Williams & Anor v Toyota Motor Corporation Australia Limited (ACN 009 686 097); Toyota Motor Corporation Australia Limited (ACN 009 686 097) v Williams & Anor

[2024] HCATrans 21

[2024] HCATrans 021

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S157 of 2023

B e t w e e n -

KENNETH JOHN WILLIAMS

First Appellant

DIRECT CLAIM SERVICES QLD PTY LTD (ACN 167 519 968)

Second Appellant

and

TOYOTA MOTOR CORPORATION AUSTRALIA LIMITED (ACN 009 686 097)

Respondent

Office of the Registry
  Sydney  No S155 of 2023

B e t w e e n -

TOYOTA MOTOR CORPORATION AUSTRALIA LIMITED (ACN 009 686 097)

Appellant

and

KENNETH JOHN WILLIAMS

First Respondent

DIRECT CLAIM SERVICES QLD PTY LTD (ACN 167 519 968)

Second Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 APRIL 2024, AT 10.03 AM

Copyright in the High Court of Australia

____________________

MR J.T. GLEESON, SC:   May it please the Court, I appear for the Williams parties in each appeal with MR P.A. MEAGHER and MR T.M. ROGAN.  (instructed by Gilbert + Tobin)

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend MS E. BATHURST for Toyota.  (instructed by Clayton Utz)

GAGELER CJ:   Yes, thank you, Mr Walker.  I note that the parties in the next matter of Capic and forward are represented in Court; there is no need to announce your appearances at this stage.  Mr Gleeson, I think you were first.

MR GLEESON:   Thank you, your Honours.  Your Honours will see from our outline that we wish to commence with a clear understanding of the breach of section 54 that grounds the dispute as to evaluation under section 272.  After dealing with that first topic, I will then deal with our approach to section 272, which embraces Justice Lee and Justice Perram in the Capic matter.  I will then deal in an anticipatory fashion with the Toyota approach which, we submit, has no support in any known principle to law.  Then, I will come to the Full Court’s hybrid approach, which I will call the lonely orphan in our appeal ‑ ‑ ‑

GAGELER CJ:   It is not really being supported, is it?

MR GLEESON:   It is not supported by anyone, so I will need to deal with it as far as I need to deal with it, but I can say now the formula of a x ^b/_c, which was proposed in a letter, was argued for by no one; it has no support in principle, and it does not get much better when one reads the way the court sought to support it between paragraphs 95 and 136 of the Full Court.  Amongst its many other problems, we are trying to ascertain a reduction in value on supply.  Toyota and Williams now agree we are looking on supply; we are comparing the statutorily guaranteed value from the manufacturer, which is defined as the lower of price paid and average retail price against the value of what you got on supply.  To turn that into an approach as per the Full Court of saying, let us try and look at what you got over the life of your vehicle, having regard to events which occurred in the actual world, we submit, is not supported in the statute and would not have been supported in a contract.

Your Honours, my fifth topic, I will have to say little under ground 2, we submit that Justice Lee’s seventeen and a half per cent assessment of the diminution in value was amply supported and there was no appealable error in it.  If anything, with respect to his Honour, he was a little on the miserly side, but we are not complaining about seventeen and a half per cent.  Your Honours, if that is convenient – I know you do not want to hear about the facts for too long, but can I just ground the breach because it explains why, in Justice Lee’s approach, the damages are correct.  Your Honours will have seen in the core appeal book at paragraph 15, on pages 18 to 21, there is, with respect, an amply concise summary of the sad history of the DPF system in the 264,000‑odd VW vehicles.

The basic problem was that, as designed in head office, the car itself and the exhaust was not intended to meet Australian emissions standards.  In order to try and meet those standards, decisions were made in the design process which led to the DPF and the DOC that you see depicted on page 19 at the top.  They were designed as an intermediary between the exhaust and the muffler to get rid of the dangerous diesel particles, which otherwise would breach Australian law.  In doing so, because they were defectively designed, they became blocked for reasons that are now common ground.  When they became blocked – you see in paragraph 15(6) – regeneration failed or was ineffective, blockage occurred and then these were the consequences.  Number one:

The DPF System was defective for the whole of the Relevant Period –

that is the period between some time in 2016 and prior to May 2020.  Number two:

the DPF system was not designed to function effectively during all reasonably expected conditions of normal operation –

and the reasons for that are given.  Number three, what it led to under normal driving conditions, including driving at 100 kilometres per hour, a normal driving condition, is:

excessive white smoke and foul‑smelling exhaust during regeneration –

process, plus indications from the dashboard that the system “was full” and that led to the problem that you were told you had to take your car in immediately for service.  If you did not, the car went into limp mode, fifth gear was disabled, acceleration was limited.

They are the consequences you start to see over the page, at subparagraphs (8) and (9).  So, that is a little introduction to the defect.  As to the consequences which were likely to emerge, you will see them at paragraph 59, on page 32, and you will see, importantly, in paragraph 62, the referee’s finding – which was accepted – was that every vehicle had the propensity to suffer at least one of the defect consequences when driven in the high‑speed pattern.  They are set out there, the consequences I have mentioned, and 63 confirms it was a propensity case.

So, the case was run based on the Medtel‑type of case, that the defect had a propensity to exhibit unacceptable behaviours in ordinary driving and it did, in fact, so exhibit those behaviours, which you see from paragraph 64.  Even on Toyota’s assessment, 50 per cent of the vehicles would fail after five years and 94 per cent would after 10 years.  So, effectively, every vehicle if driven under these normal conditions had the propensity to fail in one of those fashions. 

The primary judge made a finding of fact which the Full Court did not overturn, and could not, which was that these were serious consequences and they substantially interfered with the normal use and operation of the vehicle.  That is tolerably obvious from what I have already said, but to emphasise it – back on paragraph 21, on page 22 – even the respondent recognised that these issues posed a serious threat to their market reputation.  They were a serious matter deserving of urgent attention and substantial resources and TCM has offered refunds to hundreds of customers.

Your Honours might add together with that, between paragraphs 78 and 86 of Justice Lee, issues which are now not open in this Court.  Perhaps bizarrely, TCMA tried to argue that none of this was serious because you could still limp from A to B even though you had a foul‑smelling exhaust, you are being pulled up by the police for a bad muffler and you were being abused by the motorists for your car.

Now, Justice Lee, between 78 and 86, rejected all of that.  Paragraph 81 explains why these were incredibly serious issues, including the limp mode, the disabling of the fifth gear, the limitation of acceleration.  Paragraph 85, “tens of thousands of customer complaints”, and 86, TCMA’s internal appreciation that this was a very major problem.  Now, based on those findings of fact, if your Honours have section 54, which is on page 115 of volume 1 of the materials in the ACL.  The guarantee was that the goods would be of “acceptable quality”, defined as – and then there is a double test:

they are as:

(a)     fit for all purposes . . . 

