Ford Motor Company of Australia Pty Ltd v Capic

[2023] FCAFC 179

FEDERAL COURT OF AUSTRALIA

Ford Motor Company of Australia Pty Ltd v Capic [2023] FCAFC 179

Appeal from:

Capic v Ford Motor Company of Australia Pty Ltd [2021] FCA 715

Capic v Ford Motor Company of Australia Pty Ltd (Revised Common Questions) [2021] FCA 1320

File number:

NSD 1321 of 2021

Judgment of:

YATES, BEACH AND DOWNES JJ

Date of judgment:

14 November 2023

Catchwords:

CONSUMER LAW – representative proceedings – alleged defects in motor vehicles by reason of deficiencies in transmission system – where primary judge found affected vehicles were not of acceptable quality when supplied to consumers contrary to the guarantee in s 54 Australian Consumer Law – whether primary judge applied statutory test – the meaning of acceptable quality in a propensity case – extent to which after supply events should be taken into account when assessing whether guarantee has been met – whether error by primary judge in deciding that component posed a safety risk

DAMAGES – whether s 271(1) Australian Consumer Law gives rise to separate causes of action – whether s 271(6) Australian Consumer Law is engaged when failure to repair within reasonable time – construction of s 272 Australian Consumer Law – whether earlier decision of Full Court which construed same statutory provision should be followed – whether question of assessment should be remitted to primary judge  

Legislation:

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 54, 271(1), 271(2), 271(6), 272

Evidence Act 1995 (Cth) s 135

Federal Court of Australia Act 1976 (Cth) Pt IVA, s 33Z(3)

Trade Practices Act 1974 (Cth) s 74D

Sale of Goods Act 1893 (UK) s 14(2)

United States Code (US) Title 28 § 1782

Cases cited:

Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1672

Australian Competition and Consumer Commission v Mazda Australia Pty Ltd (2021) 158 ACSR 31; [2021] FCA 1493

Capic v Ford Motor Company (No 3) [2017] FCA 771

Capic v Ford Motor Company of Australia Limited (No 4) [2017] FCA 1575

Capic v Ford Motor Company of Australia Pty Ltd (2021) 154 ACSR 235; [2021] FCA 715

Capic v Ford Motor Company of Australia Pty Ltd (Revised Common Questions) [2021] FCA 1320

Courtney v Medtel Pty Ltd (2003) 126 FCR 219; [2003] FCA 36

Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211

Gill v Ethicon Sàrl (No 5) [2019] FCA 1905

Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31

Medtel Pty Ltd v Courtney (2003) 130 FCR 182; [2003] FCAFC 151

Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 (2021) 287 FCR 181; [2021] FCAFC 153

Pearson v Minister for Home Affairs (2022) 295 FCR 177; [2022] FCAFC 203

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28

Tapiki v Minister for Immigration, Citizenship and Multicultural Affairs (2023) 408 ALR 503; [2023] FCAFC 10

Toyota Motor Corporation Australia Limited v Williams (2023) 296 FCR 514; [2023] FCAFC 50

Vautinv BY Winddown, Inc. (formerly Bertram Yachts) (No 4) (2018) 362 ALR 702; [2018] FCA 426

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Number of paragraphs:

324

Date of hearing:

20–24, 28 March 2023

Counsel for the Appellant:

Ms W Harris KC w/ Mr M Costello KC and Mr T Farhall

Solicitor for the Appellant:

Allens

Counsel for the Respondent:

Mr J Gleeson SC w/ Dr F Roughley and Mr P Strickland

Counsel for the Respondent:

Corrs Chambers Westgarth

ORDERS

NSD 1321 of 2021

BETWEEN:

FORD MOTOR COMPANY OF AUSTRALIA PTY LTD ACN 004 116 223

Appellant

AND:

BILJANA CAPIC

Respondent

ORDER MADE BY:	YATES, BEACH AND DOWNES JJ
DATE OF ORDER:	14 NOVEMBER 2023

THE COURT ORDERS THAT:

1.Within 14 days, the parties provide to the Full Court an agreed form of orders, including the answers to the common questions and costs order, having regard to the findings made.

2.If the parties cannot agree on a form of orders and answers to the common questions, then, by 1 December 2023, the parties provide to the Full Court a form of orders (other than costs), and answers to the common questions, which they propose, to be accompanied by written submissions not exceeding five pages.

3.By 1 December 2023, the parties file and serve submissions regarding costs (not exceeding three pages) if agreement cannot be reached on the issue of costs.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION	[1]
The case brought below	[6]
Ruling by primary judge in relation to admission of documents	[12]
Overview of findings by the primary judge relating to claims by Ms Capic	[13]
Overview of findings by the primary judge relating to claims by the group	[20]
FORD’S APPEAL ON LIABILITY	[28]
Whether primary judge applied the correct statutory test	[32]
The meaning of “acceptable quality” in s 54 in a propensity case	[48]
Whether, and to what extent, after supply events are taken into account when assessing whether the guarantee has been met	[56]
Ground 1 Amended Notice of Appeal	[65]
Ground 2 Amended Notice of Appeal	[77]
Ground 3 Amended Notice of Appeal	[85]
Reasons of the primary judge	[89]
Whether primary judge answered irrelevant question	[101]
Whether conclusion as to safety as part of s 54 analysis was wrong	[108]
Conclusion	[118]
The respondent’s Notice of Contention	[119]
RESPONDENT’S APPEAL ON LIABILITY	[120]
Grounds 1 and 2 Amended Notice of Cross-Appeal	[120]
Relevant procedural history	[122]
Reasons of the primary judge	[156]
Whether the primary judge erred	[168]
Grounds 3 and 4(b) Amended Notice of Cross-Appeal	[184]
The case below	[184]
Reasons of the primary judge	[191]
Whether the primary judge erred	[197]
Ground 5 Amended Notice of Cross-Appeal	[210]
The case below	[214]
Whether the primary judge erred	[222]
Ground 6 Amended Notice of Cross-Appeal	[228]
Grounds 10 and 11 Amended Notice of Cross-Appeal	[230]
Reasons of the primary judge	[234]
Whether the primary judge erred	[246]
APPEAL ON DAMAGES	[260]
Section 271 Australian Consumer Law	[260]
Whether s 271(1) gives rise to separate causes of action	[263]
Whether s 271(6) is engaged when failure to repair within reasonable time	[285]
Section 272 Australian Consumer Law	[292]
Reasons of the primary judge	[297]
Whether the primary judge erred	[299]
APPEAL ON PRE-JUDGMENT INTEREST	[318]
DISPOSITION	[320]

THE COURT:

INTRODUCTION

1. This is an appeal by Ford Motor Company of Australia Pty Ltd (Ford) from orders made on 13 August 2021 and 18 November 2021, and the judgment delivered on 29 June 2021 in Capic v Ford Motor Company of Australia Pty Ltd (2021) 154 ACSR 235; [2021] FCA 715 (J) and the further judgment delivered on 3 November 2021 in Capic v Ford Motor Company of Australia Pty Ltd (Revised Common Questions) [2021] FCA 1320 (CQJ).

2. The primary judge found that Ford had supplied certain vehicles that were not compliant with the statutory guarantee of acceptable quality in s 54 of the Australian Consumer Law (ACL), being Sch 2 of the Competition and Consumer Act 2010 (Cth), by reason of deficiencies in the transmission system giving rise to a propensity for the vehicles to exhibit “a troubling range of behaviours”.

3. Ms Biljana Capic, the respondent to the appeal brought by Ford, has brought a cross-appeal on behalf of herself and the group whom she represents.

4. Both sides have filed Notices of Contention in the other’s appeal.

5. When referring to Ms Capic in her capacity as the group’s representative, we will refer to her as the respondent and when referring to her in her own capacity, we will call her Ms Capic.

   The case brought below

6. The proceedings below concerned various problems alleged to exist with 73,451 vehicles, manufactured by Ford Motor Company (Ford US) between July 2010 and December 2016, and imported into Australia by Ford (Affected Vehicles).  The dates they were supplied new ranged from 22 September 2010 to 29 December 2017.  They each contained a 6-speed dry dual clutch PowerShift transmission called the “DPS6”.  The Affected Vehicles were manufactured under three model lines: Focus, Fiesta and EcoSport.

7. Ms Capic brought these proceedings as a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) on behalf of herself and the group whom she represents. The group consists principally of the persons who purchased these vehicles new together with subsequent second-hand purchasers between 1 January 2011 and 29 November 2018.

8. Relevantly to this appeal and cross-appeal, Ms Capic brought a claim under s 271(1) of the ACL seeking damages pursuant to s 272(1) of the ACL on the basis that the Affected Vehicles were not of acceptable quality when supplied to consumers contrary to the guarantee in s 54 of the ACL.

9. Before the primary judge, it was alleged that the Affected Vehicles as supplied (which included a car purchased by Ms Capic) suffered from two sets of deficiencies.

10. The first set were described by the primary judge as Component Deficiencies.  It was claimed that the DPS6 posed four risks related to components within it, namely:

    (1)Input shaft seals which had a tendency to leak permitting lubricants from the gearbox side of the transmission to enter the part of the bell housing containing the otherwise dry clutch and drive plates and contaminate them;

    (2)Inadequate friction material on the faces of the clutch and drive plates (the friction material is also referred to as the clutch lining);

    (3)A transmission control module (TCM) which contained a printed circuit board (PCB) to which was affixed, amongst other things, two types of integrated circuits or chips known as an “ATIC 91” chip and an “ATIC 106” chip.  These were affixed to the PCB by means of solder.  It was claimed that the coefficients of thermal expansion of the PCB and the ATIC 91 and ATIC 106 chips were different and that repeated heating and cooling of the TCM (which is attached to the transmission assembly) created a risk of the solder cracking; and

    (4)A rear main oil seal which had a tendency to leak thereby permitting lubricants to enter the bell housing from the engine side of the transmission and contaminate the clutch and drive plates.

11. The second set were said to give rise to a risk of certain symptoms (the principal, but not only, symptom being shudder) because of what were said to be two architecture features of the DPS6 (described variously as the Architecture Deficiencies or the Architectural Deficiencies).  These were (1) inadequate heat management and (2) inadequate damping of torsional vibrations.  These problems were designated as associated with the architecture of the DPS6 because of a contention that they could not be cured without changes to that architecture and that this in fact had not occurred.

    Ruling by primary judge in relation to admission of documents

12. During the trial, Ford objected to the respondent’s attempt to tender certain documents on the basis that it would be procedurally unfair for them to be admitted.  For the most part, this objection was upheld: [924]–[955] J.

    Overview of findings by the primary judge relating to claims by Ms Capic

13. The following is a summary of the findings of the primary judge in relation to the claims by Ms Capic on her own behalf and which are relevant to the appeal and cross-appeal.

14. Ms Capic purchased a 2012 Ford Focus on 24 December 2012.

15. In relation to the Component Deficiencies, it was Ms Capic’s case that each of the first three risks eventuated in the case of her vehicle and gave rise to a range of symptoms including shudder.  Her case, however, was not that her vehicle was not of acceptable quality because three of the risks materialised; it was rather that it was not of acceptable quality because it was supplied with the four risks inherent in it.

