Williams v Toyota Motor Corporation Australia Limited; Toyota Motor Corporation Australia Limited v Williams [2024] HCA 38

What the court decided

Toyota Motor Corporation Australia Limited (Toyota) was the manufacturer of vehicles supplied to consumers between 1 October 2015 and 23 April 2020, each with a hidden defect in its diesel exhaust [1]. Kenneth Williams and Direct Claim Services Qld Pty Ltd (Direct Claim Services), a company of which he is sole director, were the lead applicants in representative proceedings against Toyota concerning 264,170 vehicles [5].

The primary judge (Lee J) found that every vehicle had a propensity, and a high likelihood, of experiencing the defect consequences [6], [10]. His Honour held that the vehicles were not of acceptable quality, a finding that stood on appeal and was not in issue in the High Court [14], [17], [42]. An effective repair first became available to some group members in May 2020 [13]. His Honour assessed damages at acquisition without regard to the repair and fixed the reduction at 17.5% of the average purchase price [15].

The Full Court of the Federal Court (Moshinsky, Colvin and Stewart JJ) read section 272(1)(a) as compensation for actual damage, which might require a departure from the date of supply or an adjustment to avoid over-compensation [6], [18]. It remitted the assessment on the basis of a 10% reduction, apparently scaled to each consumer's holding period before the repair, leaving the formula to the primary judge [20], [24]. Both sides were granted special leave to appeal on these damages [26].

The judgment also addresses submissions in Capic v Ford Motor Company of Australia Pty Ltd [2024] HCA 39 (Capic), an appeal heard immediately afterwards [6].

The joint reasons of Gageler CJ, Gordon, Steward, Gleeson and Beech-Jones JJ held that section 272(1)(a) supplies its own measure of damages, with no added requirement to prove loss [51]. It followed that the date of assessment cannot be moved to prevent over-compensation [54]. The provision looks only to the time of supply, so the Full Court erred in allowing assessment at another time [55].

The assessment brings to account, as at supply, what is known at trial about the goods' state and condition, including the effectiveness, cost, inconvenience and timing of any repair [3], [59]. The same knowledge is attributed in asking whether the section 54 guarantee was breached [34], [60]. The assessment also takes in how long after supply the repair would become practically available and what a hypothetical reasonable consumer would bear meanwhile [61]. Individual cost and inconvenience beyond what that buyer would have assumed is potentially recoverable under section 272(1)(b) [61]. Leaving section 271(6) aside, a consumer who refuses an effective repair that is practically available is in no different position from one who accepts it [61]. Where, as here, the defect is the design itself, whether its consequences materialised, beyond the propensity later events show existed at supply, is irrelevant to section 272(1)(a) damages [64]. Loss from a consequence that does materialise may be claimed under section 272(1)(b), less the section 272(1)(a) damages referable to that risk [65].

Their Honours thought it inherently unlikely that a reasonable buyer of the Direct Claim Services vehicle in 2016, told that no effective fix would come for at least four and a half years, would have paid the same price, but left that to the primary judge [62]. Remittal may yield different assessments between group members, the only likely variable being the time to the repair's practical availability [62].

They rejected an argument by the lead applicants and by Ms Capic, the appellant in Capic, that section 271(6), on express warranties, is the only way a manufacturer's capacity to repair can affect section 272(1)(a) damages [66]–[67]. Answering a submission of Ford Motor Company of Australia Pty Ltd, the respondent in that appeal, the joint reasons took the better view to be that the right to reduction in value damages runs with title or ownership [68], [71].

On the lead applicants' grounds, the joint reasons rejected the first but upheld the challenge to departing from the date of supply [79]. Though not strictly necessary, they also held, to settle the status of the Full Court's findings, that it wrongly rejected the primary judge's use of the valuer called for the lead applicants [17], [81], [86]–[87]. The primary judge's orders were not restored, because he too had not applied the correct approach [80]. Toyota's sole ground, that nothing was recoverable as no reduction in value continued at trial, failed because it ignored the period before repair [88]. Its alternative case, assessment at supply allowing for when a repair would in fact be implemented, carries into the remittal so far as accepted [27], [88].

The Court allowed the appeal of the lead applicants and set aside the Full Court's orders varying the damages assessment and answering the common questions on it, and also set aside the primary judge's answers to those questions [89]–[90]. It remitted the reassessment of section 272(1)(a) damages and excess GST damages under section 272(1)(b), and answers to common questions 26 to 35 [90]. Neither side achieved complete success, though the lead applicants' arguments were mostly accepted, so Toyota was ordered to pay half their costs of their appeal, while its own appeal was dismissed with costs [89]–[90]. The Full Court's order that each party bear its own costs of the appeal to that court was left undisturbed [89].

Edelman J agreed generally with the joint reasons and their orders [91], [128]. His Honour called reduction in value damages a performance-based remedy, distinct from loss-based damages [95], [99]. In his view, repair delay arising only from factors not inherent in the defect, such as supply chain issues, is irrelevant to those damages [103]. The joint reasons do not state that limit, asking instead when the repair would become practically available [24], [61]–[62].

Jagot J read the word "recover" in section 272(1) as confining the entitlement to loss still subsisting at judgment, the amount being fixed at supply, so that ownership need not continue [131]–[132]. Her Honour would also have upheld the lead applicants' appeal and dismissed Toyota's, but on different orders and costs, restoring the primary judge's assessment except for any group member who bought shortly before the repair became available and had it applied effectively and promptly, within days or weeks, with little inconvenience [133], [226]–[227].

Why it matters

Applying the joint reasons, valuation evidence should address value at supply, assuming a buyer who knows what was later learned about the defect and when, how and at what cost it could be repaired [59], [79]. In my view, because the joint reasons expect assessments to vary only with the time from supply to practical availability of a repair, common questions on damages may need framing by date of supply [62].

On the joint reasons' better view, with which Edelman J agreed, a former owner may claim consequential loss under section 272(1)(b), including loss on resale, but not reduction in value damages [71]–[72], [112]–[113]. That view answered a submission in Capic, not a ground of these appeals [26]–[27], [68]. Jagot J took a different view on whether continued ownership is required [131].

Readers should check the current text of the Australian Consumer Law.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.