(b)     acceptable in . . . finish; and

(c)     free from defects . . . 

. . . 

(e)     durable;

as a reasonable consumer fully acquainted with the state and condition . . . (including any hidden defects . . . would regard as acceptable –

So, one attributes to the reasonable consumer a full knowledge of this sad, sad situation with VW’s vehicle and says would the consumer regard that as acceptable, and I am emphasising this because this is the finding that will then carry through to the valuation exercise.

His Honour reached his conclusions on this question commencing at paragraphs 153, but, in particular, I would emphasise the findings that commence at paragraph 173 where his Honour went through each of the breaches of the guarantee.  What is put at paragraph 183 is hard to gainsay, including not only the discomfort for those in the car who were experiencing “the foul-smelling white smoke”, “being pulled over by the police”, “abuse” from other drivers, frustration, frustration, anger, et cetera.  And those conclusions, this Court will now act upon.

So far, I have looked at the major aspect of the problem.  This was a defect with a propensity to cause significant defect consequences.  Can I then turn to what is in the balance of paragraph 2 of our outline, which is, what were the facts as they were known or knowable at the date of supply about the possibility, if any, of a repair.  At paragraphs 168 to 170, his Honour, correctly concentrating on the text of section 54, focused on:

the state and condition of the vehicles at the time of supply –

rather than things that might occur after supply, and at 170 said:

it is inappropriate to imbue the “reasonable consumer” with knowledge that an effective fix will ultimately become available . . . This is not a matter that goes to “the state and condition of the goods” at the time of supply –

And then we see a finding of fact:

nor is it a fact that could have been known at the time of supply –

There is then a reference to Medtel and Henry Kendall and, importantly, in the last sentence, his Honour made a finding of fact that:

no fix is presently available, and it is not known when –

or one might interpolate, whether:

a fix will become available –

GAGELER CJ:   Why so interpolate “whether”?

MR GLEESON:   It follows from the “when”.  So, his Honour’s finding is, as we would seek to summarise in paragraph 2:  is there a fix available today?  Answer:  no.  That is the known known.  Paragraph 2(b), the known unknown, is there can be no certainty today or even reasonable expectation of whether, when or on what terms a fix might become available.

GAGELER CJ:   Do you say that comes from the finding?

MR GLEESON:   It comes from this finding, read with the findings I am now going to take your Honours to.  So, if I might go to those additional findings, what they are is that over the four and a half year period, despite enormous attempts to seek to solve the problem, Toyota failed to solve the problem and, indeed, some of its purported solutions made the problem worse.  That is material which can be taken into account in respect to each consumer at the date of supply to indicate there could be no confidence whether, when or on what terms a fix might become available.

Can I take your Honours to the additional findings and evidence that support that submission.  Firstly, at paragraph 16, you have the overall finding that over the four years, despite enormous attempts:

the number of complaints increased dramatically; the issues were escalated . . . and a number of countermeasures were introduced, tested and failed.

Next, you have paragraph 44, which is the referee’s finding that:

The countermeasures attempted . . . during the Relevant Period were ineffective and in some cases caused the DPF System to malfunction . . . which had not previously suffered –

problems.  At 46, his Honour made clear that that finding applied to the 2018 production change, and 49 confirms that finding.  I would like to take your Honours to take our chronology, just to highlight the references which support that finding.  So, this is the appellants’ chronology in appeal 157/2023.  Item 3, the problem starts to emerge, and item 4, it is reported to head office.  Item 6 is the first Toyota Global Registration Notice, recording that the:

“Failure strongly affects the reputation . . . 

There is no current repair method.

So, that confirms our paragraph 2(a):

A quick Production [countermeasure] & supply of service parts is required.”

Now, that is a correct recognition by Toyota of what the reasonable consumer would demand, that if you do not have a current repair method, you must find a quick and readily available supply.  Item 7 shows that by June 2016 they had:

identified the High Speed Driving Pattern as a root cause –

As, likewise, item 10.  Importantly, item 11 is the first field fix.  December 2016, it:

was ineffective, and in some cases, caused the DPF System to malfunction –

where there was no previous malfunction.  So, if we pause the frame at the end of 2016, we have no repair, attempts at repair are ineffective, there could be no confidence when a better result would be achieved.  In 2017, item 16 is the internal document of April 2017 that 50 per cent will fail:

within 5 years and 94% within 10 years.

Item 18, it is mid-2017 that the first field fix starts to be deployed.  And then, over the page at item 21, by September 2017, there is a further Global Registration Request indicating that the First Countermeasure has failed and caused problems in vehicles with no previous problems.  Item 22 makes clear the seriousness of that situation.  Over the page, item 31 is the second field fix – that is the 2018 one; that failed.  And then, over the page at item 36, October 2018, they start rolling out the second field fix, but that continues to cause problems.  And then, by item 43, by January 2019, they are on the fourth Global Registration Notice: 

“Vehicles which have received the latest CSC (ECU reprogram) continue to fail post repair.  As the number of occurrences is increasing and a large number of vehicles are effected an urgent Field Fix and root cause investigation is necessary.”

So, if your Honours recall, I had started with the entry at item 6, which is, a quick fix was necessary.  We are now close to three years in, and they are saying the current fixes have failed and we still need an urgent fix.  Then, at item 45, we get the fifth GRN, the number of occurrences is still “increasing”, the fix is needed, and, over the page at item 49 – you can see the fix, item 57, first starts to be offered to some customers from May 2020.

Now, across that entire four-year period, the situation that we say has been found by his Honour at paragraph 2(b) remains constant: no certainty or expectation whether, when or on what terms a fix might become available.  The 2020 field fix, I have shown your Honours, emerged in May 2020.  In terms of the nature of the fix, if your Honours have the parties’ book of further materials – that is the Williams book – at page 135, paragraph 171 of the agreed facts, that is what it involved. 

STEWARD J:   Sorry, Mr Gleeson, what was the page number, again?

MR GLEESON:   Page 135 of the Williams book, paragraph 171.  That is what the fix involved – a new Euro 6 unit with “a modified substrate”, “a modified additional injector housing assembly”, reprogrammed software.  We would describe that as a reconstitution of the exhaust system achieved four and a half years after the problem was first identified.  So, we would submit, coming to section 272, it is that set of failures to honour the guarantee that form the substratum of the remedy.

If your Honours have section 271 and 272, can we make these construction submissions?  It is page 314 of the book.  So, the action for damages against the manufacturer is conferred under section 271, by reference to the non‑compliance with the guarantee.  It is conferred upon affected persons who are defined in section 3, on page 44, to include the consumer but also certain privies of the consumer.  It is to:

recover damages from the manufacturer –

Under section 272(1), in that action for damages, the affected person has an entitlement to recover damages for two separate matters, (a) and (b), and the first matter is damages for:

any reduction in the value of the goods, resulting from the failure to comply with the guarantee . . . below . . .

