proceeding for mention so as to hear from the parties as to the appropriate course for dealing with the matter referred to in paragraph 388(a) above, interest, costs and final orders.
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