6:47 pm, October 13, 2023
Pendragon has failed in its attempt to have a £260m claim in the High Court against its Pinewood software arm dismissed completely – but the claim has been substantially reduced.
The case – number HT-2022-000244 – by Pinewood Technologies Asia Pacific Ltd (Pinewood AP) was filed in the Technology and Construction Court, a division of the High Court, in July last year.
The claim – which was not announced by Pendragon to the Stock Market at the time – alleges Pinewood UK failed to make changes to the dealer management system to fit legal requirements required in different markets.
This, says the claimant, blocked its ability to launch in Japan and caused issues in markets it served including Thailand, Hong Kong, the Philippines and Vietnam.
Pinewood UK says the case is ‘without merit’ and counter-claimed in November over unpaid invoices worth more than £500,000.
The High Court case, first revealed by Car Dealer in January, has been rumbling on for more than a year, but today Mrs Justice Joanna Smith ruled that there is a case for Pendragon’s DMS arm to answer.
The case will now go to court at some stage in the near future. Dates have yet to be set.
In a 40-page judgement sent to the legal teams at 2pm today (Oct 13), Mrs Justice Smith wrote: ‘For the purposes of this application, I must proceed on the basis that the breaches alleged in the particulars of claim are capable of being established at trial.’
However, in a win for the defendants, Mrs Justice Smith also ruled that the potential future profit element that Pinewood AP was claiming for cannot be included. She said it should only be for incurred costs.
This means the size of the £260m claim has now been substantially reduced. Some reports suggest this could now be as little as £1m. The claimant said it would argue this part of the ruling in the Court of Appeal.
Pendragon told Car Dealer ‘it does not comment on live litigation’.
In its annual report for 2022, Pendragon said Pinewood considers the claim is ‘entirely misconceived’ and explained how it had appealed for ‘summary judgement to dismiss the claim’.
Pinewood AP said it took Pendragon’s subsidiary Pinewood Technologies PLC to court over ‘contract breaches in their reseller agreement’ which it says ‘resulted in Pinewood AP being unable to fulfil contracts it had devoted time and resources into building’.
Pinewood AP chief executive David Neilsen said: ‘We are delighted that the judge has rightfully decided to dismiss the strikeout and that Pinewood Technologies PLC have a case to answer.
‘Alongside Josephine Lee, we set up a business, won contracts and thought we had a good partnership with Pendragon. It turns out that that was not the case.
‘We are pleased that we will take the matter forward in court and that justice has a chance to be done.’
Pendragon are currently at the centre of a bidding war. Shareholders will shortly consider an increased bid from American firm Lithia Motors to buy its car dealerships and leasing arm. The deal – worth the equivalent of 35.4p per share – values the assets at £397m.
The deal will see Pinewood, the group’s software arm, hived off and take Pendragon’s place on the London Stock Exchange, led by Bill Berman, the current CEO of Pendragon.
Both parties have pledged to invest in the software business and Lithia believes it can increase the Pinewood DMS business by at least 30% thanks to promises it’s already received.
It is not known what the bidding parties think of the current live legal action and it has not been mentioned in any updates from the firms.
Hedin and Penske recently removed their offer from the table, while AutoNation, a third bidder, is said to be currently considering whether to up its 32p per share offer for the firm.