(i)     the price paid or payable . . .

(ii)     the average retail price –

Pausing there, we submit that the paragraph (a) entitlement protects the performance interest of the affected person.  What it does is to secure to the person a sum of money, measured by reference to the diminished value following the failure to comply, which, when taken together with the defective goods, puts the consumer in as good as position as money can, as if section 54 had been complied with.  It does that at the date of supply by comparing a creature known at the date of supply – which is price paid or average retail price, whichever is lower – with the value of the goods reduced, as at that date, resulting from the breach.

Therefore, it requires very close attention to what is the breach and if the breach lies in the goods containing a defect which gives them a propensity to exhibit troubling behaviours with no known or knowable ready remedy.  It is that propensity and that absence of a known or knowable ready remedy which is fed into the value calculation.  One way we would put it, your Honours, is that it is contemplating a hypothetical transaction between the reasonable marginal consumer and the supplier in – which with full knowledge of the defect, and full knowledge of the lack of any ready repair – what would the consumer have paid.

EDELMAN J:   It is a form of, effectively, monetised specific performance, is it not?

MR GLEESON:   It is, and it is done at that date based upon knowledge of the defect.  So, that knowledge is brought to the parties, and it can include the knowledge that there is no ready repair – I am sorry, your Honour?

JAGOT J:   In Spencer’s Case dealing with hypothetical transactions, the purchaser is assumed to be fully informed, as is the vendor, about the actual attributes and condition of the land.  So, why is the line of knowledge drawn at – because it is hypothetical, you are attributing to them knowledge of the defect or the failure – why is the fully‑informed hypothetical parties, about attributes of the vehicle, not attributed with further knowledge?  There seems to be a line as to where you draw the attribution of knowledge.  Not to do with events after sale, it is all hypothetical; it is not an actual transaction, it is by definition hypothetical.  So, why can you not attribute other knowledge?

MR GLEESON:   I agree with your Honour, it is by definition hypothetical, and we know from section 54 you have to attribute knowledge about the defect – the true nature of the hidden defect – you attribute that as part of the hypothetical calculation.  So, the consumer and Toyota are hypothetically engaged in a negotiation:  I am not now selling you a brand new well‑functioning Prado, I am now selling you a Prado which has an unacceptable propensity to exhibit all those consequences.

JAGOT J:   But why not?  Why do you not also, including that – if it is a fully informed about all the attributes Justice Isaacs, then why do you not attribute knowledge that these defects are ultimately repairable after four and a half years of hell?

MR GLEESON:   What we are content to attribute is what is in paragraphs 2(a) and (b) of our outline, which is you can first attribute the fact that there is no known remedy currently available.  So, that is easy; 2(a).  And 2(b), at that date what you are attributing is an uncertainty of knowledge.  There can be no certainty whether, when or on what terms a fix might become available in the future.  That is the knowledge that is reasonably available in the hypothetical bargain.

JAGOT J:   Then the parties are not fully informed.

MR GLEESON:   They are informed of all the matters that they are capable of being informed of at the time the bargain is being made, which is the time when the breach occurred.

EDELMAN J:   Suppose you had the converse of this situation where I manufacture or sell to you goods that, at the time, nobody could have known had some major latent defect, maybe they contained carcinogens or something like that.  Years later that major latent defect is discovered.  Is the difference in value not substantial even though, at the time that I have supplied the goods to you, nobody could have known, on the state of scientific knowledge, the defect in the goods?

MR GLEESON:   Well, the defect is – the difference is substantial in that example.

EDELMAN J:   So, why is the state of knowledge relevant in the case before us then?

MR GLEESON:   I am sorry, I missed your Honour’s question.  Why is it relevant at all or how is it relevant?

EDELMAN J:   Well, as I understand your submission, it is that one does not look to the fact that a fix was later discovered because you could not have known at the time of supply that there would be a fix that was later discovered and then offered for free.  In the example that I am giving you, on the state of scientific knowledge, nobody could have known that there was a major latent defect in the goods that are supplied.

MR GLEESON:   Your Honours, our answer lies in two things, which is that this is protecting the performance interest, we are not in the field of tort where we are trying to put someone back in a position they were in, we are protecting a performance interest.  To identify that performance interest, this Court in Clark v Macourt, that I would like to go to, provided some discussion of it.  That is at tab 8.

GAGELER CJ:   There is a whole contestable philosophy that lies behind that label of performance interest.

MR GLEESON:   Yes.

GAGELER CJ:   Are you attributing that philosophy to the Parliament in enacting this provision?

MR GLEESON:   No, I am trying to attribute some plain sense meaning to some plain sense words.  What was the Parliament trying to do in this case?  What it was trying to do, we say, was you are trying through money to put you in the position the statute guaranteed the manufacturer would put you in and how do you do that in a practical sense, having regard to the breach that has occurred in the particular case.

Now, what we take from Clark v Macourt 253 CLR 1 are two things. The first thing, in paragraph 67 in your Honour the Chief Justice’s judgment, dissenting in the result but not on this issue, when your Honour described – admittedly, this was a context of a non‑delivery case, not a defective delivery case, but in paragraph 67 your Honour was speaking of the “hypothetical sale” and the ordinary position, which is the position under the statute, and your Honour in the middle referred to:

The value to the buyer of having ownership of, and control over, contractually compliant goods that can be bought and sold in a market . . . ordinarily equates to the market value –

So, the performance interest we identify is having ownership and control over goods which comply with the statutory guarantee as compared with having ownership and control of the defective goods you have been given.  That is what you are trying to measure in the process.  I draw attention to that because when the Full Court tries to conduct a life in use utility analysis in fact we would submit that is wrong because that is almost looking at it like the revenue account, this is trying to look at, almost on the capital account at the date of the transaction, what was the value in terms of ownership and control over statutorily compliant goods as compared with the ownership and control of the goods I had in fact.

That is one aspect in Clark which we submit is of some assistance.  Secondly, in Justice Keane’s judgment, there is a lengthy discussion of the principles from 106 and following, but in, for example, 107 where his Honour refers to Bellgrove v Eldridge in this Court in 1954, and in turn what this Court said in Tabcorp (2009) 236 CLR 272, at 286, paragraph 13, this Court said, in the middle:

in the case of the supply of defective goods, the prima facie measure of damages is the difference in value between the contract goods and the goods supplied.  

Then it goes on to reference Ruxley for “a notional transaction”, and so on.  So, your Honour Justice Jagot, part of our answer would be that the inquiry here is not an acquisition of property with an attempt to establish just terms.  The inquiry is in this framework of either contract or statutorily guaranteed performance, and what we are seeking to do is to say, when this consumer leaves the shop with a defective car, what is the sum of money which when added with the defective car puts the consumer in as good a position walking out the door as if the guarantee was complied with.