16. As to this part of Ms Capic’s case, the primary judge decided that:

    (1)Ms Capic established the existence of each of the risks except the risk said to arise from the rear main oil seal: [5] J.  We observe that no appeal has been brought in relation to the rear main oil seal;

    (2)for each risk, Ms Capic had a separate cause of action under s 271(1) of the ACL entitling her to claim damages from Ford under s 272: [5] J;

    (3)in the case of Ms Capic’s vehicle, the three accepted risks also manifested themselves and, after they did, her vehicle displayed a troubling range of behaviours which caused Ms Capic to take her vehicle for servicing and to complain about these problems: [6] J;

    (4)Ford did not satisfactorily resolve the problem relating to the friction material: [8] J;

    (5)the risk inherent in the input shaft seals with which Ms Capic’s vehicle was supplied was eliminated when they were replaced by Ford, but this was not done within a reasonable time: [10]–[11] J;

    (6)the risk posed by the TCM failing was not removed when Ford installed a software update known as “15B22” which detected solder cracking before actual symptoms became perceptible to the driver: [7] J;

    (7)the risk posed by the TCM failing was removed when Ms Capic’s vehicle received a new TCM with the revised ATIC 91 chip, but this was not done within a reasonable time: [7], [10]–[11] J;

    (8)Ms Capic did not demonstrate the existence of the problem with the original ATIC 106 chips: [7] J.

17. Ford asserted below that it was entitled to rely upon s 271(6) of the ACL in response to Ms Capic’s claim, but this was rejected by the primary judge because of the findings made above. The primary judge was therefore satisfied that Ms Capic was entitled to sue Ford for the reduction in value damage which she suffered as a result of the supply to her of a vehicle with the three inherent risks: [11] J.

18. As to the Architecture Deficiencies, the primary judge decided at [13] J that:

    (1)the heat management case failed;

    (2)the manner in which the DPS6 damped torsional vibrations generated a risk that the gears in Ms Capic’s vehicle would rattle and her vehicle would display a slight shudder at low speeds;

    (3)Ford described the gear rattling and a slight shudder at low speeds as “normal operating characteristics” of the DPS6 and so did not attempt to resolve them.  However, the primary judge considered that the fact that gear rattling and a slight shudder at low speeds were described as normal operating characteristics did not have the consequence that they cannot constitute a breach of the guarantee of acceptable quality;

    (4)the fact that Ms Capic’s vehicle was supplied with these two problems inherent in it had the consequence that it was not of acceptable quality for the purposes of s 271(1) and she had another cause of action against Ford in respect of them.

19. Ms Capic was awarded damages for reduction in value in the amount of $6,820.91 and other reasonably foreseeable loss and damage under s 272(1) of the ACL: [14]–[15] J. Although Ms Capic made a claim for damages for inconvenience, distress and vexation in her pleadings, she did not pursue it in her submissions and so the primary judge made no award for it: [16] J.

    Overview of findings by the primary judge relating to claims by the group

20. The following is a summary of the findings by the primary judge in relation to the claim by the group and which are relevant to the appeal and cross-appeal.

21. As to the Component Deficiencies, the primary judge decided that:

    (1)the vehicles which were supplied with the original input shaft seals posed a risk of failure with the consequence that all of these vehicles were at the time of their supply not of acceptable quality: [19] J;

    (2)the vehicles which were supplied with the original clutch lining material (known as “B8080”) suffered from a risk of developing symptoms such that they did not comply with the guarantee of acceptable quality: [23] J;

    (3)the vehicles supplied with TCMs containing the original ATIC 91 chip were not of acceptable quality at the time of their supply because of the risks they posed: [30] J;

    (4)the claim based on the supply of vehicles with TCMs containing the original ATIC 106 chip failed: [29] J;

    (5)the vehicles supplied with a TCM with the revised ATIC 91 chip were not in breach of the guarantee of acceptable quality: [29] J;  

    (6)the claim based on the supply of vehicles with an inherent risk of failure due to the rear main oil seal failed: [33] J.  We observe that no appeal has been brought in relation to the rear main oil seal.

22. As to the application of s 271(6) of the ACL to the claim concerning the input shaft seals, the primary judge decided that:

    (1)in vehicles in which the original input shaft seals had not been replaced, those group members have claims under s 271(1) for reduction in value damages under s 272(1)(a) and (if applicable) other reasonably foreseeable loss and damage under s 272(1)(b) of the ACL: [20] J;

    (2)where the input shaft seals had been replaced with seals containing both the new “FKM” elastomer and a steel outer backing on the inner seal, the issue of whether the repair was effected within a reasonable time had not been tried and turned on the individual position of each group member: [21] J. It could not be known whether these group members have claims for reduction in value damages, although they may have claims for other reasonably foreseeable loss and damage under s 272(1)(b) of the ACL: [22] J;

    (3)where the input shaft seals had been replaced with seals containing only the new FKM elastomer but not the new steel backing on the inner seal, the extent of the remaining risk was not established: [22], [680] J.

23. As to the application of s 271(6) of the ACL to the claim concerning the clutch lining, the primary judge decided that:

    (1)in the case of vehicles in which the original clutch lining (the B8080) was not replaced, those group members have claims under s 271(1) for reduction in value damages under s 272(1)(a) and (if applicable) other reasonably foreseeable loss and damage under s 272(1)(b) of the ACL: [24] J;

    (2)in the case of vehicles which received replacement clutches using clutch lining known as “RCF1o”, this replacement removed the relevant risk. The issue of whether the repair was effected within a reasonable time had not been tried and turned on the individual position of each group member. It could not be known whether these group members have claims for reduction in value damages, although they may have claims for other reasonably foreseeable loss and damage under s 272(1)(b) of the ACL: [25] J;

    (3)in the case of vehicles which received a replacement clutch known as a “half-hybrid B8040/B8080 clutch”, this replacement did not remove the relevant risk. As s 271(6) does not apply, these group members have claims for reduction in value damages as well as for other reasonably foreseeable loss and damage under s 272(1)(b) of the ACL: [26] J;

    (4)in the case of vehicles which were supplied with the half-hybrid B8040/B8080 clutch, the group members did not have a claim in respect of the clutch lining: [27] J;

    (5)in the case of vehicles which were supplied with RCF1o, the group members did not have a claim in respect of the clutch lining: [28] J.

1. As to the application of s 271(6) of the ACL to the claim concerning vehicles supplied with TCMs containing the original ATIC 91 chip, the primary judge stated at [30] J that:

   …The Respondent applied two fixes.  First, each vehicle which was presented for service after 27 October 2015 received a software update known as 15B22.  It did not address the physical problem of solder cracking but it detected that problem before the symptoms associated with it became perceptible to the driver and disabled the vehicle in a sufficiently confronting way, attended with warning lights and messages, that it may be accepted that a driver would take the vehicle in for service almost immediately and without fail.  Secondly, once new TCMs with the revised ATIC 91 chip became available these were inserted into vehicles which showed symptoms of TCM failure or which had been brought in for service due to the operation of the warning system instituted by the 15B22 software update.

2. At [32] J, the primary judge found that the replacement of the original TCM with a new TCM with the revised ATIC 91 chip was “a successful repair and removed the risk posed by the original TCM” but that, again, “in the case of each such group member it is not presently known whether the replacement was effected within a reasonable time”.  For this reason, the primary judge concluded that it could not be known whether these group members have claims for reduction in value damages.

3. As to the Architecture Deficiencies, the primary judge decided that:

   (1)the claim based on the supply of vehicles with an inherent risk of failure because of the way in which heat was managed in the DPS6 failed: [34] J;

   (2)the DPS6 did not suffer from the Architecture Deficiency constituted by inadequate torsional damping; however, all Affected Vehicles had a risk that they would develop rattling gears and slight shudder at low speeds due to the manner in which the DPS6 damps torsional vibrations, with the consequence that the Affected Vehicles did not comply with the guarantee of acceptable quality: [35], [530] J.

4. The group members sought damages on an aggregate basis, but the primary judge determined that he could not be satisfied that a reasonably accurate assessment could be made of the total amount to which group members would be entitled, as required by s 33Z(3) of the Federal Court of Australia Act: [36] J.

   FORD’S APPEAL ON LIABILITY

5. By grounds 1, 2 and 3 of the Amended Notice of Appeal, Ford raises related complaints about the manner in which the primary judge construed s 54 of the ACL, and approached the task of assessing whether the statutory guarantee had been met. We turn then to consider that provision, and the issues raised by these grounds generally, before addressing the grounds themselves in more detail.

6. Section 54(1) of the ACL relevantly provides that, if a person supplies goods to a consumer in trade or commerce (as was the case here), there is a guarantee that the goods are of acceptable quality.

7. Sections 54(2) and 54(3) of the ACL provide guidance as to the meaning of “acceptable quality” in s 54(1) as follows:

   (2)      Goods are of acceptable quality if they are as:

   (a)fit for all the purposes for which goods of that kind are commonly supplied; and

   (b)acceptable in appearance and finish; and

   (c)free from defects; and

   (d)safe; and

   (e)durable;

   as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

   (3)      The matters for the purposes of subsection (2) are:

   (a)the nature of the goods; and

   (b)the price of the goods (if relevant); and

   (c)any statements made about the goods on any packaging or label on the goods; and

   (d)any representation made about the goods by the supplier or manufacturer of the goods; and

   (e)any other relevant circumstances relating to the supply of the goods.

   (emphasis original.)

8. In Ford’s appeal, there are three issues raised in connection with the proper interpretation of s 54, and the approach taken by the primary judge in its application, being:

   (1)whether the primary judge applied the correct statutory test. In particular, whether the primary judge applied s 54 as requiring a standard of perfection;

   (2)the meaning of “acceptable quality” in s 54 in a propensity case;

   (3)whether, and to what extent, after supply events are taken into account when assessing whether the guarantee in s 54 has been met.

   Whether primary judge applied the correct statutory test

9. As observed at [52]–[53] J, the respondent’s case that the Affected Vehicles were not of acceptable quality was made on the basis that the vehicles had a propensity towards, or risks of, certain identified misbehaviours.  The case was therefore about the existence of propensities (or risks) of identified forms of vehicle misbehaviour.  The method of proof selected by the respondent was to seek to demonstrate that the propensities or risks existed because of particular mechanical features of the DPS6.

10. We turn then to consider the reasons of the primary judge.

11. At [54] J, the primary judge identified the nature of the evidence which the respondent relied on to prove the existence of the risks of the alleged misbehaviours.  At [55] J, the primary judge identified that a more fulsome explanation of the respondent’s case that the vehicles suffered from the risks of misbehaviour identified by Dr Greiner (the respondent’s expert) was contained in Section XVI of the reasons.  At [58] J, the primary judge summarised the case that Ford was required to meet on the existence of the alleged propensity of the vehicles to misbehave.

12. In section VI of the reasons, the primary judge addressed the issue of the leaking input shaft seals.  Harking back to the earlier discussion concerning the manner in which the respondent sought to establish liability, the primary judge observed at [221] J that:

    [The] question in the case is whether the vehicles pose a risk of a particular set of failures and are, for that reason, not of acceptable quality under s 54.  Whether that risk proceeds from features of the input shaft seals which have their origins in manufacturing processes or instead design processes (or both) is irrelevant to that question.

    (emphasis added.)

