ASX-listed advertising agency Adcorp has launched a lawsuit against Dentsu Mitchell in the NSW Supreme Court, AdNews can reveal.
Adcorp says it has been in a dispute with Dentsu Mitchell after it terminated its contract as part of the Australian Government work it won in 2014. Dentsu Mitchell (then Mitchell & Partners) and Adcorp won the account from UM, then worth about $159 million in annual billings.
Dentsu Mitchell has responsibility for overall media planning and buying of the campaign portion of the contract and subcontracted some non-campaign work to Adcorp, including recruitment and public notice advertising.
The lawsuit is thought to be seeking several million dollars in damages as a result of Dentsu Mitchell terminating its contract for the non-campaign portion of that contract.
“Adcorp is seeking damages arising from the termination of services that Adcorp was providing to Dentsu Mitchell in the context of Dentsu Mitchell's role as the principal contractor under the Australian Government's Master Media Agency Contract (MMA),” Adcorp said in a statement to the market.
“Adcorp also claims payment for unpaid invoices in the context of the provision of these services. The MMA contact commenced in July 2014.”
Prior to the MMA, Adcorp has provided non-campaign services to the government since 2008, but these were consolidated with campaign work into one contract for the 2014 MMA.
“We jointly tendered for the Australian government account and that was positioned, if you look at the market announcements at the time, that Dentsu Mitchell were the principle contractor however they were acting in an alliance with Adcorp and they would be treated as one entity,” Adcorp CEO David Morrison tells AdNews.
“At the time Kenny Stewart, the then CEO of Dentsu Mitchell, in their own press releases regarded it as an alliance, but in September last year they decided to terminate us from that relationship. This relates to the aspects that led to that termination.”
In March, Adcorp claimed Dentsu Mitchell unfairly terminated its subcontracting work and blamed the fallout the fallout for a $823,000 after tax loss in the six months to 31 December 2016, which includes $226,000 of costs associated with a restructure in the wake of losing government work.
Dentsu Mitchell has also claimed Adcorp owes it money in a letter it sent Adcorp in November.
Dentsu Mitchell now has several weeks to respond to Adcorp's statement of claims before a court hearing date is sent.
Read more about Adcorp's dispute with Denstu Mitchell here.
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