JAGOT J:   I understand that, but Spencer is just about market value, not necessarily in a compulsory acquisition.  It is just market value traditionally requires a fully‑informed purchaser, not of supervening events – I accept that, and that may be the question of what is a supervening event and what is not – but certainly fully informed about the attributes of the thing to be valued.  That is what you have.  That is what you are taken to be fully informed about.

MR GLEESON:   So, if one asks a first question, which is, is remediability of the defective goods an attribute of the goods – that is the question – we would not argue against remediability being a relevant attribute of the goods.

JAGOT J:   Right.

MR GLEESON:   That is one question.  The next question along is, what is known or capable of being reasonably known at the time you engage in the transaction, the voluntary transaction, about that question of remediability, and this is a voluntary transaction that has been diminished by reason the breach of the guarantee.

BEECH-JONES J:   Mr Gleeson, if you had the fix that had been fixed first time within about eight months, would that be a material difference on your case?

MR GLEESON:   Yes.

BEECH-JONES J:   My follow up question is, what is the rationale for the difference?

MR GLEESON:   Well, let us take Dwyer.  Mr Walker tries to map himself on Dwyer.  Dwyer is possibly the opposite extreme of this case.  In Dwyer – we can go through the findings, but the essential finding is there was no breach of the guarantee because the problem, first of all, never came home for anyone in the real world and, in any event, was fixed on a routine service after a recall notice without anyone ever experiencing the slightest problem.  Now, in that case the Court of Appeal says no breach of the guarantee.

It is a difficult exercise to do the alternative in that case because on those findings of fact you got what you were entitled to get, but in the alternative the court says, in this sort of set of facts, we do not detect a reduction in value at the date of supply because the ready ease and availability of that fix to you occurring before any problem ever emerged in the real world is such that you suffered no loss on the capital account.  So, it is the factual case at the opposite end of the extreme. 

BEECH-JONES J:   Is that to say we attribute to the hypothetical purchaser in that case a knowledge of some reasonable likelihood of the reasonably easy fix?

MR GLEESON:   Yes.  You attribute first the knowledge, which you might in every case, that if you are dealing with a reputable manufacturer, if a problem emerges, they will try to fix it.  There is no problem with that attribution.  In a Dwyer case, you then add to it what your Honour has just put to me.  In the present case, the reason I have gone through these sorry facts is to say the only conclusion you can draw is that no one – not Toyota, not the consumer – could have had any confidence in the ready availability of a fix at any point in time.

JAGOT J:   But you have accepted, I thought – maybe you did not but I thought you accepted – that remediability – capacity to remediate of the problem is properly attributable knowledge.  That means both it can be remediated, or it cannot be remediated of its nature, the defect.

MR GLEESON:   What I accepted, your Honour, was remediability could be an attribute of the goods.

JAGOT J:   Okay.  So, once you get to that, it is time, is it not?  The only difference between you and Toyota becomes when, because this defect was ultimately remediable.  So, inherent in the nature of the defect, that it was able to be remediated.  I was saying that if you accept that either being remedial or being not remedial is properly attributable knowledge to the hypothetical buyer and seller, this fell into the remediable category, ultimately, and therefore the real difference between you and Toyota seems to be four and a half years.

MR GLEESON:   I am not accepting that knowledge of remediability is attributable, because that is where ‑ ‑ ‑

JAGOT J:   You are not?

MR GLEESON:   I am accepting that remediability is an objective quality.  There may be some goods where objectively you can say:  with that defect it can never be remedied.   Your Honours are going to hear that in the Capic appeal because there were some defects in Capic where the findings are ‑ ‑ ‑

JAGOT J:   It can never be remedied.  But why is that not an inherent attribute of the good?

MR GLEESON:   And that is an inherent attribute of the good.  So, remediability, whether it can or it cannot, could be such, but what is critical is, with this close attention to the facts, how do you respond to a situation where the responsible manufacturer spends four and a half years trying and failing to fix the goods and, in fact, purports to remediate the goods of many people and makes their goods worse?  So, you have the whole of that sorry history, and then you have, yes, at the end of it:  four and a half years, eureka, happy day.

Let me put positively what we are accepting.  It would be consistent with the authorities to look at the whole of that course of conduct, that sorry experience, together with a happy day at the end, and look back and say:  how does that bear upon what could reasonably have been known by the parties in 2016 when they were negotiating the hypothetical bargain?  What that would tell you, looking back, on this set of facts, is the propensity you have to exhibit these troubling behaviours is a very real, likely, problem, because whether you ever get to the happy day, you can have no certainty whether it is now, three years, four years, six years, or eight years.  And so what the consumer would say – the consumer cannot have perfect knowledge.

That is where I am, with respect, disagreeing with your Honour.  You cannot attribute to the consumer under 272 perfect knowledge that a fix occurs four years later.  What you can attribute is, by looking back, from this sorry history, what would I pay if I was told, on the one hand, I am likely to exhibit the foul smoke, et cetera, over the life of this vehicle, and on the other hand, there is at best a chance that at some point – which, today, cannot be known, because we do not know what Toyota is going to do – in the life of the vehicle, my problem might go away.  That is what we are saying you would attribute to the consumer.

JAGOT J:   I understand that.

GORDON J:   But the difficulty with that, Mr Gleeson, is this:  if one takes the facts you have put to us, and one has this inquiry as at the date of supply, by reference to the matters that you set out in (a) and (b), the guillotine comes down at the date of judgment.  So, one ends up with a test which, in effect, flips and flops depending upon where you are at the time of judgment.  In effect, the Capic Case proves the point.

There are fixes and fixes, the known knowledge at the time when you – the fully informed on the known is known, but it is not known in relation to those fixes which are not available.  So, one has a concrete assessment by reference to knowledge at the time of supply, without this need to sort of undertake some inquiry about, do I have it or do I not have it?

MR GLEESON:   We are not encouraging any ample inquiry like that.  What we are ‑ ‑ ‑

GORDON J:   Well, you must, on your analysis, because it is undertaking an inquiry about whether or not the knowledge to be attributed to the purchaser at the time is something whether they could have – to pick up your language – propensity to have troubling behaviour and not know whether it is going to be fixed or not.

MR GLEESON:   I do not retreat from propensity.  The case is run as a propensity case.  You have a defect – it is a dud exhaust system.  It is likely, as in a certainty, to manifest in one of the troubling behaviours as soon as you put your foot down.  That is the defect.  Now, because it is being assessed – and I am agreeing here with your Honour – looking forward, it is not an inquiry into how many times those defect consequences manifested for each person.  What it is saying is:  because you have a car with that propensity, how much less is it worth?

STEWARD J:   Can I ask you a question.  Based on your submission, does a member of the class who purchased a car in, say, March 2020, suffer any actionable loss or damage?

