12:09 pm, September 26, 2023
Pendragon is trying to get a £260m High Court case for alleged breach of contract by a tech subsidiary dismissed.
Pinewood UK is facing legal action over its dealer management system by its reseller in the Asia-Pacific region Pinewood AP, as reported exclusively earlier this year by Car Dealer.
Pinewood AP claims that Pinewood UK failed to make modifications needed for the system (DMS) to meet legal requirements in the region as well as meet vehicle manufacturer franchise standards, despite repeated requests.
It says it recruited more than 40 people to look after the countries and territories. However, because of Pinewood UK’s inaction, it struggled to fulfil its contracts, which made its business model unviable.
That, says Pinewood AP in the action brought by King & Spalding International LLP, meant that most of the staff had to be laid off and it suffered damage to its reputation as well as losing millions of pounds.
It claims that Pinewood UK then approached Pinewood AP’s customers and ‘won numerous contracts from Pinewood AP’.
Pinewood UK subsequently made the changes quickly, says Pinewood AP, which claims it has suffered loss and damage worth some $312.7m (£260m) plus interest and is also seeking disclosure to establish if there is a fraud argument to be made.
Pinewood AP says that under a first reseller agremement dated 2017, it entered into nine customer contracts covering 631 user accounts across Hong Kong, Vietnam, Thailand and the Philippines, including Tesla and Lamborghini dealerships.
A second reseller agreement dated 2019 saw deals made with manufacturers Porsche, JLR plus VW Group and Audi in Japan. In addition, 30 customer contracts were struck with JLR or Porsche dealerships in Japan, covering 764 user accounts.
But Pendragon – which operates the brands Stratstone and Evans Halshaw – is trying to get the case dismissed.
It also says Pinewood AP owes it some £500,000 for unpaid invoices relating to the reseller agreements and is claiming for them.
Pendragon is currently at the centre of a buyout wrangle involving two suitors as well: Lithia Motors plus a joint bid by Hedin and Sytner’s American owner Penske.
In its annual report for 2022, Pendragon says Pinewood considers the claim lacks merit and is ‘entirely misconceived’.
It adds that Pinewood has also applied for a summary judgment to dismiss the claim by Pinewood AP ‘and on Pinewood’s claim for payment of the outstanding debt’.
The report says Pinewood expanded its international user base by 13 per cent last year to a record figure of some 6,400 users.
‘International users now represent 24% of Pinewood’s total external user base. There continues to be a strong pipeline of opportunities in new markets, with new customers added in Singapore and the Middle East during 2022,’ it said in its report.
Pinewood systems now operate in 19 countries, it says. Pinewood is also said to be continuing ‘to build a strong partnership with Volkswagen AG and Porsche’.
It is unknown when the judgment will be made.
Pinewood AP director David Neilson told Car Dealer: ‘As a start-up business, we poured significant time, money, and expertise into the contract, operating under the belief we had a genuine partnership with Pinewood UK and their parent company Pendragon.
‘In good faith, we not only upheld our end of the contract across Asia but also clinched unprecedented deals to market Pinewood UK’s DMS solution, including their most substantial contract to date.
‘In the process, we recruited a team of over 40 people to service the seven countries and territories where we had contracts.
‘Yet, due to the conduct of Pinewood UK, we couldn’t fulfil those contracts and were forced into the regrettable position of making most redundant and suffering significant damage to our business.’
He added: ‘Our disappointment in Pinewood UK failing to fulfil their side of the agreement cannot be understated or ignored.
‘Their actions have undermined the contracts we fought to win and, in the process, damaged our reputation with countless clients and most importantly resulted in job losses for our loyal staff.
‘Our leadership and investors are resolute that we cannot and will not stand idly by and let Pinewood UK see this as an acceptable or professional way of working, it isn’t, and they should face the consequences of their actions.’
Regarding the unpaid invoices, a spokesman for Pinewood AP told Car Dealer: ‘Pinewood UK’s failure to make the required updates, changes and developments to their software resulted in Pinewood AP being unable to launch the Pinewood AP and was therefore unable to secure the targets set out by Pinewood UK.
‘As such, Pinewood AP withheld payment of the invoiced sums on the basis of equitable set-off against the sums claimed by Pinewood AP from Pinewood UK.’
A spokesperson for Pendragon told Car Dealer: ‘Pendragon considers Pinewood AP’s claim to be entirely misconceived and lacking merit.
‘The absence of any provision for the claim in the company’s accounts is evidence that the board, in agreement with the group’s external auditors, deems the risk from the claim to be immaterial.
‘Fraud is not alleged in this case, but any such claims would be unfounded.’
Hedin and Penske had their surprise bid for Pendragon rejected last week, but then came back two days later with a revised offer.
The latest on the Pendragon buy-out affair was discussed during last week’s Car Dealer Podcast, which you can listen to below.
This story was originally published at 12.09pm on September 26 and updated later in the afternoon with comments from Pinewood AP and Pendragon.