13. Section VIII of the reasons addressed the “TCM Issue”. The respondent contended that, before the introduction of the 15B22 software update, this posed a safety issue. The primary judge considered this to be something of a side issue. At [388] J, the primary judge again referred to the actual question for determination, being whether the vehicles were of acceptable quality within the meaning of s 54 of the ACL. His Honour continued:

    The safety risk the Applicant puts forward is that which arises from the ATIC 91 chip and is limited to the symptom consisting of a total loss of motive power. If one makes the assumption that the Applicant succeeds in proving that, as sold, the vehicles had a real risk of a total loss of motive power whilst driving then the question is whether a vehicle with that real risk is of acceptable quality within the meaning of s 54. If on the other hand, the Applicant fails to show the existence of such a real risk then the issue does not seem to arise. On this view of affairs, the question of whether the real risk was also a safety risk does not seem to matter very much.

    (emphasis added.)

14. Section X of the reasons addressed the alleged Architecture Deficiencies.  The primary judge observed at [456] J that:

    …The question of whether the damping systems for the DPS6 are adequate from an engineering perspective is not quite the same question as whether vehicles fitted with a DPS6 are of acceptable quality for the purposes of ACL s 54. For example, it is often said that the Sydney Harbour Bridge is over-engineered in the sense that it was built much stronger than it needed, in fact, to be. In that sense, its engineering was inadequate because excessive resources had been devoted to achieving a strength which was of no practical utility. The bridge however is perfectly adequate from the perspective of all those who have driven over it.

15. The primary judge continued at [500] and [512] J:

    …It is not enough to say that the damping was inadequate per se. This is because this is a case under ACL s 54 and the Applicant needs to show that the vehicles were not of acceptable quality. That question is a consumer-facing question…

    …

    …Assuming in the Applicant’s favour that the use of clutch slip generated heat and that the heat management system was not sufficient to deal with this, the question then arises: what actual problem did this cause? By itself a hot transmission does not translate into a vehicle which is not of acceptable quality within the meaning of s 54. There must be something about the excess heat which impacts negatively on a consumer’s enjoyment of a vehicle fitted with the DPS6.

    (emphasis added.)

16. At [529] and [530] J, the primary judge stated:

    …To label the engineering qualities of the DPS6 with the word ‘deficiency’ or its damping system with the word ‘inadequate’ carries a particular risk that such a designation will contaminate the assessment of the statutory question.  Where that word is used in an engineering context that risk is augmented.  What is a deficiency from an engineer’s perspective may not necessarily be unacceptable from a consumer’s perspective. Indeed, it is precisely the prospect of such an outcome which underpins the Respondent’s contention that the DPS6 complies with the s 54 guarantee because shudder, harsh gear shifts, rattle, shunting and mechanical sounds during gear shifts are but its normal operating characteristics. Such an outcome is not logically excluded merely because a transmission engineer might think the torsional damping provided in the DPS6 could have been better.

    I therefore do not accept the Applicant’s contention that the DPS6 suffered from the Architectural Deficiency constituted by inadequate torsional damping.  However, as I have explained I do accept that torsional vibrations caused 2 of the 5 normal operating characteristics which the Respondent admitted.  Rejection of this contention does not, however, tell one anything about whether those characteristics meant the vehicles did or did not comply with the guarantee of acceptable quality in s 54.

    (emphasis added.)

17. Section XII of the reasons addressed the topic of acceptable quality.

18. After identifying that the issue is governed by s 54 of the ACL, the primary judge quoted the provision at [603] J, and then stated at [606]–[607] J:

    … [F]or present purposes, the issue is whether the vehicles were of ‘acceptable quality’ within the meaning of s 54(1). The language of s 54(1) suggests that the guarantee applies at the time of supply of vehicles. The issue is therefore whether the vehicles were of acceptable quality at the time of supply.

    ‘Acceptable quality’ is defined in s 54(2), extracted above. The relevant portions of this are the requirement that the vehicles be fit for all purposes for which such vehicles are commonly supplied, be free from defects, be safe and be durable. In deciding whether the vehicles satisfied those requirements one is required by s 54(2) to have regard ‘to the matters in subsection (3)’, also extracted above.

19. The next section of the primary judge’s reasons, which spans [614] to [637] J, contains an analysis by the primary judge of the matters listed in s 54(3) of the ACL. At [614] J, the primary judge introduced this section by stating:

    It is therefore necessary to consider whether each of the inherent risks of failure I have concluded existed were such as to mean that the vehicles were not of acceptable quality. However, that assessment is required by s 54(2) to be conducted having regard to the matters in s 54(3) which are therefore mandatory matters which the Court must assess…

20. The primary judge then proceeded to address each of the matters in s 54(3), before stating at [637] J that, having surveyed the mandatory matters in s 54(3), it was necessary to consider each of the problems which had been identified. The primary judge then did so, and referred back to his consideration of the matters in s 54(3), without repeating them, which he was entitled to do: see, for example, [640] and [669] J. No error is shown by taking such an approach as it is plain that, when making such references, the primary judge was referring to the section of his reasons which addressed the mandatory considerations in s 54(3) at [614]–[637] J.

21. It is a central contention by Ford on its appeal that the primary judge erred because he applied a standard of “acceptable quality” that demanded perfection, or something close to perfection, which is not the standard envisioned by the statutory phrase.  When making this submission, Ford focused on particular sentences or paragraphs in his Honour’s reasons for judgment, such as the final sentence of [671] J that, “New cars should not have a tendency to rattle, even slightly”.

22. However, having regard to the reasons as a whole, especially those extracted above, that is not a fair characterisation of the approach taken by the primary judge.  In particular, had the primary judge applied such a standard then (for example) he would not have observed at [612] J (quoted below) that not every inherent risk of failure will have the consequence that goods are not of acceptable quality, or emphasised that the test of acceptable quality is gauged by reference to a consumer’s reasonable expectations.

23. A related submission by Ford is that the primary judge applied the standard in absolute terms, and not by reference to what a reasonable consumer (with the requisite knowledge) would regard as acceptable.  This submission was advanced on the basis that his Honour’s reasons addressed the issue of whether the vehicles were free from defects without mention of, or regard to, the expectations of the hypothetical reasonable consumer.  Again, Ford focused on particular paragraphs within the judgment to demonstrate this.

24. However, there was no error in the approach taken by the primary judge. As is evident from the reasons which are extracted or noted above, the primary judge identified the basis upon which the case had been brought under s 54, namely that the vehicles had a propensity towards, or risks of, certain identified misbehaviours. In the course of addressing the evidence, and making factual findings about whether that case had been established, the primary judge reinforced that he was addressing the respondent’s case under s 54: see, for example, [221], [388], [456] and [530] J. As we have noted, the primary judge then set out the text of s 54 and addressed the nature of the respondent’s case within that specific framework, with express references made in [612] and [613] J to the consumer’s reasonable expectations. After addressing the mandatory matters in s 54(3) by reference to the facts as found, the primary judge then addressed each of the alleged problems, referring back to the s 54(3) analysis but also through the prism of acceptable quality which had been the subject of earlier analysis in the reasons. That he did so is apparent from a fair reading of the reasons as a whole including particular paragraphs of the reasons which will be addressed in relation to specific grounds of appeal. In these circumstances, it was not necessary for the primary judge to refer repeatedly and expressly to the fact that he was assessing whether the vehicles were of acceptable quality by reference to the perception of the reasonable consumer within the meaning of s 54. It is plain that his Honour did so. No error has been demonstrated.

    The meaning of “acceptable quality” in s 54 in a propensity case

25. It was common ground on the appeal that a propensity case which alleges breach of the statutory guarantee contained in s 54 of the ACL turns on two interrelated variables, namely the severity of the problem if it arises and the probability of the problem arising. It is the assessment of those variables which informs the conclusion as to whether the goods are of acceptable quality as required by the statutory guarantee.

26. So much was accepted by the primary judge.  We agree that is the correct approach.

27. The relevant aspects of the primary judge’s reasons are at [608]–[613] J:

    The Applicant’s case took as its starting point that the vehicles fitted with the DPS6 had various risks of failure.  The Applicant contended that goods with a risk of failure would not be of acceptable quality.  She relied on this Court’s decision in Courtney v Medtel Pty Ltd [2003] FCA 36; 126 FCR 219 (‘Medtel’).  In that case it was found that Mr Courtney was entitled to recover damages for the pain, suffering, loss of enjoyment of life and economic loss associated with having removed from his chest cavity a particular kind of sub-optimal pacemaker.  The pacemaker unwisely utilised ‘yellow spool solder’ which is bad.  The use of yellow spool solder was generally attended by a risk of dendritic failure which is why Mr Courtney had the pacemaker removed.  On inspection of the blighted pacemaker following its successful explantation from Mr Courtney it was ascertained that it had always functioned normally and, indeed, had it not been explanted it would probably not have failed prematurely.  The risk with the yellow-spool solder, though real, would likely never have eventuated in Mr Courtney’s case.  With hindsight one could say that the explantation had been unnecessary.  Indeed, this is precisely what the manufacturer did say in resisting Mr Courtney’s claim.

    The trial judge, Sackville J, understandably rejected this unattractive submission.  He concluded that the pacemaker was not of merchantable quality because it had a superadded risk of failure, that is, a superadded risk that it would be unable to fulfil the purpose of restoring or maintaining the heart rate of patients experiencing electrical heart-related problems: Medtel [224]. It was not to the point that in the individual case the risk might not have transpired. The Full Court upheld the trial judge’s conclusions: Medtel v Courtney [2003] FCAFC 151; 130 FCR 182. Branson J with whom Jacobson J agreed observed at [78]:

    In my view, having regard to the evidence before the primary judge … no error can be shown to have been involved in his Honour’s conclusion that a pacemaker that has only the ordinary or usual risk of premature failure is more fit for the purpose of being used as a pacemaker than a pacemaker that has, by reason of the method of its manufacture, an appreciably higher risk of premature failure.  In this case it was reasonable to expect, at the time of the supply to Mr Courtney of his pacemaker, that Mr Courtney’s pacemaker had been manufactured in a way which gave rise to only the ordinary or usual risk of premature failure.  However, the use of yellow spool solder in the manufacture of Mr Courtney’s pacemaker meant that Mr Courtney’s pacemaker had an appreciably higher risk of premature failure than the ordinary or usual risk of premature failure to be expected in pacemakers.

    This reasoning has been applied to other goods with an inherent risk which renders them not of acceptable quality: eg, components in satellite broadband devices in APS Satellite Pty Ltd (formerly known as “SkyMesh Pty Ltd”) v Ipstar Australia Pty Ltd  [2016] NSWSC 1898 (‘APS Satellite’) at [69]-[82] per Rein J (while the case was not on all fours with Medtel, his Honour recognised the reasoning in Medtel as an authoritative approach to ‘prone to failure’ cases); high density polyethelene containment liner in Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338 at [516]-[531] per Tate, Santamaria and Kyrou JJA (although the claim failed); and, ocean going recreational fishing vessels in Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426; 362 ALR 702 (‘Vautin’) at [145]-[151] per Derrington J.

    The Respondent submitted that Medtel was distinguishable because a pacemaker was a non-discretionary good upon which a consumer’s life might depend.  There was no comparison to be made between the nature of a pacemaker and the nature of a vehicle or between the potential for a pacemaker to fail and the potential for a vehicle to exhibit non-safety related issues.  Further, there was no way the pacemaker in Mr Courtney’s chest could have been checked for yellow spool solder; explantation was the only reasonable course open.

    I accept that not every inherent risk of failure will have the consequence that goods are not of acceptable quality.  The conclusion in any particular case will be a function of the nature of the feared failure and the extent of the risk of its occurrence, measured against the consumer’s reasonable expectations of how the product ought to behave.  Sometimes the failure will be trivial or the risk insubstantial and in such cases the claim may fail.  Further than this, at least in principle, seems dangerous to go.

