Franchising Contracts and Good Faith – Beecham Motors Pty Ltd v General Motors Holden Australia NSC Pty Ltd
The Victorian Supreme Court decision, Beecham Motors Pty Ltd v General Motors Holden Australia NSC Pty Ltd [2025] VSC 125, underscores the critical importance of precise contract drafting. The case highlights the legal challenges that arise when relying on ambiguous terms to enforce obligations not sufficiently clear in the contract.
Background
In January 2018, Beecham Motors Pty Ltd (Beecham Motors), a Holden dealership located north of Brisbane, entered into a five-year Dealership Agreement (Agreement) with General Motors Holden Australia (GM Holden), a subsidiary of the General Motors Company (GMC). This Agreement authorised Beecham Motors to sell and service new Holden vehicles until 31 December 2022.
However, in February 2020, GMC announced its decision to retire the Holden brand and exit the Australian market by 2021, over a year before the Agreement’s expiration. The decisions was made unilaterally by GMC, without consultation with GM Holden or Beecham Motors.
As a result, Beecham Motors contended that GM Holden breached the Agreement by failing to supply vehicles for the full term. Although the Agreement did not explicitly guarantee vehicle supply for the five years, Beecham Motors based its claim on:
A clause requiring Holden to “comply with Holden’s Wholesale Standards”, which included a commitment to “endeavour to supply dealers with sufficient vehicles to meet SEG targets or reasonably anticipated demand.”
An argument that a term should be implied into the Agreement, obliging Holden to supply vehicles throughout its term.
A claim that GM Holden breached its duty of good faith under section 6(1) of the Franchising Code of Conduct.
Key Issues
The Court addressed three primary issues, namely whether:
the Wholesale Standards imposed obligation on GM Holden to supply vehicles for the full term.
an implied term existed requiring vehicle supply for the Agreement’s full duration.
GM Holden breached its duty of good faith under the Franchising Code.
Court’s Findings
1. Obligations Under the Wholesale Standards
The Court found that the clause using the word “endeavour” was not promissory in nature. The language indicated an intention to supply vehicles but did not create a binding obligation to do so for the entire term. Furthermore, the decision to exit the Australian market was made by GMC, not GM Holden. As a result, GM Holden had not breached the express terms of the Agreement.
2. Implied Term of Ongoing Vehicle Supply
For a term to be implied into a commercial contract, it must be necessary to give the contract business efficacy. The Court ruled that no such term could be implied, as the Agreement merely gave Beecham Motors the opportunity – not the right – to sell Holden vehicles. Imposing a supply obligation would have gone against the Agreements intended purpose.
Beecham Motors also attempted to argue that such term was industry standard. Despite presenting evidence from multiple car retailers, the Court found the evidence insufficient and concluded that the implied terms was not customary in the motor vehicle industry.
3. Breach of Good Faith
Under section 6(1) of the Franchising Code, parties to a franchising agreement must act in good faith in the business dealings with one another. However, the Court stated that a good faith claim cannot stand independently where it overlaps with a contract breach claim. Since Beecham’s claim for breach of good faith was based on the same facts as its breach of contract claim, it could not proceed separately.
Even so, the Court held that GM Holden had not breached its good faith obligations. The exit from the Australian market was directed by the parent company, GMC, and not withing GM Holden’s control.
Significance of the Decision
This case serves as a reminder of the critical importance of drafting contracts with precision. Vague commitments – such as “endeavouring” to meet obligations – are unlikely to be enforced as binding promises.
The decision also clarifies that good faith obligations under the Franchising Code of Conduct are not a catch-all remedy and will not support standalone claims where they simply mirror alleged contractual breaches. Businesses should be cautious in relying on good faith as a substitute for clearly defined terms.
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