MR GLEESON:   Yes, on the findings of fact in this case.  They suffer exactly the same actionable loss.  The reason being that, on the findings of fact, across the four-year period there was no difference either in the propensity for the defect consequences to come home or, if it be relevant, no difference in the knowledge as to whether there would be a repair.  So, what I mean by that, your Honour, is if you walk out the door in March 2020, what you have is a car which has exactly the same propensity as each of the earlier cars over the whole of its life to exhibit the same troubling behaviours.

STEWARD J:   But is that person not in the Dwyer category?

MR GLEESON:   No, no, because that person, based on the findings in this case – it is important to understand this whole issue about knowledge of repairability was never the issue before Justice Lee.  That was why ‑ ‑ ‑

GORDON J:   That is because it is fixed.

MR GLEESON:   It is fixed, Toyota ‑ ‑ ‑

GORDON J:   That is the difficulty you have in your case; that is the thing that makes it different.

MR GLEESON:   But what was run – let us be clear about what was run at trial.  Toyota’s position at trial was to say, do not assess the date of supply, assess the loss at trial.

GORDON J:   Well, that is now moved.  It seems to be common ground that it is a date of supply; the question is, what do you take into account, and how you adjust it?

MR GLEESON:   That is right, but I am mentioning that because it explains why the findings on repairability are as limited as they are, because it was not Toyota’s case, for example, to take your Honour Justice Steward’s question and say that person is in a different position.  So, because it was run as a Medtel case, it is like the defective pacemaker; it is saying each car, even the ones supplied in March 2020, has exactly the same propensity to exhibit those troubling behaviours.  Each car suffers the same reduction in value on supply.

GORDON J:   Was there any argument run – as you know, there is a time limit on the actions here that are able to be brought; I think it is three years.  Was there any suggestion that this assessment should be limited by reference to those sorts of time limits?

MR GLEESON:   I think the answer is no, your Honour. 

GORDON J:   I ask this question because otherwise we have this inquiry that you would have us to undertake, which is unlimited.

MR GLEESON:   Your Honours, the fault is mine.  I am not urging the unlimited inquiry.  What I am trying to respond to is the case that says, you give centrality to this fact that has occurred by the time of trial.  The case we are trying to run, which we were trying to conceive of as a tolerably simple case, was each vehicle had this unacceptable propensity at the date of supply, and you are trying to work out a sum of money, which, on the capital account, restores you to the position as if it did not have that unacceptable propensity at the time you walked out the shop.

GAGELER CJ:   Mr Gleeson, you mentioned earlier the New South Wales Court of Appeal’s decision in Dwyer.  There is a statement of principle, really, an extensive statement of principle in paragraphs 225 through to 240 of that judgment before one gets to the heading, “Application to the facts”.  Do you accept the statement of principle in those paragraphs and simply distinguish the case on the facts, or do you take issue with what is said there?

MR GLEESON:   We take issue with parts of that principle, and perhaps I should show your Honours which, but we also distinguish the facts; I can do both.  So, can I do the principle first and then go back to the facts?  At 229 and 230 – this is Dwyer, which is in tab 18, volume 4 – we accept paragraphs 229 and 230, which follow what your Honour Justice Edelman in Moore v Scenic Tours at 64, and it is the performance interest that is being respected.  Paragraph 230 says:

subsequent events are potentially relevant because they may illuminate or indicate or reflect the true value at the time of supply.

That is correct, provided it is understood appropriately.  Where we start to have a word of caution is at 231, which is the reference to HTW Valuers.  What this judgment appears to do is to assimilate the principles in deceit in assessing true value with the principles in contract or section 272.  We suggest that there needs to be some caution at that point because, although both are an inquiry into true value, they are doing it for a different reason.

In deceit – and this is the reason the distinction arose between extrinsic events and supervening matters – one is trying to make sure that the wrongdoer is not held liable for more loss flowing from, in the world, the inducement than is appropriate under the policy of the law.  So, if the reduction in value has flowed from something truly intrinsic in the goods which you were induced by deceit to buy, the wrongdoer is responsible for it.  If there is further reduction in value by reason of extraneous events, the wrongdoer is not responsible for it.  In the course of tort law, following the loss a decision is being made when the wrongdoer’s responsibility must come to an end.

In contract, or in section 272, although we are asking about true value, it is for a different reason.  We are trying to – as your Honour Justice Edelman put to me – monetise the specific performance and give you the sum of money so that from that moment going forward, the money plus the defective car puts you in as a good a position as if the contract was being performed.  That is why in contract, sale of goods, or in section 272, subsequent events may be irrelevant.  So, if the buyer has a fortuitous sale into a different market in contract, that does not reduce the damages because of the way the performance interest is being honoured.

So, what we would suggest, your Honours, we submit, is that, with 231 and 232, our submission would be yes, but one needs care in transposing deceit principles into contract or the statute.  We strongly disagree with paragraph 235 – and that is for a textural reason.  It may or not intersect with your Honour Justice Gordon’s question.  If the Court has section 271(6), we submit it is of critical importance in understanding the section 272 remedy.  What it does is to incentivise the manufacturer, if you give an express warranty, and if you are called upon to perform it, and if you repair within a reasonable time, you turn off the tap to the reduction in value remedy.

One view, which gives a very simple answer to the present problem, is if you are relying upon the remedy occurring in fact in the subsequent world, you can only do so under the 271(6) banner and, absent that, the remedy occurring in the actual world cannot impede your remedy under 272(1)(a).

STEWARD J:   Do you say that the legislative scheme gives the consumer a right to elect between monetising the defect or getting it fixed?

MR GLEESON:   Yes, and Justice Perram – I will just give the reference, it is 719 of Capic at first instance – said that, we submit, correctly.  It is an election to the consumer.  If you go down the route of repair and you get it within a reasonable time, you have lost your reduction in value remedy.  If you do not go down that route or it is not in a reasonable time, you get your reduction in value and you ignore the repair in the actual world.

STEWARD J:   Is there anything in the extrinsic materials that support that?  Or is it just an implication from the terms of (6)?

MR GLEESON:   I think it is an implication, your Honour, but it can be strengthened by comparing what happens with the action against the supplier.

STEWARD J:   This is 259?

MR GLEESON:   Yes.  I think what you do get from the extrinsic materials is the common sense that the manufacturer is deemed to be the primary person that has created the problem.  Therefore, the remedy against the manufacturer is the most powerful remedy available, which is you get the reduction in value damages unless 271(6) has turned off the tap.

The contrast with the supplier under 259 is that there is a more stringent gateway before you can get into reduction in value damages.  Under 259(3), you will either have to prove it “cannot be remedied” or you will have to prove it is a “major failure” before you can get the reduction in value remedy.  If I can draw attention to 260(1)(c), one of the examples of a “major failure” is where:

the goods are . . . unfit . . . and they cannot, easily and within a reasonable time, be remedied –

So, what has happened with the remedy against the supplier is the supplier has two abilities to turn off reduction in value damages either through the remediability of the goods, whereas with the manufacturer, the consumer has the election your Honour Justice Steward raised with me.