    Plainly enough the risk in Medtel was a very serious risk from Mr Courtney’s perspective but I do not read the case as stipulating that inherent risk claims are confined to those where the risk is life-threatening or of some similar ominous standard separate from the standard embedded in the statutory questions embodied in s 54(2) itself: the consumer’s reasonable expectations of the fitness for purpose, appearance, lack of defects, safety and durability of the product in question (see Medtel at [224] per Sackville J). In APS Satellite the risk was that the satellite kit was prone to leak which is hardly the stuff of drama.  In Vautin the way in which the vessel had been constructed exposed its hull to a risk of delamination in heavy seas.  These perils are not of the genre to which the Respondent seeks to confine the Medtel principle.  I conclude that the principle is not so confined.

1. As part of its appeal, and by reference to this analysis, Ford is critical of the primary judge’s evaluation of the variables.  While Ford accepts that the likelihood of the problems arising with the vehicles was undoubtedly higher than was desirable, it submits that the magnitude of the consequences of the risk manifesting were within the parameters that a reasonable consumer would accept, taking into account that the Affected Vehicles were purchased with a warranty and that the consequences if the components did fail “were, at worst, intermittent issues that might impact the driver’s comfort”.  Ford submits that this is an important distinction from the authorities on propensity relied on by the primary judge.

2. Ford contrasts the present case with Courtney v Medtel Pty Ltd (2003) 126 FCR 219; [2003] FCA 36 where the consequence of the risk materialising was potentially fatal. It submits that, in such a case, the risk of failure does not have to be very high when the consequence of failure is death. In relation to the other cases cited by the primary judge, Ford refers to the fact that, in those cases, the product became unusable, which was not the situation with the Affected Vehicles which had “at worst, intermittent issues that might impact the driver’s comfort”.

3. However, there is no textual basis for confining the statutory language of “acceptable quality” in s 54 of the ACL to “not potentially fatal” or “unusable”. This is demonstrated by the nature of the requirements in s 54(2) which include but are not limited to the appearance or finish of the goods, and durability. Thus the guarantee may be breached in circumstances which fall short of a possible fatality or complete uselessness.

4. Further, having regard to the unchallenged factual findings of the primary judge which are summarised above, the consequence of the problems arising in the Affected Vehicles cannot (in truth) be described as being “at worst, intermittent issues that might impact the driver’s comfort”.

5. No error has been shown in the primary judge’s reasons on this issue.

   Whether, and to what extent, after supply events are taken into account when assessing whether the guarantee has been met

6. There is no dispute on this appeal that the question whether the reasonable consumer would have regarded the quality of the goods as acceptable is to be determined at the time of supply, which accords with the authorities: Australian Competition and Consumer Commission v Mazda Australia Pty Ltd (2021) 158 ACSR 31; [2021] FCA 1493 (ACCC v Mazda) at [101] (O’Callaghan J); see also Medtel Pty Ltd v Courtney (2003) 130 FCR 182; [2003] FCAFC 151 (Medtel (FC)) at [57] (Branson J, with whom Jacobson J agreed).

7. Further, the parties do not dispute that s 54 requires consideration of at least some knowledge acquired after supply, or else it would not be possible to hold that goods were not of acceptable quality by reason of a latent or hidden defect: see Medtel (FC) at [57]. Indeed, it is well-recognised that the question under s 54 is to be determined taking into account the relevant information known at the time of the trial, including “after-acquired” knowledge: Gill v Ethicon Sàrl (No 5) [2019] FCA 1905 at [3540] (Katzmann J); Vautinv BY Winddown, Inc. (formerly Bertram Yachts) (No 4) (2018) 362 ALR 702; [2018] FCA 426 at [143] (Derrington J); ACCC v Mazda at [101]; Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1672 (ACCC v Jayco) at [27] (Wheelahan J); Medtel (FC) at [70].

8. The issue raised in this appeal is the identification of the relevant information known at the time of the trial which is to be taken into account in assessing whether the guarantee of acceptable quality has been met.

9. As to this, Ford submits that the assessment required by s 54(2) is performed from the standpoint of “a reasonable consumer fully acquainted with the state and condition of the goods” and that the emphasised words indicate that all available information is to be considered. On that basis, Ford submits that the analysis must therefore take account of the fact that as problems emerged, fixes would be identified and made available, the Affected Vehicles’ warranties would be extended, and not every vehicle would experience symptoms but those that did would be repaired (at no cost). Ford submits that, if this is accepted, then, in circumstances where the hypothetical reasonable consumer “fully acquainted with the state and condition of the goods” knew (a) that cars sometimes (indeed, almost inevitably) develop problems, (b) that there was a risk (not a certainty) that the vehicle may develop one or more behaviours, (c) that if it did, the car could at all times continue to be driven, and (d) that repairs were available at no cost to the consumer, they would regard the Affected Vehicles as being of “acceptable quality” and, therefore, compliant with the s 54 guarantee when supplied as new.

10. Ford relies upon the reasoning of Lord Reid and Lord Guest in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 in support of the proposition that all after-acquired knowledge is to be taken in account. That case involved, amongst other things, the operation of s 14(2) of the Sale of Goods Act 1893 (UK) which provided an implied contractual condition when goods are bought by description that the goods should be of merchantable quality. Lord Reid (at pp 75–76) and Lord Guest (at pp 108–109) held, in effect, that it is not appropriate to take into account certain parts of after-acquired knowledge, but disregard other parts.

11. In Medtel (FC), the Full Court was met with a similar argument in reliance on the same authority for the purposes of determining whether a product was of merchantable quality within the meaning of s 74D of the Trade Practices Act 1974 (Cth). Branson J, with whom Jacobson J agreed, rejected the argument, stating at [69]–[70]:

    Lord Pearce, with whom in this regard Lord Wilberforce agreed, took a different approach from that adopted by Lord Reid, Lord Guest and, it seems, Lord Morris of Borth‑y‑Gest.  His Lordship observed (at 118–119):

    ‘Logic might seem to indicate that the court should bring to the task [of estimating merchantability] all the after-acquired knowledge which it possesses at the date of trial.  But I do not think that this is always so.  For one is trying to find what market the goods would have if their subsequent ascertained condition had been known.  As it is a hypothetical exercise, one must create a hypothetical market.  Nevertheless the hypothetical market should be one that could have existed, not one that could not have existed at the date of delivery.  Suppose goods contained a hidden deadly poison to which there was discovered by scientists two years after delivery a simple, easy, inexpensive antidote which could render the goods harmless.  They would be unmarketable at the date of delivery if the existence of the poison was brought to light, since no purchaser could then have known the antidote to the poison.  Hypothesis is no reason for complete departure from possibility.  One must keep the hypothesis in touch with the facts as far as possible.’

    (Emphasis in original.)

    In my view, in the context of s 74D of the Act, the approach of Lord Pearce to the use of after‑acquired knowledge in the Hardwick Game Farm case is compelling. Section 74D, as is mentioned above, calls for the quality, or fitness for purpose, of the goods to be measured against what it was reasonable to expect in that regard at the time of the supply of the goods to the consumer. That measurement must be undertaken, in my view, in the light of information concerning the goods available at the time of trial. However, the issue remains whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer.

12. On Lord Pearce’s approach, whilst one brings into the hypothetical construct knowledge about the nature of the latent defect at the time of trial (which the respondent contends would include, in a propensity case, the problems which may arise and knowledge of the extent of the risk of such problems being encountered), and one also brings into the construct the fact that at the time of supply a warranty is given, one does not also incorporate knowledge that, at some time after supply, a remedy will be discovered for a latent defect with which the goods were supplied or that an extended warranty program might eventuate.  We consider that this is the correct approach.

13. Further, to the extent that Ford’s submissions contend that the warranties in place in relation to the Affected Vehicles are relevant to the question of whether the goods complied with the statutory guarantee of acceptable quality, that suggestion is rejected.  As stated by Wheelahan J in ACCC v Jayco at [43] and cited with approval by O’Callaghan J in ACCC v Mazda at [102], a manufacturer’s warranty should generally have no bearing on the question of whether the goods comply with the statutory guarantee of acceptable quality. See also Toyota Motor Corporation Australia Limited v Williams (2023) 296 FCR 514; [2023] FCAFC 50 at [45] (Moshinsky, Colvin and Stewart JJ).

14. As submitted by Mr Gleeson SC for the respondent, the Court can take into account all evidence at trial which bears on the propensity of the risk.  However, evidence as to the discovery, availability, and effectiveness of remedies for the defects in the Affected Vehicles which are discovered after the date of supply is more relevant to the question of loss or damage than to the quality of the vehicles at the time of supply.  We note that such a conclusion is aligned with Medtel (FC) at [73] and Vautin at [173].

    Ground 1 Amended Notice of Appeal

15. By this ground, Ford contends that the primary judge erred in finding that the Affected Vehicles failed to comply with the statutory guarantee by reason of their tendency to display a slight vibration or shudder under light acceleration at slow speeds or during a coast down, as the transmission upshifts or downshifts; and a slight audible rattle, particularly when operated within an enclosed area such as a carpark.

16. On the basis that the Affected Vehicles were “economical, entry-level vehicles” fitted with the DPS6 which offered improved fuel economy and efficiency, it is said that these tendencies were “two very minor behaviours”, which only manifested, if at all, in specific circumstances.  They were also described as “normal operating characteristics” of these vehicles.  This means that Ford accepts that the Affected Vehicles objectively had these performance characteristics in normal operating conditions.

17. Ford submits that, having regard to the s 54(3) factors (including the nature and price of the goods), a reasonable consumer would not regard a tendency to display those “slight” behaviours, which were normal operating characteristics of the type of vehicle being acquired, as rendering the Affected Vehicles not of “acceptable” quality, especially as it is a matter of common experience that all cars sometimes experience slight vibrations and noises. Ford contends that, by holding otherwise, the primary judge imposed a standard approaching perfection and, in any event, higher than the statutory standard of “acceptable quality”.

18. Ford submits that the wholly disproportionate outcome of the primary judge’s approach would be that every purchaser of an Affected Vehicle – whether or not they experienced the rattle or vibration – would have been entitled to reject their vehicle and require a refund or replacement from the supplier on this basis alone pursuant to s 259 of the ACL.  It contends that this would create a disincentive for manufacturers and suppliers to supply economical, low-budget goods (which necessarily involve making quality trade-offs to achieve a lower price).

19. For the following reasons, this ground of appeal must fail.

20. We have already rejected Ford’s contention that the primary judge imposed a standard approaching perfection.  Further, although Ford is critical of the statement by the primary judge that “[n]ew cars should not have a tendency to rattle, even slightly” ([671] J) as demonstrating that the primary judge applied such a standard, Ford did not grapple with the evidence of Dr Greiner that if a vehicle’s ordinary operation “involves vibration, shuddering, jerking, shunting and/or rattling that is perceptible to the driver, this indicates that the vehicle is defective” nor did it contend that the primary judge’s finding had no proper basis in the evidence.

