DISPUTE RESOLUTION KEY TO STRONG AUTO CODE: PANEL

Ensuring a robust dispute resolution process is part of the Automotive Code is the most important next step for AADA as it works with the Federal Government in the development of the Code, according to MacPherson Kelley National Director, James Sturgess.

Mr Sturgess was speaking as part of the Automotive Code Panel at the AADA 2019 National Dealer Convention & Expo in Melbourne in September.

Mr Sturgess said AADA had “done an absolutely magnificent job pushing the Code to where it is now, for both sides of Parliament to say we’re willing” to bring in an Automotive Code.

“The bit I would really like to see happen is the dispute resolution part of the process,” he said.
“The single biggest thing we can do, now that we’ve got both sides of government’s attention, is really hammer home on the dispute resolution part, because the legal system is an absolute disaster for solving dispute resolutions in the commercial setting we’re all living in.”

HWL Ebsworth Lawyers lead partner, Evan Stents, said the current Franchise Code did not protect Dealers against unfair terminations, which he would prioritise in the Automotive Code.

“There are things in there that provide significant disadvantages for Dealers, given their level of investment. For instance, there’s still a ‘no-fault’ termination in the Code,” Mr Stents said.
“It’s a bit of a furphy to say a Dealer must give reason to terminate the agreement, because the OEMs are under a no-fault arrangement and don’t have to give reasons to Dealers when they don’t renew the Dealer’s franchise.

“Dealers generally enter into an agreement with more than one term as a right of renewal but it’s an illusory right, and off the back of that right investments are made thinking there’s more than one term. But getting to the end of that term the OEM might say they’re not renewing because they don’t want to go through the breach scenario where there’s an obligation to remedy or an opportunity for them to be challenged.”

Mr Stents argued Dealers should be afforded the same rights and protections given to lessees in real estate matters where the tenant (Dealer) was the party with the right of renewal, not the landlord (OEM).

Mr Stents said it was essential Dealer agreements with OEMs include mandatory buy-back terms and minimum tenure clauses with minimum notice.

“The government is saying it doesn’t want to mandate buy-back obligations, but they’re already in place within the Dealer agreements,” he said

“The only reason Dealers have those vehicles in stock is because of the requirements by OEMs in that same agreement.”

Mr Sturgess agreed, arguing that Dealers need protection in the case of dealership closures.

“You enter into an agreement for the life of the dealership. If for some reason the Dealer wants to get out that’s fine, but if the OEM wants to shut down a dealership for whatever reason, you need to be having a conversation about compensation,” he said.

Mr Sturgess said it was crucial the Automotive Code remained outside the Franchise Code.

“An annexed code is a watered-down code. The issues we’re talking about you might be able to squeeze into an annex, but it would be watering down the arguments by accepting that,” he said.

Mr Stents pointed out that with eight standalone industry codes covering other industries, it was imperative the automotive industry was not shackled to a shared code that doesn’t work for the auto industry. He also stressed that any Automotive Code should be future-proofed by ensuring it was not limited to franchising alone.

He said that while the current franchising code of conduct comes under the Department of Treasury, an Automotive Code should come under the Department of Small Business.

HWL Ebsworth Lawyers partner, Maria Townsend, said an Automotive Code would hopefully give Dealers the ability to join forces and strike collective bargaining agreements with OEMs.

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