GLEESON J:   Mr Gleeson, was there expert evidence that remediability in four years’ time had a material value?

MR GLEESON:   The expert evidence from Mr Cuthbert was directly to the contrary of that.  So, he was – perhaps I should just give your Honour the reference.  In the Williams book of materials at page 229, after Mr Cuthbert had given his evidence – which I will come to on the other ground – Justice Lee, at lines 25 to 45, put some assumptions for the expert to consider overnight.  The six assumptions are found at page 198.  Each of those assumptions was made out on the evidence, and the present one is the fifth assumption.

BEECH‑JONES J:   What pages are those assumptions again, sorry?

MR GLEESON:   Page 198.  Then, his Honour asked two questions.  What would be the reduction in value if you only used the information at purchase or, secondly, if you used it today?  Mr Cuthbert’s answer to question 2 on the next page and over the page was that his view on value would be exactly the same even if you took the fix into account, and his reasons were it was:

a long period of time.

The consumer would have:

extra servicing and possible repairs . . . hesitations . . . 

. . . 

constant thought –

that the vehicle was going to:

leave him in an embarrassing situation with the issuing of white smoke and/or the foul odour –

So, in other words, four and a half years was too long to have any difference.  Now, that is the evidence.  So, that is the sort of approach we commend as acceptable.  Just while your Honours have that, so I do not have to come back to it, if you could go to the bottom of page 200 ‑ ‑ ‑ 

EDELMAN J:   Can I just ask about that question 2?  Is that not conflating the value question with the consequential loss question?

MR GLEESON:   Some of Mr Cuthbert’s reasoning might look like consequential loss reasoning, but it can be both, because if one is trying to say, what is the value of leaving the shop with a car with this defective exhaust, one starts to think, what is the expected utility over the full life of a vehicle that is going to be diminished for me by driving?  And to have the white smoke coming out the back, to smell it in the car and so on, that is a diminution in the goods, we would submit, even if it is also causing consequential loss.  That is why the statute has addressed that in section 272(3) by saying that you cannot get the consequential loss under (1)(b) to the extent that it is:

suffered through a reduction in the value of the goods.

You cannot get it twice, but you can get it as part of that reduction in value.

GLEESON J:   I do not want goods that have to be repaired; I want goods that conform to the guarantee.

MR GLEESON:   Yes.  And in the hypothetical bargain, that is the position the consumer is in.

EDELMAN J:   But if, contrary to your primary submission, one were to be factoring in all of the knowledge of the later repairs availability and that it will be performed by the manufacturer, would not the comparison be between buying a car that is free from defects and buying a car that is defective but can be repaired for nothing, and all of the inconvenience and the difficulties over the four and a half year period is then the question of consequential loss?

MR GLEESON:   I am sorry, I missed your Honour’s comparison, it was between two vehicles?

EDELMAN J:   Between going into the shop and saying, well, I want a vehicle that is free from defects and being told, well, you can have either a vehicle that is free from defects or you can have a vehicle that is defective but can be repaired free of charge, without taking into account four and a half years of inconvenience and difficulties and so on, because that would be the consequential loss that you might suffer.

MR GLEESON:   Well, I am sorry, I cannot agree with your Honour on the facts, and it comes back to your Honour Justice Beech‑Jones’ question.  On the facts, you might have been able to have that hypothetical conversation in Dwyer, but in the present case, the only conversation that could have been had with Toyota is when the consumer asks, how long am I going to suffer those problems?

GLEESON J:   Well, it might be a different thing if you are in the showroom and someone is saying to you:  this has a defect but I am going to repair it before you leave the showroom.  You might say, all right, well, that will not affect the value of it.  But once you are saddled with something that you are actually going to have to take back, unless you have a servant to do it for you, it is much less valuable.

MR GLEESON:   It is less valuable.  It is less valuable.  Take Mr Williams, he has to go back 17 times to the repair shop.  Seven of them are unscheduled.  He has it replaced three times.  He still does not have a fix, because they have not rung him up to say it is ready.  Now, that is not just mere consequential loss, we would say.  That is a reflection of the intrinsic nature of what Mr Williams was offered.

GORDON J:   Is Mr Cuthbert’s evidence the high mark of that evidence in terms of the findings about value?

MR GLEESON:   Yes, as to expert evidence – I will come to it on ground 2 – he is the high point.  But the survey evidence – actually, I should give your Honours the reference.  This is the heat map ‑ ‑ ‑ 

GORDON J:   If you broke it up into component parts, as Justice Edelman just tried to do a moment ago, and we deal with inconvenience in the sense of, I had to take time off work and had to incur cab fares and the like to go and have it repaired, they are clearly 272(1)(b) damages.  We will park those for the moment.

Then we are left with the availability and the assessment of taking into account at the time of supply the comparison between a good which is 54‑compliant and a good which is 54‑compliant but only after fixes have been applied to bring it up to compliance.  And one says, well, what do I take into account, and that is a debate we have been having, about the extent to which you take into account supervening events in getting to that calculation.

Is this now a third category?  And that is that, notwithstanding that one has a fix available and it makes it 54‑compliant, I still have a good which is of a lesser value at the time of supply, i.e., a person who walks in is going to pay a different price for a good which is clearly 54‑compliant and a good which is only 54‑compliant after fixing.

MR GLEESON:   Yes, that is so.

GORDON J:   Was that put at trial?

MR GLEESON:   Well, Mr Cuthbert was there to ‑ ‑ ‑

GORDON J:   That is why I am asking where the high point is.  So I had not understood that that was a claimed head of loss.

MR GLEESON:   No, not as a claimed head of loss, but as part of ‑ ‑ ‑

GORDON J:   Sorry, that is a wrong description – a claimed category of loss.

MR GLEESON:    Not as a claimed separate category, but as an aspect of evaluating the true reduction in value of the goods.  That was part of the way it was put not only because of Cuthbert, but I will give you the other reference, which is in Justice Lee’s judgment at paragraph 363 to 378.  The survey evidence of Mr Boedeker – you will see from 363, the screenshot.

What happened was, people were asked the sort of question your Honour Justice Gleeson and Justice Gordon have put to me, what would you pay for these cars if you had this information about – and you can see in the small print, whether the defect is present or not, the probability that the defect effects were manifest, the elapsed time to fix the defect.  So, people were given different assumptions as to how long you will be driving the bad car before the defect is fixed.

You do not have to worry about the detail, but the heat map, which is on page 118, what that shows as you go from yellow to orange to a whole lot of nasty red is the unsurprising conclusion that, as the probability of the defect manifesting increased and the length of time before you could get a fix increased, the consumers’ willingness to pay reduced.