21. As to the label given by Ford to the tendencies as being “normal operating characteristics” of the Affected Vehicles, the reasons of the primary judge concerning that description included the following at [655], [658] and [659] J:

    Regardless of where these [tendencies] fit into the Applicant’s case, the Respondent’s position was that these behaviours were ‘normal operating characteristics’ of the DPS6 and as such could not have the consequence that the vehicles were not of acceptable quality. This is a form of argument by definition. Its limitations may be illustrated. A car with a tendency to explode in a fireball would not be of acceptable quality even if the manufacturer successfully proved that this behaviour was a normal operating characteristic of the vehicle. This might suggest that proof by a manufacturer that a characteristic is a normal operating characteristic is not legally responsive to a contention that the characteristic is such as to mean that the requirements of s 54(2) are not satisfied.

    …

    I have found it difficult to conceptualise the Respondent’s submissions in a way which can be reconciled with the text of s 54. If a good X has a particular quality a which means that one of the integers in s 54(2) is not satisfied it is difficult to see that it can be legally significant that a is a normal operating characteristic of X. Accepting that it is such a characteristic cannot without more lead to the conclusion that s 54(2) is satisfied (in this case to do so would be inconsistent with the initial hypothesis). To avoid that inconsistency it is therefore necessary to accommodate the submission within the interstices of s 54(2) itself. But when the argument is broken down and distributed across the integers of s 54(2) the problem merely recurs. Thus in terms of s 54(2)(a), if X is not fit for a purpose for which goods like X are commonly supplied because of a, then it is difficult to see how the fact that a is a normal operating characteristic of X can lead to a different outcome. The same point may be made in relation to each of s 54(2)(b)-(e). Perhaps the point is made most clearly with the safety requirement in s 54(2)(d). It cannot be to the point that a quality which makes a good unsafe is also one of its normal operating characteristics.

    I therefore conclude that the Respondent’s factual contention that the five characteristics of the DPS6 are its ‘normal operating characteristics’ is irrelevant to any legal issue which arises from s 54(2) …

22. No error has been shown in the reasons or the conclusion reached by the primary judge. To put it another way, whether it is usual or “normal” for goods to have a particular characteristic does not assist in the evaluation of whether those goods are of acceptable quality within the meaning of s 54(2) of the ACL. The focus is required to be on the characteristic itself through the lens of the reasonable consumer in the circumstances outlined in the provision.

23. In this regard, it is relevant that the primary judge did not accept Ford’s contention below that all dual clutch transmissions or all dry dual clutch transmissions have these normal operating characteristics or that these behaviours “are found in millions of other vehicles”: [665] J.  Ford does not appeal this finding.  That is not surprising as it was supported by the evidence of the respondent’s expert, Dr Greiner, who said that he was “not aware of any other example of manufacturers feeling it necessary to describe ‘normal operating characteristics’ to their customers in this manner”.  He said that the types of issues which Ford labelled “normal” for the operation of the DPS6 were “unacceptable for a modern transmission system” and “not issues that a consumer would expect when purchasing a vehicle, regardless of whether the vehicle is a B- or C-segment vehicle, regardless of whether or not the vehicle is a ‘luxury’ vehicle, and regardless of what sort of transmission system the vehicle has”.  Dr Greiner’s views were supported by documents prepared by senior Ford US engineers that the presence of rattle and “judder” (a term used within Ford US to refer to the subset of shudder that occurs immediately after a vehicle takes off from rest) was unacceptable: see [485]–[491] J.

24. Another finding of the primary judge which Ford does not appeal, but which is relevant to the s 54(2) analysis, is that the DPS6 was marketed as “an automatic transmission with smooth gear shifts”: [629] J. It is not possible to reconcile this finding, and the obvious impact of such marketing on the reasonable consumer’s perceptions as to what would be acceptable, with Ford’s submissions in connection with this ground. It is notable that Ford did not attempt such an exercise.

25. Finally, we do not accept that s 54 should be read down because it could otherwise lead to a “disproportionate outcome”. If the outcome is disproportionate as claimed (which we do not accept in any event), then such a policy consideration is a matter for Parliament. Nor should this Court take into account additional factors not referred to in s 54, which is the approach pressed by Ford.

26. For these reasons, ground 1 of Ford’s Amended Notice of Appeal fails.

    Ground 2 Amended Notice of Appeal

27. By this ground, Ford contends that the primary judge erred in finding that the Affected Vehicles failed to comply with the statutory guarantee by reason that they were fitted with the original input shaft seals, the B8080 clutch lining and the original ATIC 91 chip.

28. Ford’s submissions concerning this ground challenge the primary judge’s findings on the basis that the primary judge ought to have, but did not have, regard to all information which was available at the time of trial, which it contends is the correct approach required to be taken under s 54. We do not accept those submissions, for the reasons explained above.

29. We also observe that, even if it had been appropriate to have regard to all information available at the time of trial, it would not alter the outcome in this case given that, despite spending hundreds of millions of dollars attempting to do so, Ford did not establish that it had developed a fix for all issues ([13], [314], [315] J), and the warranty data (which underestimates the scale of the problem: [322] J) indicated that, compared with industry standards, the needs of these vehicles for transmission-related repair even just during the warranty period was “frequent” and the DPS6 failed at an “extreme rate” compared to other transmission systems.

30. The second basis upon which Ford advances this ground is that the primary judge failed to appreciate the important distinction between the consequences of the failure of the components in this case (as part of the evaluation required in a propensity case) and the authorities cited by him at [609]–[610] J, namely death or the goods becoming unusable.  We do not accept that submission, for the reasons explained above.

31. The third basis upon which Ford advances this ground of appeal is that the primary judge otherwise did not apply the correct statutory test.  We do not agree, for the reasons already given.

32. Finally, having regard to the unchallenged findings of fact of the primary judge which we have identified above, and the additional finding concerning safety which is challenged by ground 3 (but which is rejected for the reasons given below), the primary judge’s finding that the Affected Vehicles failed to comply with the guarantee of acceptable quality within the meaning of s 54 of the ACL when supplied as new by reason of being fitted with the original input shaft seals, the B8080 clutch lining, and the original ATIC 91 chip was correct.

1. In this regard, we note that Ford accepts that, if ground 2(a) fails, then ground 2(b) (which related to the supply of second-hand vehicles) also fails.

2. For these reasons, ground 2 of Ford’s Amended Notice of Appeal fails.

   Ground 3 Amended Notice of Appeal

3. By this ground, Ford contends that the primary judge erred in holding that the original ATIC 91 chip posed a “safety risk” and ought to have held that Affected Vehicles fitted with the original ATIC 91 chip were as safe as a reasonable consumer fully acquainted with the state and condition of the vehicles would regard as acceptable within the meaning of s 54(2)(d) of the ACL.

4. This ground raises a challenge to the primary judge’s finding at [411] J that the old (or original) ATIC 91 chip posed a safety risk in the vehicles in which it was installed and poses such a risk in those vehicles in which it remains and which have not had the 15B22 software update.

5. This ground also raises a challenge to the primary judge’s finding at [647]–[648] J that, prior to installation of the 15B22 warning software update, vehicles supplied with the original ATIC 91 chip were not as “safe” as a reasonable consumer fully acquainted with the goods would regard as acceptable.

6. To address that challenge, it is necessary to track through key findings made by the primary judge concerning this issue.

   Reasons of the primary judge

7. At [333] J, the primary judge made the following observations:

   [Where] there was failure in the ATIC 91… the TCM goes offline.  The clutches are designed so that, absent communications from the TCM, they mechanically place themselves into neutral by disengaging the clutch plate from the drive plate.  This is referred to as a fail-safe mode and operates in a similar fashion to a dead man’s switch.  If the failure is very brief (in the order of milliseconds) then this process will not progress very far and the disengagement of the clutches may not be detectable at all or perhaps only as a brief shudder.  If the failure is longer in duration (a few seconds) then the effect is a power loss.  The full disengagement of the clutch will mean, in that circumstance, that the power of the engine is no longer being applied through the drivetrain to the wheels.  For that reason, the failure of the ATIC 91 chip leads to potentially more significant disruptions in the driving experience…

8. As the issue of solder cracking between the ATIC 91 chip and the TCM was not in dispute ([340] J), the primary judge proceeded to make these findings at [342] and [343] J:

   A consequence of sufficient cracking is disruption in electrical conductivity between the PCB and the chip but this may take some time to occur.  Disruption to the conductivity of the solder leads to interference in the communications passing to and from the relevant ATIC.  Disruptions of this kind vary in their severity.  When a degradation in the solder first occurs it may have little or no direct result since the crack involved may be very small and may not yet materially disrupt the flow of electricity.  As the problem worsens, however, there may be complete although intermittent disruptions to conductivity which may be only of very short duration (in the order of milliseconds).  As more cracks develop the problem deepens and the disruptions may become more frequent or of longer duration or both until, at last, there is a complete break.

   The progressive symptoms which solder cracking can generate depends on where it occurs… [D]amage to the ATIC 91 chip can generate failures resulting from attempts of various durations to disengage the clutch caused by the fail-safe mode…

9. At [344] J, the content of a Ford US 6 panel report is set out which included an assessment by Getrag (the manufacturer) of what a customer might experience in a vehicle suffering from degenerative cracking in the solder affixing an ATIC 91 chip to the PCB as follows:

   Customer experience: (Symptoms For Atic91)

   1.Loss of motion condition may occur while driving or stopped

   2.Indication to customer:

   •Consistently – PRNDL on cluster will start flashing, “D” or other position will be blinking

   •May be accompanied by Check Engine Light

   •May be accompanied by various messages in cluster Message center including: Transmission Malfunction, Transmission Overheating, Hill Assist not available.

   3.Vehicle coasts to side of road, engine remained running.

   Braking & Steering assist still active.

   4.Pedal response:

   •Experience 1: Neutral (open clutch)

   •Attempt to accelerate, engine rev’s.

   •No Forward/No Reverse

   •Steering and brakes still functional

   •Experience 2: No throttle response

   •Attempt to accelerate, engine remains at idle.

   •No Forward/No Reverse

   •Steering and brakes are still functional.

   5.Once stopped:

   •If engine turned off and restart is attempted – will not crank.  No Start.

   •Allow vehicle to sit with key off for 5 – 10 minutes, then car may crank and start and drive normally

   6.Codes Set may include:

   •TCM: P0607 and/or P06B8 Control Module or NVRAM failure

   •ABS/IPC: U0101 and U1013 loss of communication with TCM

   •PCM/IPC: P0850 Park/Neutral Switch Input

10. The primary judge then interpreted aspects of the report at [345] J and made the following findings at [346] and [347] J:

    Each of these symptoms is consistent with the point made earlier that failure of the ATIC 91 manifests itself as attempts by the clutches to disengage themselves when the TCM goes offline (the consequence of the vehicle’s neutral fail-safe mode).  As I have foreshadowed, when a power cut occurs the mechatronic actuators in the transmission default to the open position.  The symptoms which arise from this problem depend on how long the TCM is offline.  It is easy to understand that when the TCM is offline for several seconds then this will be experienced by the driver as the kind of complete loss of power which results when the vehicle puts itself in neutral gear.  When the TCM is offline for only a matter of milliseconds then, as Dr Greiner explained, this might be experienced as a shudder.

    Because the solder cracking problem is progressive rather than instantaneous the course of symptoms is also progressive.  At first, the cracking will be asymptomatic (so far as the driver is aware), then there may be symptoms such as the shudder described by Dr Greiner which may be followed by very brief, but discernible, losses of driving power; finally, there may be a loss of driving power for a substantial period of time (in the order of many seconds).  I accept Dr Greiner’s evidence, which is consistent with common sense, that these final stages of the problem are dangerous.  If a vehicle overtaking another suffers a three second power loss this generates a real risk of an accident.  Other similar examples may be imagined such as turning in front of oncoming traffic.

