In brief
The Federal Court of Australia has awarded aggregate damages in an Australian consumer class action proceeding commenced by a private applicant. The last time an order of this kind was made was in 1998, in representative proceedings commenced by the Australian Competition & Consumer Commission (ACCC).[1]
In Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344 (“Williams“), a class action concerning defective diesel particulate filter systems, Justice Lee awarded damages on an aggregate basis under section 33Z(1)(e) of the Federal Court of Australia Act 1976 (Cth) (“Act“) to group members who had held the vehicles the subject of the action for the entirety of the period the subject of the action. The total amount of damages is yet to be quantified (and will depend on the number of group members who come forward to participate), but could be as much as AUD 2 billion. Depending on how the Court treats the lead applicant’s legal costs and any commission to be paid to the litigation funder, this decision may also impact the way funders approach future class action litigation.
For respondents, awards of damages in the aggregate make it difficult to quantify total exposure until the process of assessing the damages of group members has been completed and the amount of exposure may also vary significantly depending on whether a class has been closed or remains open.
Depending on how the Court treats the lead applicant’s legal costs and any commission to be paid to the litigation funder, this decision may also impact the way funders approach future class action litigation.
In depth
Background to proceeding
Williams concerned claims relating to 264,170 Toyota Prado, Fortuner and HiLux motor vehicles sold to consumers between 1 October 2015 and 23 April 2020 (“Relevant Period“). The vehicles in question were fitted with “1GD-FTV” or “2GD-FTV” diesel combustion engines which were supplied with a diesel exhaust after-treatment system. The case concerned whether the diesel exhaust after-treatment system was defective because it was not designed to function effectively during all reasonably expected conditions of normal operation and use of the vehicles. The lead applicant, Direct Claim Services Qld Pty Ltd, claimed that the defective diesel particulate filter systems forming part of the diesel exhaust after-treatment system caused smoke and malodours to emanate from a vehicle’s exhaust, along with a reduction in fuel efficiency and excessive notifications regarding the need to service the vehicle.
The lead applicant alleged that by reason of the defective diesel particulate filter system:
- The relevant vehicles were not of “acceptable quality” and, therefore, breached the statutory guarantee as to quality under s 54 of the Australian Consumer Law (ACL).
- Toyota Australia also made misleading representations and omissions regarding the vehicles in contravention of sections 18, 29(1)(a) and (g), and 33 of the ACL. Toyota Australia admitted to making certain representations but did not accept that all those representations constituted breaches of the ACL.
Under section 272 of the ACL, damages may be recovered from a manufacturer of goods for the reduction in the value of the goods resulting from the failure to comply with the statutory warranty under s 54, assessed against the lower of the price paid (or payable) by the consumer for the goods and the average retail price of the goods at the time of supply.
The lead applicant sought an award of damages in the aggregate for:
- The reduction in value of its vehicle, a Toyota Prado, and those of group members as a result of a failure to comply with the s 54 statutory guarantee (that is, the vehicle was worth less than the price consumers paid for it by reason of the defect)
- The excess GST, stamp duty and financing costs that it and group members paid in connection with the purchase of their vehicle (on the basis that, because the price paid to acquire the vehicle was higher than its value by reason of the defect, the lead applicant and group members had overpaid GST and stamp duty, and incurred additional financing costs)
The lead applicant sought aggregate damages on alternative bases, either under ss 33Z(1)(e) or 33Z1(f) of the Act.
Under s 33Z(1)(e), the Court may award damages for group members, sub-group members or individual group members consisting of specified amounts or amounts worked out in such manner as the Court specifies.
Under s 33Z(1)(f), the Court can award damages in an aggregate amount without specifying amounts awarded in respect of individual group members if, but only if, a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment (s 33Z(3) of the Act).
Decision
Lee J found each of the lead applicant’s claims to be made out and quantified the damages (excluding excess financing costs, which will be the subject of separate calculations between the parties) as AUD 8,466.65. The Court also awarded AUD 4,725 to the lead applicant reflecting lost income.
Applying two overarching principles as to the award of compensatory damages (to put the claimant in the position it would have been but for the contravening conduct and the Court must still do the best it can in estimating damages where precise evidence is not available), Lee J found that the reduction in value of vehicles was in the range of 15% to 20%, and the Court settled on the mid-point, that is, a reduction in value of 17.5%.
The Court then awarded aggregate damages under section 33Z(1)(e) of the Act to those group members who held a relevant vehicle for the entire Relevant Period but declined to do so in respect of group members who had not held a relevant vehicle for the entire Relevant Period, because the many variables associated with calculating their losses meant loss would need to be assessed on a “per vehicle” basis, rather than “per group member” as required. The result is that their losses would will need to be assessed on an individualised basis. The Court’s award of aggregate damages covered both the reduction in value of vehicles held by group members for the entire Relevant Period, together with the excess GST and stamp duty paid by those group members in connection with the acquisition of their vehicle.
The Court declined to award aggregate damages under s 33Z(1)(f) of the Act, even for those group members who held a relevant vehicle for the entire Relevant Period. This was essentially because:
- The method of calculation advanced by the lead applicant’s loss expert, which was designed to provide an indication as to how far, on average, actual purchase prices were below the average retail price for each model and build year, only proposed a “proxy” for the two statutory concepts in section 272 of the ACL identified above (that is, price paid and average retail price at the time of supply) rather than evidence as to those two amounts
- As a result, the Court was not satisfied, as s 33Z(3) of the Act required, that a reasonably accurate estimate could be made, on this basis, of the total amount to which group members may be entitled.
Next Steps
The total quantum of damages to which eligible group members are entitled has not yet been specified. We anticipate the Court will award damages in the aggregate pursuant to the methodology proposed by the lead applicant for those group members who held their vehicle for the entire Relevant Period. The total quantum of damages will depend on the number of group members who are entitled to participate. For group members who had held their vehicle for only part of the Relevant Period, an individual assessment of loss and damage will need to be made, which will invariably further elongate the class action proceeding, as well as give rise to further considerable costs in the proceeding and, in turn, impact the amount which eligible group members may recover.
The manner in which the Court will treat the lead applicant’s legal costs and any sum to which the funder is entitled is also presently unclear. Depending on how the Court treats those aspects, the outcome of this decision is likely to have a significant impact on the appetite of funders and plaintiff law firms to pursue class action proceedings of this kind in the future.
[1] Australian Competition & Consumer Commission v Golden Sphere International Inc & Ors (1998) 83 FCR 424.