JAGOT J:   Mr Gleeson, could I just ask – I have no problem with the concept that things might come under the label “inconvenience” can go to value as opposed to consequential losses.  In Toyota’s outline of submissions at paragraph 10, they say the experts concluded that:

there was no ongoing reduction in value in the relevant vehicles –

once the 2020 field fix became available.  That does not ‑ ‑ ‑

MR GLEESON:   That is wrong.  It is wrong, your Honour.

JAGOT J:   This certainly does not fit with Mr Cuthbert.

MR GLEESON:   No.

JAGOT J:   No, this is other experts?

MR GLEESON:   No, there is – no experts said that.

JAGOT J:   Okay.

MR GLEESON:   So, we want to show that is wrong.  Should I just deal with that now, to get it out of the way?

JAGOT J:   No, I do not want to take you off your course.

MR GLEESON:   No, no, let me – could I just complete your Honour the Chief Justice’s question, which was about ‑ ‑ ‑

GAGELER CJ:   Yes, we are bombarding you with questions from different angles.

MR GLEESON:   No, no, that is good.  Very happy.

GAGELER CJ:   So – whatever is the most convenient course for you.

MR GLEESON:   No, no, I will try and remember the questions, but I did want to make sure that your Honours knew which part of the Court of Appeal we disagreed with, and I have not finished that yet.

EDELMAN J:   I think you have done 235.

MR GLEESON:   Yes, and 235 led me to the hopefully not unhelpful diversion that 271(6) has a pretty important role to play in the construction here, and it is one of the simplest answers to why you do not look at the repair in fact.  Then, at 237, there is a little bit of a flavour of the Full Court in Williams that you should look more generally at universal rules.  We would submit that is unhelpful, because 272 has given you, very precisely, the relevant rule.

The areas we really disagree with are from 240 onwards, because it starts from the premise that we are comparing the damages with contract, which is okay, but we are then comparing with statutory damages and HTW Valuers.  We are now in tort, so that is the caution I mentioned about do not rush to tort too quickly – and then the next sentence, if it is read literally is a problem:

If the replacement of the airbag . . . is a consequence of intrinsic or inherent factors in the nature of vehicle, it is an event which must be taken into account –

Now, if you read that literally, we submit it cannot be right, because if it were saying whenever you replace a defective part of a good, in whatever circumstances, at whatever point in time, you are simply responding to intrinsic or inherent factors, and, therefore, the person never suffered reduction in value loss at the beginning, if that is what it is saying, it must be wrong in terms of the statute and in terms of contract.  I think there is a better reading of it, which is that it is a fact-specific finding.  We make the same submission about 241.  If you read 241 literally:

Given that a vehicle should remain safe for use, it is inherent in the nature of a vehicle that upon recognising a latent defect, the defective part will be repaired or replaced as necessary.

Now, there must be some words missing; it must mean that the defective part will need to be repaired or replaced as necessary, because whether it “will” be replaced or repaired as necessary is wholly fact-specific.  And as your Honour Justice Gordon raised, if this trial had occurred about a year or so earlier, it would not have been fixed at all.  So, we would submit that ‑ ‑ ‑

GLEESON J:   Is it relating to safety defects?

MR GLEESON:   Well, as expressed, it is unlimited.  Any latent defect:

will be repaired or replaced as necessary.

It can only mean, will need to be repaired or replaced as necessary.  And then it says:

that is what occurred in this case.

That can only be read as fact-specific, that in this particular case, VW, when the problem arose, fixed it with little difficulty before the consumer ever suffered a problem.

BEECH‑JONES J:   And on your analysis, that was something that could be attributed to the hypothetical purchaser at the time of supply.

MR GLEESON:   On the factual findings made in Dwyer.

BEECH‑JONES J:   In Dwyer, yes.

MR GLEESON:   And you see a hint of that factual anchoring of the proposition in 242.  It:

has been fully rectified, at no cost, in a manner that a reasonable consumer would have always expected given the nature of goods of this kind, if the vehicle contained a latent defect.  On the present assumption, that was an event that arose from the nature of the vehicle.

So, the real difference between us and Toyota – you are about to hear from them – is they are reading these paragraphs as canonical statements, that whenever there is a latent defect and wherever there is a latent fix, you treat the latter as intrinsic and you get no damages.

GORDON J:   Well, I think it might be – whether they are doing that or not may be irrelevant.  But for present purposes, it is drawn on the authorities which you say caution should be attributed to.

MR GLEESON:   Yes.

GORDON J:   I mean, it is not without principle.  It is just a question of whether the principle is the right principle.

MR GLEESON:   Yes.  So, can I just show your Honour why it is factually distinguishable, but also perhaps it explains these paragraphs.  If you go back to the beginning, paragraph 7, the airbag was replaced:

at no cost during a routine service –

you can hardly compare that to Mr Williams’ unhappy experience.  Paragraph 24:  despite the overseas reports, there has never been a reported instance of the Takata airbag causing a problem.  And 26:  VW’s view was there was no risk, but – 27 to 28 – following the recall notice from the government, they did the right thing, they recalled them, on a routine service they put in the replacement.  Paragraph 59:

some 440,000 of those vehicles had been involved in a collision that had resulted in the deployment of an airbag –

That is an unhappy fact.  But two bullet points down:

there was no evidence of any mis‑deployment of a Takata airbag in any Volkswagen.

So, this is why there was no breach, but it also tends to explain what is happening in the damages finding.  In the hypothetical bargain, VW could honestly have said, across our entire experience of 20 million vehicles worldwide, this problem has never eventuated, and yet, we will treat it as routine, we will fix it if we get a recall notice.  You will see that in 147 they failed to prove there was a relevant risk.  At paragraph 155, it was:

a merely speculative theoretical possibility –

And paragraph 202 is important.  These are Justice Stevenson’s findings, which remained intact.  It was not just the airbag had been “replaced at no cost”, there had been “full use of the vehicle” up until then with no performance issue, no accident, and the vehicle continues to be as valuable as it was, and at paragraph 223, the VW argument, which was accepted by the court, had as an essential premise:

any notional reduction in value based on abstract propositions could not be shown to have caused the appellant any loss in circumstances where the appellant had experienced no detrimental impact –

Now, that is not this case.

EDELMAN J:   But that is consequential loss.

MR GLEESON:   No, that is the argument as to why you get no reduction in value damages.  We do not fully embrace this reasoning, but the reasoning seems to be – maybe a jury would be permitted to do it – that after the event, you got a replacement, it cost you nothing, in the period up to the replacement the airbag never caused you a problem in fact.  No breach, alternatively, no damages.  That is the sort of reasoning being deployed in Dwyer.