    (emphasis added.)

11. Before continuing, the significance of the acceptance by the primary judge of the evidence of Dr Greiner, an independent expert, cannot be overstated.  No attempt was made by Ford to challenge that acceptance, or to justify its position that the primary judge was in error on the issue of safety notwithstanding the acceptance of this evidence.

12. At [353]–[355] J, the content of a letter apparently sent by Ford US to Getrag, which attached approximately 650 pages of material, is set out.  That letter included this statement (with the reference to “MAM” being a reference to the TCM):

    Following significant analysis into the DPS6 mechatronic actuation module (MAM) field issues, Ford has determined that the best course of action for affected vehicles is to initiate a customer satisfaction action aimed at correcting all vehicles equipped with DPS6 transmissions built since November, 2009.  This action includes a warranty extension on 2.47M DPS6 equipped vehicles along with a potential software re-flash aimed at earlier issue detection and failure mode mitigation for all vehicles that Ford has developed.

    The initiation of these actions, along with corresponding customer notification, is pending finalization of a robust service part supply plan.  Discussion on this plan has been ongoing and I ask for your team's continued support as we finalize these details.

    Currently we are forecasting that these actions will cost us over $579M through the 2024 calendar year, not including our normal warranty coverage.  There is significant technical data that demonstrates Getrag is fully responsible for this issue based on the robustness of the design independent of any other factors.

13. After analysing this letter and other evidence relating to the ATIC 91 chip, the primary judge stated at [366] J that:

    Despite all of these uncertainties, I am prepared to infer that the use of the original ATIC 91 chip did pose a real risk of failure.  The primary reason for this is the engineering evidence which reveals the progressive nature of the problem and its physical consequences.  It was a problem which was more likely to occur the longer the vehicle was driven and it was a problem which got worse not better once it manifested itself.  The problem was sufficient to persuade Ford US to embark on a program seeking to remediate the problem by replacing the ATIC 91 chips in new vehicles and progressively replacing them where necessary in vehicles which were already on the road.  The claim made by Ford US against Getrag, foreshadowed in the letter extracted above, suggested that the costs to Ford US were in excess of half a billion US dollars.  A subsequent, and substantial, settlement was reached between Ford US, Getrag and Continental.  One may infer therefore that the description of the problem in the theoretical terms proposed by Dr Greiner (and in Ford US’ own documents) corresponded with a real world problem, certainly a nine digit one.

14. At [368] J, the primary judge stated:

    Consequently, I find that there was a real risk of the solder cracking on the original ATIC 91 chip.  Where this risk eventuated, it would cause, in turn, the series of steadily worsening symptoms to which I have already referred.  Whether the most serious of those symptoms – complete loss of motive power for several seconds – would occur depended on how long the vehicle continued to be driven once the initial less serious symptoms were manifest.  Those symptoms included, as noted above, shudders and brief power drops as well as various warning messages lighting up on the dashboard such as flashing of the ‘D’ symbol on the gear selector.  It will be necessary to return to this topic when assessing the Applicant’s submission that the ATIC 91 posed a safety risk.

15. The primary judge’s analysis of the safety risk associated with the original ATIC 91 chip (prior to the 15B22 software update) included the following findings at [388]–[399] J:

    The Applicant contended that the TCM solder issue represented a safety issue prior to the introduction of the 15B22 software update.  The first question which arises is why this matters.  The actual question for determination is whether the vehicles were of acceptable quality within the meaning of ACL s 54. The safety risk the Applicant puts forward is that which arises from the ATIC 91 chip and is limited to the symptom consisting of a total loss of motive power. If one makes the assumption that the Applicant succeeds in proving that, as sold, the vehicles had a real risk of a total loss of motive power whilst driving then the question is whether a vehicle with that real risk is of acceptable quality within the meaning of s 54. If on the other hand, the Applicant fails to show the existence of such a real risk then the issue does not seem to arise. On this view of affairs, the question of whether the real risk was also a safety risk does not seem to matter very much.

    However, the parties were united in their view that this was something they should debate…

    Having registered my objection to the question, it is then appropriate to consider the position of the two chips…

    Turning then to the position of the ATIC 91 chip, I have accepted that there was a real risk that vehicles in the cohort might develop solder cracking and therefore a real risk that the vehicles equipped with an old ATIC 91 might develop symptoms associated with that risk.  The only risk which was put as a safety risk was the risk that there might be a loss of motive power for a period of sustained duration, perhaps a few seconds or more.  This was a symptom which would only appear after earlier symptoms such as shudder or a very brief power drop had gone unremedied.  And it may also have been preceded by lights appearing on the dashboard when the symptoms made themselves known.

    The question then is whether that risk is a safety risk.  If one takes out of the picture the antecedent symptoms including the flashing lights on the gear selector so that the first and only symptom of the solder cracking was a sustained period of loss of motive power, then I would not hesitate to describe the risk to safety as real.  On this, admittedly artificial, hypothesis there would be a real risk of solder cracking which would first manifest itself when the vehicle suddenly lost power.  That could happen in an overtaking situation or midway through an intersection.  The potential for a serious accident is obvious.

    What makes the situation more complex is that, as the Respondent submits, long before a driver experienced that power loss, there would have been a range of lesser symptoms of increasing severity and the display of flashing lights on the gear selector.  Here the thinking is that these symptoms and those flashing lights would have been likely to cause the driver of the vehicle to take it in for servicing.  On this view, whilst there might be a risk of ultimate loss of motive power this risk must be much reduced by the practical reality that very few vehicles are likely to be driven to the point where it materialises.

    I have found this a difficult submission to assess.  My initial impression of the problem was that one needed to identify what the risk of this particular symptom was.  Whilst I have accepted that there is a real risk of solder cracking and hence a real risk of the symptoms associated with solder cracking, this statement does not permit one to deduce anything about the risk of a particular symptom.  Conceptualised that way, this suggests that it was one for the Applicant to prove as the party bearing the onus of proof.  If so, then the fact that the evidence does not permit any conclusions to be drawn entails that the Applicant fails to show that the risk of a total loss of motive power was a real risk and, therefore, that it was a safety risk.

    A corollary of that line of thought would be, in fact, that the Applicant fails to prove that there is a real risk of any particular symptom.  This follows because the same argument can be made in relation to each individual symptom.  This leads one to the curious, although not necessarily logically indefensible position, that there is a real risk of the set of symptoms but no real risk in relation to any individual symptom.

    Another way of looking at the problem, however, is this.  There is a real risk of solder cracking and hence of the symptoms it entails.  Those symptoms include a total loss of motive power for a sustained period of time.  Indeed, this was not in dispute on the evidence.  Having accepted that that symptom was amongst the class of symptoms of which there was a real risk, the challenge then becomes how to accommodate the fact that it is the end-stage symptom into the analysis.  Here the answer may lie in the distinction between the legal burden of proof (which at all times lay on the Applicant) and the evidentiary burden (which might, depending on the circumstances, shift).

    I think this second way of looking at the problem is better than the first.  There are two reasons for this.  First, I am concerned about the artificiality identified in the penultimate paragraph although I accept that it is not an incoherent outcome.  Secondly, the nature of the proposition under consideration, on inspection, shows that it was really a defensive proposition put forward by the Respondent and was not something which the Applicant was required to negative.  The relevant propositions were these:

    (1)there was a real risk of solder cracking;

    (2)there was therefore a real risk of the symptoms associated with solder cracking;

    (3)those symptoms included a complete loss of motive power for more than a transitory period of time; but

    (4)the risk of that symptom was so small as not to constitute a safety risk because the nature of the anterior symptoms would have caused the vehicle to be serviced before there ever could be a complete loss of power for more than a transitory period of time.

    Framed that way, it is apparent that the fourth proposition was a matter for the Respondent to prove and not a matter for the Applicant to disprove.  The Applicant bore the onus of proving that there was a risk (or real risk as I have preferred to characterise it).  She proved that there was a real risk of solder cracking and that the symptoms which could flow from that included a non-transitory total loss of power.  At that point the evidentiary burden shifted to the Respondent to prove that, in fact, the symptom would never have arisen because the vehicle would have been serviced on the occurrence of the earlier less severe symptoms.

    I am not satisfied that the evidence makes good that contention.  No doubt the idea that many vehicles would be presented for service before arriving at a complete loss of motive power for more than a transitory period of time has an anecdotal attractiveness.  However, I do not think that just because I can follow the line of thought that it proves it as a fact.  No doubt for many vehicles this will be true but I do not think I can say it is inevitably so.  Further, there is the additional problem that prior to at least mid-2014 but very possibly up until a later date, if presented for service the problem would not be fixed because the new TCM with the revised ATIC 91 chip was not available.

    Once that conclusion is arrived at it seems therefore that the real risk of solder cracking carried with it a risk of a non-transitory loss of power.  As I have said, I am satisfied that this risk was a safety risk.

    (emphasis added.)

16. At [411] J, after addressing Ford’s evidence, the primary judge concluded:

    To the extent that it matters I therefore conclude that the old ATIC 91 chip posed a safety risk in the vehicles in which it was installed and poses such a risk in those in which it remains which have not had the 15B22 software update.

17. At [647]–[648] J, the primary judge made the critical findings relating to the ATIC 91 chip:

    I have concluded that vehicles which were supplied with a TCM containing an original ATIC 91 chip had a real risk of developing solder cracks.  If the cracks developed the consequence was a gradual reduction in the solder’s conductive efficiency and a corresponding propensity for interruptions in the distribution of electrical power to the TCM.  As this occurred a steadily increasing range of transmission faults would arise.  Where the TCM was offline for a matter of milliseconds this might be perceptible to the driver as a shuddering sensation; as the problem worsened, however, the vehicle might sustain a total loss of motive power for a period of seconds – which was unsafe.  This was a fault which could, albeit in rare circumstances, result in a serious accident.

    Having regard to the matters set out above, I do not think that vehicles supplied with the original ATIC 91 chip can be said to be fit for the purpose of being driven as a motor vehicle (s 54(2)(a)) or that they were free from defects (s 54(2)(c)) or that they were safe (s 54(2)(d)).  Consequently, at the time they were supplied vehicles containing the original ATIC 91 chip were not of acceptable quality.

    (emphasis added.)

1. Ford submits that the primary judge’s construction avoids the risk of the limitation period in s 273 working an injustice.  It submits that, on Ms Capic’s construction, time would start running on the day that the consumer first became aware of the first problem and that, if the consumer took no action within the three year period (because, for example, the symptoms were not that serious), but another more serious problem with “overlapping” symptoms later arose, the consumer would be barred from obtaining relief in respect of either.

2. However, the limitation period in s 273 does not run from when an affected person is first aware of “the first problem” (i.e. the symptoms). It runs from when the person is aware, or ought reasonably to have been aware, that the statutory guarantee has not been complied with. If the symptoms noticed initially are “not that serious”, the affected person probably would not be aware of non-compliance with s 54, and so time would not start to run. By contrast, if the symptoms were “serious”, time would start running. This is reasonable and does not work an injustice, because the consumer should be aware that the statutory guarantee has not been complied with at that point in time.

3. Finally, Ford complains that what Ms Capic seeks to do by these grounds is re-enliven a “symptomology” case that the primary judge had ruled was not available on her pleading: Capic v Ford Motor Company (No 3) [2017] FCA 771. Ford contends that, by these grounds, Ms Capic now submits that compliance with the guarantee in this proceeding is to be analysed by reference to symptomology which amounts to an attempt to re-frame her case on a basis rejected by the primary judge.

4. We do not accept this complaint. Ms Capic’s claim is not based on symptoms actually exhibited, but rather the deficiencies in the DPS6 transmission that had a propensity to cause a range of overlapping consequences for consumers. The point which Ms Capic makes is that whether or not these matters amount to a failure to comply with s 54 must be assessed at the level of the reasonable consumer’s informed perception at the point of supply and that, when assessed at that level, the various deficiencies constitute a single failure, because this is the way it would be viewed by the reasonable consumer. For these reasons, we do not agree that Ms Capic has sought to re-enliven a “symptomology” case or re-frame her case on a basis expressly rejected by the primary judge.

5. It follows, in our respectful view, that the primary judge ought to have found that, where an Affected Vehicle was affected at the time of the relevant supply by one or more of the deficiencies as found by the primary judge in answer to question 2(a), that circumstance gave rise to a single failure to comply with the guarantee of acceptable quality in s 54(1) of the ACL and a single cause of action in respect of that failure pursuant to s 271(1) of the ACL.

6. We therefore uphold grounds 8 and 9 of the Amended Notice of Cross-Appeal.

   Whether s 271(6) is engaged when failure to repair within reasonable time

7. This issue arises pursuant to ground 4 of the Amended Notice of Appeal.

8. At [697] J, the primary judge identified that one of the issues between the parties was “whether delay in effecting repairs prevents s 271(6) operating”. At [724], [730] and [734] J, the primary judge answered the question in this way:

   [T]he provision does not say anything about late repairs or replacements. Rather, it removes a consumer’s cause of action if, having required the manufacturer under its express warranty to make the goods of acceptable quality, the manufacturer does so within a reasonable time. The Respondent referred to this timing requirement as a species of constructive failure to repair which I think is a sound description of its operation. If a manufacturer who has been required to remedy non-compliance with the guarantee of acceptable quality, fails to do so within a reasonable time then it is treated as if it had not done so at all: s 271(6) will not be engaged. In that circumstance, the use of the concept of a lately performed repair is not especially helpful and runs the risk of obscuring the statutory question.

   …

   …What is said [in s 271(6)] is that ‘the manufacturer has refused or failed to remedy the failure or has failed to remedy the failure within a reasonable time’. What this means in English is that ‘the manufacturer has not remedied the failure within a reasonable time’.

   …

   In effect, the whole of the section after the word ‘unless’ just means ‘unless the manufacturer has failed to remedy the non-compliance with the guarantee of acceptable quality within a reasonable time’.

9. Ford contends that this construction was erroneous because the primary judge disregarded most of the words “unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the failure within a reasonable time” as “otiose”, and held that s 271(6) was not engaged where the manufacturer remedied the non-compliance but had not done so within a reasonable time.

10. Ford submits that the phrase is not otiose; it refers to three separate scenarios: (i) refusal to remedy (where the manufacturer refuses to offer a repair or replacement); (ii) failure to remedy (where the manufacturer attempts to effect a repair, but fails to do so); and (iii) failure to remedy within a reasonable time (where a reasonable time has elapsed, but the manufacturer has still failed to effectively repair or provide a replacement). That is, Ford construes the third situation “has failed to remedy the failure within a reasonable time” as merely defining how long an affected person must wait for a repair before bringing a s 272(1)(a) claim when none has been provided, but submits that a consumer cannot bring a claim for damages after a repair has, in fact, been effected.

11. However, the plain words of s 271(6) indicate that the bar to bringing a s 272(1)(a) claim after making a request for a remedy is lifted in three distinct situations. Firstly, if the manufacturer says it will not remedy the non-compliance (i.e. “refused”). Secondly, if the manufacturer has not remedied the non-compliance, or tried and failed (i.e. “failed”). Thirdly, if a remedy was provided, but not within a reasonable time (i.e. “failed to remedy the failure within a reasonable time”).

12. Thus, a claim can be made even if a repair has been effected, but the repair has not been undertaken within a reasonable time.  To construe the provision otherwise would be to equate, at the time an action is commenced, a failure to repair within a reasonable time with a failure to repair simpliciter, and thus leave the words “or has failed to remedy the failure within a reasonable time” with no work to do.  The task of a court construing a statutory provision is to strive to give meaning to every word of the provision: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [71] (McHugh, Gummow, Kirby and Hayne JJ).

13. For these reasons, ground 4 of the Amended Notice of Appeal fails.

    Section 272 Australian Consumer Law

14. This aspect of the appeal concerns an attack by Ford upon the primary judge’s assessment of damages payable to Ms Capic through grounds 5, 6, 7 and 8 of the Amended Notice of Appeal.

15. The assessment was made by the primary judge by reference to s 272 of the ACL, which relevantly provides that:

    272     Damages that may be recovered by action against manufacturers of goods

    (1)In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for:

    (a)any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower:

    (i)the price paid or payable by the consumer for the goods;

    (ii)the average retail price of the goods at the time of supply; and

    (b)any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure.

16. Ford complains about the primary judge’s construction of s 272 (by ground 5) and the consequent errors by the primary judge through the application of s 272 so construed when assessing the quantum of Ms Capic’s loss and damage (by ground 8). The essence of these complaints concerns the failure by the primary judge to find that events subsequent to the supply of the vehicle were capable of bearing on the proper assessment of reduction in value for the purposes of assessing damages under s 272(1)(a) and that, in the case of Ms Capic’s vehicle, the primary judge failed to take into account the fact of particular repairs to Ms Capic’s vehicle which had been effected at no cost to her, the value of Ms Capic’s vehicle at the time of trial, and her use of the vehicle up to the time of trial.

17. By grounds 6 and 7, Ford contends that the primary judge erred in finding that Ms Capic had established the fact of loss or damage, and in holding that her vehicle was worth 30% less than its fair market value at the time of purchase, despite having found there was “no useful evidence” as to that matter.

18. After five hearing days of this appeal had occurred, the decision of the Full Court in Toyota was delivered on 27 March 2023.  We heard oral submissions from the parties about the impact of that decision on these grounds of appeal on 28 March 2023.

    Reasons of the primary judge

19. The primary judge stated the following in relation to Ms Capic’s vehicle at [674] J:

    …In light of the conclusions above it follows that Ms Capic’s vehicle was supplied to her in breach of s 54 for four reasons. It contains a DPS6 the normal operating characteristics of which made it prone to a slight shudder and rattling, it contained the original input shaft seals, it contained a B8080 clutch and it contained a TCM fitted with an original ATIC 91 chip. As Mr Pike SC for the Applicant put it, it was a lemon.

20. After identifying the purchase price of Ms Capic’s vehicle at [877] J (of $22,736.36, about which there is no challenge), rejecting the valuation evidence adduced by the parties as it was based on assumptions which had not been established or which “[did] not match the facts” (amongst other reasons), and expressing the view that there was no useful valuation evidence as a consequence, the primary judge stated at [883]–[890] J:

    Be that as it may, I am quite satisfied that Ms Capic’s vehicle was worth less at the time of its acquisition than she paid for it.  Mr Vasilakis gave evidence to this effect which was not contradicted but in any event it is to my mind obvious.  How should the reduction in value damages be assessed?  It is trite that ‘mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them’ and  ‘[w]here precise evidence is not available the court must do the best it can’: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 per Mason CJ and Dawson J, citing Fink v Fink (1946) 74 CLR 127 at 143 per Dixon and McTiernan JJ; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411-412 per Dixon and Fullagar JJ; Chaplin v Hicks [1911] 2 KB 786 at 792 per Vaughan Williams LJ; Jones v Schiffmann (1971) 124 CLR 303 at 308 per Menzies J.

    The process of assessing what the value of a chattel was 9 years in the past when the defects it suffered from are risks not actualities is inherently impressionistic.  That the risks came to pass is, so it seems to me, not to the point.  If it were otherwise the value at the date of acquisition would be conceptually tied to contingent future events and hence theoretically unknowable.  The fact that the vehicle’s input shaft seals did fail does not, therefore, matter.  But for the same reason, the fact that the Respondent replaced them does not matter either for neither bears upon the risk of failure which existed at the date of the acquisition.  The risks of the three proven component failures Ms Capic faced on 24 December 2012 were not altered in their extent when they came to pass just as a person who wins the lottery cannot be said to have had a 100% chance of winning.  They had the same chance as everyone else: the outcome of a probabilistic event does not affect the original probability.

    Identical remarks may be made about the TCM.  In the case of the clutch lining the same analysis flows albeit with a slight twist.  That the risk came off that the clutch lining would behave erratically is irrelevant to the value at the time of its acquisition for the reasons just given.  It is thus also irrelevant that it was not successfully repaired (whereas in the case of the TCM and input shafts seals what is irrelevant is that they were repaired).

    In a sense, the Applicant makes this very submission on behalf of group members when she submits that group members with vehicles which have never displayed any symptoms are equally entitled to recover.  The Applicant’s position on this issue is an inevitable corollary of running the case on the basis of a risk of symptoms rather than actual symptoms.

    Ms Capic’s vehicle came with a real risk that:

    (a)the input shaft seals would fail resulting in oil contamination of the clutch plate surface in turn causing wet clutch shudder;

    (b)the solder connecting the ATIC 91 chip to the PCB in the TCM would progressively crack giving rise to an increasing array of problems starting with loss of power for a few milliseconds (which might be imperceptible or experienced as a brief shuddering sensation) and ending with a total loss of motive power for a period of seconds;

    (c)the clutch lining material would exhibit negative damping causing it to behave unpredictably resulting in self-excited shudder and geometric misalignment in the clutch components would cause forced-excited shudder; and

    (d)torsional vibrations would be transmitted from the crankshaft through the drivetrain resulting in gear rattling and a slight shudder at low speeds.

    I assess the risk of (d) as high since the Respondent described it as a normal operating characteristic but I would also describe the occurrence of the risk as not as dramatic as (a) to (c).

    I disregard the offer made by Jefferson Ford on 10 February 2016 to purchase the vehicle for $10,000.  Whilst it appears that Ms Capic told the dealer the problems she had with the vehicle, again, this invites the wrong question which is about the value of a chattel attended by risks of failure at the date of purchase rather than the value of the chattel given the occurrence of the risks or some of them.

    Taking these matters into account, I have concluded that Ms Capic’s vehicle was worth 30% less than its fair market value without any defect on the day that she purchased it.  I accept that its fair market value on 24 December 2012 without defects was the amount she paid for it, $22,736.36 and I assess her reduction in value damages at $6,820.91.  This is the amount which, if tendered to her on 24 December 2012, would have put her in the position she would have been in if the guarantee of acceptable quality had been complied with at least in a balance sheet sense (ie expectation damages).  I will order pursuant to s 51A(1)(a) of the FCA Act that there be interest up to judgment on that sum from 24 December 2012 at 4% above the official cash rate published by the Reserve Bank of Australia, calculated monthly but without compounding.

    Whether the primary judge erred

21. For the following reasons, and contrary to the submissions of Ford, grounds 6 and 7 must fail.

22. In Toyota, the Full Court observed at [306]–[307]:

    In the present case there was detailed evidence in the form of the report from the referee as to the nature of the defect and its consequences.  Further, the consequences were likely to arise in relatively common driving conditions.  Therefore, the defect was one which was likely to manifest for many buyers.  These aspects of the findings by the primary judge were not in issue on the appeal.  Further, the nature of a motor vehicle and its utility to a consumer are matters of ordinary everyday understanding.  It is not necessary for the Court to receive evidence as to the nature of the use to which vehicles of the kind the subject of the present claims might be put by a consumer.  On the basis of the findings as to the defect and its consequences, the Court can form a view as to an appropriate percentage reduction in utility as viewed by a reasonable consumer.

    As we noted at the outset of these reasons, the primary judge made detailed findings concerning the defect and its consequences.  Some of those were more technical in nature.  Others concerned the practical consequences for the owner of the vehicle.  In our view, it is appropriate to have regard to the way the matters the subject of those findings would be viewed by a reasonable purchaser of a motor vehicle in order to form a view as to the extent of the effect upon the utility of the vehicle over its useful life…

    (emphasis added.)

23. At [311], the Full Court continued:

    Accordingly, even in the absence of expert evidence, the Court is able to reach a view as to the extent of the reduction in value based upon a close consideration of the evidence as to the nature of the defect.  In effect, this is substantially what was done by the primary judge…

24. Those observations are apposite to this case.  We will adopt the same approach when analysing the approach taken by the primary judge.

25. Accordingly, notwithstanding that the expert evidence adduced by the parties was not accepted by the primary judge as being of assistance to the valuation of Ms Capic’s vehicle, we consider that his Honour remained able to make a finding that Ms Capic had established the fact of loss or damage by reason of the findings made by him concerning her vehicle (particularly that it was a “lemon”) coupled with his earlier detailed analysis and conclusions about the defects in the Affected Vehicles.  Further, in these circumstances the primary judge was able to reach a view as to the extent of the reduction in value based upon his findings as to the nature of the defects in her vehicle.  Thus, no error has been shown and grounds 6 and 7 must fail.

26. Having regard to this conclusion, it is not necessary to address paragraph 3(b) of Ms Capic’s Notice of Contention.

27. We turn then to grounds 5 and 8 of the Amended Notice of Appeal.

28. The decision of Toyota made several critical findings concerning the proper interpretation of s 272 of the ACL which are pertinent to (and answer the questions raised by) these remaining grounds of appeal. Contrary to the submissions advanced by Ms Capic, these findings pertain to the manner in which s 272 should be construed irrespective of the facts which were before the Full Court in Toyota and the extent to which those facts might differ from the facts of this case.

29. Relevantly to this appeal, the reasoning of the Full Court was as follows:

    (1)the text and structure of s 272(1)(a) indicate that, at least generally, the point in time for assessing damages for any reduction in the value of the goods is the time of supply: [98];

    (2)however, the statutory language should not be seen as requiring an assessment as at the time of purchase irrespective of the particular circumstances (though in most cases that will be the appropriate approach): [100];

    (3)the assessment of whether or not an applicant has suffered loss or damage resulting from a failure to comply with the consumer guarantee may require, depending on the circumstances of the case, a departure from the time of supply or an adjustment to avoid over-compensation: [99];

    (4)the overarching consideration is that the amount of compensation for any reduction in value be appropriate: [99];

    (5)in the case of a claim against a manufacturer, assessment of reduction in value damages may still be undertaken by reference to the price paid (or the average retail price) at the time of supply, but taking into account subsequent events if considered appropriate: [100];

    (6)it is necessary to ensure that there is no over-compensation given the circumstances known at the time of trial: [131];

    (7)the statutory guarantee is applied to what may be described as consumer goods which, in most instances, will be goods that are acquired to be utilised or consumed.  Therefore, in most instances, the intrinsic value of consumer goods to a retail buyer will lie in their utility over their useful life rather than the price at which they may be on-sold: [110]–[111], [127];

    (8)to assess the quantum of any damages, it will usually be necessary to focus upon the price that would have been paid if the consumer had known of the defect when purchasing the goods, which requires identification of the component of the price actually paid that could be said to be attributable to the loss in utility arising from the defect: [118], [127].

1. As to the last point, the Full Court considered that such an assessment requires consideration of:

   (1)the availability of replacement or repair as a means of remedying the defect and restoring the value of the consumer goods in the hands of the buyer: [118];

   (2)where repair is not possible (or the cost of any repair means that, as a matter of commercial reality, there is no repair), the nature of the defect and the magnitude or significance of its effect upon the utility of the goods in the hands of the consumer: [148]–[150];

   (3)where the repair was not available at the time of trial, reasonable expectations of the consumer as to the availability and timing of any such repair; that is, an assessment as at the time of purchase as to the period of time for which the defect was expected to affect the vehicle (before a repair could be found and carried out on the vehicle), whether the repair would be at no cost to the consumer, and any use to which the goods may be put despite the defect (though compromised by the consequences of the defects): [122], [123], [127] and [128]. In factoring in the possibility of the availability of a fix, two types of uncertainty that existed at the time of purchase should be taken into account: firstly, uncertainty as to whether there would be a fix; and, secondly, even if a fix became available, uncertainty as to how long it might take for the fix to be designed, tested, and made available: [128];

   (4)where the repair was available at the time of trial, or the uncertainties referred to above had been resolved, the known information as to the availability, cost and timing of a fix at the time of trial: [127], [129]–[130]. In reaching a conclusion as to the reduction in value, the court should also have regard to any use to which the goods were put despite the defect: [127]. As to this:

   (a)where the repair would wholly reinstate the utility of the goods, the cost of repair may be a measure of the reduction in the value of the goods that resulted from the defect.  This is because it is a measure of what is required in order to restore the utility of the goods: [146];

   (b)if the repair will only partially reinstate utility, then it may be necessary to allow an amount for repair costs and, in addition, assess the residual reduction in value associated with the ongoing diminished utility: [147].

2. That position – that subsequent events may be relevant to the measure of damages – is consistent with the recent decision of Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211 (Gleeson JA, with whom Leeming and White JJA agreed), where the New South Wales Court of Appeal held such events may “illuminate or indicate or reflect the true value at the time of supply”: see [230], [234].

3. Mr Gleeson SC who appeared for Ms Capic submitted that the reasoning in Toyota should not be followed by this Full Court.  However, for the reasons which follow, we are not persuaded that we should refrain from following a decision of another Full Court, notwithstanding the timing of delivery of the decision in Toyota.

4. In Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 (2021) 287 FCR 181; [2021] FCAFC 153, Allsop CJ (with whom Kerr and Mortimer JJ agreed) observed at [18] that:

   The caution that the Court should exercise before departing from earlier Full Court authority should be reflected in how parties approach the task of appellate advocacy and in how Full Courts approach calls and attempts to re-agitate questions of law (especially statutory construction), decided by earlier Full Courts.  This is so especially in the exercise of migration jurisdiction as replete with cases, replete with the same or similar provisions being applied in case after case, and with one litigant in one Ministerial form or another in every case.  Parties should expect that a Full Court will demand submissions on matters such as why it should be convinced of error in the earlier decision, why it should exercise the power to depart when that power should be exercised cautiously, sparingly and with great care, why consistency and predictability of principle should give way, and why, if the matter is one of statutory construction, the error is clear or patent, not merely a difference of view as to meaning, or why it has produced unintended and perhaps irrational consequences.

   (emphasis added; citations omitted.)

5. FAK19 was applied in Tapiki v Minister for Immigration, Citizenship and Multicultural Affairs (2023) 408 ALR 503; [2023] FCAFC 10 at [11]–[12] (Perry, Derrington and Thawley JJ). In Tapiki, the Full Court was required to construe a particular provision of the Migration Act 1958 (Cth). The hearing took place on 16 August 2022 and judgment was reserved. On 25 November 2022, a differently constituted Full Court heard an appeal which involved the same question of statutory construction. That Full Court delivered its decision in Pearson v Minister for Home Affairs (2022) 295 FCR 177; [2022] FCAFC 203 on 22 December 2022, being prior to delivery of the decision in Tapiki.  The Full Court in Tapiki considered itself required to follow the decision in Pearson, regardless of the timing of delivery of Pearson, by reference to the observations of Allsop CJ in FAK19.

6. We consider that it is appropriate to adopt the same approach in this appeal.

7. That is because the findings in Toyota which are relevant to this appeal concern statutory construction.  The errors asserted to exist in the reasons of Toyota are not clear or patent, and nor are we convinced that the construction adopted by the Full Court in Toyota is erroneous.  In this regard, we are mindful that any decision to depart from the decision of another Full Court should be exercised cautiously, sparingly and with great care.

8. Applying the construction adopted in Toyota to this case, it follows that:

   (1)ground 5 should be upheld, as the primary judge ought to have held that subsequent events were capable of bearing on the proper assessment of reduction in value damages;

   (2)grounds 8(a) and 8(c) should be upheld because, when assessing the damages payable to Ms Capic, the primary judge did not take into account the facts known at the time of trial (being the repairs) and the use by Ms Capic of her vehicle up until the time of trial;

   (3)ground 8(b) should be upheld because (applying the reasoning in Toyota), evidence as to the value of the vehicle at the time of trial was relevant information which would have enabled the primary judge to ensure that Ms Capic was not over-compensated.

9. The question then becomes, what order should be made as a consequence?  In our view, the appropriate order is to remit the question of Ms Capic’s damages for re-determination by the primary judge on the basis of the evidence already before his Honour.  We appreciate that this might leave the primary judge with some imponderables.  However, we do not think that it would be conducive to the just and efficient determination of Ms Capic’s claim to damages to permit the parties to effectively re-litigate that question at this stage of the proceeding.

10. As we have noted, in this case, unlike the position in Toyota, the primary judge did not embark upon an assessment of damages under s 272(1)(a) of the ACL on an aggregate basis. Indeed, the primary judge made that plain at [36] and [849] J and at [6] CQJ. It follows that there can be no question of a remitter in connection with the assessment of damages in relation to the group.

    APPEAL ON PRE-JUDGMENT INTEREST

11. This was a complaint by Ms Capic about the failure by the primary judge to award pre-judgment interest on the damages awards for excess amounts of GST, stamp duty and financing costs (grounds 14 and 15 of the Amended Notice of Cross-Appeal).

12. Ford accepted that Ms Capic was entitled to pre-judgment interest on these amounts. We agree. However, the amount of such interest is a matter that can be determined by the primary judge, and awarded, on remittal following the assessment of the damages payable to Ms Capic under s 272 of the ACL.

    DISPOSITION

13. We will allow the appeal brought by Ford in relation to grounds 5 and 8 of the Amended Notice of Appeal.

14. We will allow the cross-appeal brought by the respondent in relation to grounds 1, 2, 5(a) to (c), 6, 8, 9, 14 and 15 of the Amended Notice of Cross-Appeal.

15. We will invite the parties to provide an agreed form of orders within 14 days, including a draft of agreed answers to the common questions, having regard to the findings made.  We will also invite the parties to reach agreement on the appropriate costs order.

16. In the absence of agreement, the parties will be directed to provide to the Full Court with a form of orders (other than costs), and answers to the common questions, which they propose, to be accompanied by written submissions not exceeding five pages.

17. As to the question of costs, the parties will be directed to provide written submissions on the question of costs (not exceeding three pages) if agreement cannot be reached.

I certify that the preceding three hundred and twenty-four (324) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Yates, Beach and Downes.

Associate:

Dated:       14 November 2023