In our case, propensity to exhibit troubling behaviours, 50 to 94 per cent will exhibit them in fact, well before any fix ever can be achieved, monstrous efforts to try to achieve a fix, they failed for many years and eventually they succeeded.  So, we would urge your Honours both in principle and fact to treat Dwyer with a lot of caution.  Is that a convenient time, your Honours?

GAGELER CJ:   Yes, you are finished with Dwyer, at this stage?

MR GLEESON:   I think that is enough for Dwyer, your Honour.

GAGELER CJ:   Thank you.  Yes, we will take morning adjournment.

AT 11.18 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.31 AM:

MR GLEESON:   Your Honours, I may need to come back to it, but with your Honour Justice Jagot’s questions about the relevance of resumption cases, could I just give the reference to Bwllfa and Merthyr Dare StreamCollieries v Pontypridd Waterworks Company [1903] AC 426, which has some discussion in the resumption context which I might come back to.

Your Honours, I was proposing then to move to what we consider to be the battleground which is between us and Toyota, before saying something about the Full Court’s approach and ground 2.  Can I take up what your Honour Justice Jagot raised with me about what was the evidence as to the propositions of fact advanced by Toyota.  Just to be clear, what we disagree with in the Toyota reply, at paragraph 8, it is said:

It is that the critical fact – that the 2020 field fix was available by the time of the initial trial with the effect that there was no ongoing reduction in value –

Then, the last sentence is:

the expert evidence was not only that the 2020 field fix itself would prospectively restore the value of the vehicle, but that the availability . . . would have that prospective effect –

see, Mr Cuthbert.

GORDON J:   Can I just add one reference to that, which is the matter that I was raising just before the break, and that is the finding of the Full Court, at paragraph 123 at page 291, where, at the foot of that page, it says that, after taking into account some of the things we have discussed this morning:

Their significance is exposed by the fact that, by the time of the initial trial, it was known that the 2020 field fix was available and the experts agreed that, in consequence, there was no ongoing reduction in value.

One of the things that could turn out is that somebody manages to sell at a price which comfortably exceeds.  There may be some special reason why a particular vehicle sells at a particularly high price.  That will be avoided loss.  Nobody could possibly say, that is subsequent, you cannot take that into account because there is no mention of subsequent events in 272(1).  The tired answer to that is:  that is because there are damages, and you do not get damages for an avoided loss.  If you have managed to offload your vehicle for a price handsomely in excess of its value when you purchased it, then you have no loss under paragraph (a).

BEECH-JONES J:   Mr Walker, if you had a simple class of the two people, one who had sold and one who had not, you accept that the one – and the person sold at a discount, because of what was known about the defect and that it could not be remedied ‑ ‑ ‑

MR WALKER:   Would get damages accordingly.

BEECH-JONES J:   They would get damages for the reduction in the value of the goods?

MR WALKER:   Yes.

BEECH-JONES J:   But the other one would not have suffered a reduction in the value of the goods?

MR WALKER:   That is right, because they still have the goods, they still have the ownership interest in full.

BEECH-JONES J:   But the difference between the two turns on the word “damages”.

MR WALKER:   Yes.

GORDON J:   Another way of putting it is to say, consistent with your comparator you put at the beginning, is on one hand you have the price paid, and the other is the value of the good at the date of supply with the known defects.

MR WALKER:   Yes.

GORDON J:   This bit you might take issue with.  In light of the state of the remedy.

MR WALKER:   In light of the state of remedy?

GORDON J:   Yes.  So, it might be there is a remedy available; it might be that it has been remedied.

MR WALKER:   I am so sorry – and that last matter can change over time. 

GORDON J:   That is correct.

MR WALKER:   Yes.  So, that is inherent – tempted to say intrinsic – in the nature of a defect that – its potential to be addressed completely or partially is ‑ ‑ ‑

GORDON J:   And that would cover all cases then sufficiently, on your case, to enable a valuation to be undertaken, a comparison to be done and damages to be assessed.

MR WALKER:   That is right.

STEWARD J:   In that sense, are there two ways in which you are putting your case?  You are putting it in the way that Justice Gordon has suggested to you that takes us into that area of intrinsic attributes of the goods as at the date of breach or, alternatively, that you accept that there was a loss in value as at the date of breach, but that loss was restated by the time of the trial and had disappeared, and thus you are not entitled to damages.

MR WALKER:   The short answer is yes, but the second is a way of explaining why the first is correct, or vice versa. 

STEWARD J:   I see, all right.

GAGELER CJ:   Mr Walker, I am sorry to take you up on that.  I thought we were talking about the language and application of section 272(1)(a).

MR WALKER:   We are.

GAGELER CJ:   I thought, though, that what you have done is somehow introduce some qualification or cap, perhaps, on that paragraph by reference to the word “damages” in the chapeau.  Is that where we have got to now? 

MR WALKER:   Yes.

GAGELER CJ:   I see.

MR WALKER:   I hope that is apparent from our written submissions.  Yes, that is important.  These are terms of art; you are entitled to recover damages, and in subsection (3) in a carve out for paragraph (b) of subsection (1), and by reference to reduction in the value of the goods, the terms of art “loss or damage” are used.  So, Parliament is signifying its holus-bolus adoption of the notion that the money to be the subject of a judgment is to be understood as being damages.

There is no definition of damages that says, do not worry about what damages means at law it just means a sum of money.  So, you have loss, damage, and damages.  Yes, we absolutely say that in the chapeau the word is repeated twice, and it picks up, for our case, 271(1) itself.  So, 271(1) creates the statutory actions to recover damages, 272(1) in such an action says that there is an entitlement to recover damages.  There might be an apparent difference in the written submission that let me resolve now between the parties.  We do not say that there are discretions involved, we say there are simply the ordinary assessments of damage.

EDELMAN J:   The problem is the ordinary use of the word “damage” and the ordinary assessment of the word “damage” is not monolithic.  Section 272(1)(a) and (b) really reflect some common law notions of very different concepts of damages.

MR WALKER:   Yes.

EDELMAN J:   Subsection (b) is much more comfortably aligned with the notion of loss, (a) is not.

MR WALKER:   Subsection (a) is absolutely custom‑made.  I do not think one would find (a) perfectly reproduced in any common law analogue.  It is obviously borrowing from it, that is, the notion of a:

reduction in the value of goods, resulting from failure to comply with the guarantee –

is not a long way away from Potts v Miller and similar cases.  It is when you get to the yardsticks that one finds that this really is a consumer statute which is dealing with manufacturers not in privity with claimants, et cetera, et cetera.  May I make this clear:  we do not say there is any discretion involved and we do not say that the Full Court was obliged to apply some kind of discretion in our favour so as to not have the remitter, we simply say that the entitlement is to something called “damages” which arises because of a loss or damage which is:

suffered through a reduction in the value of the goods.

That is the phrase in subsection (3).

BEECH‑JONES J:   But it is the value of the goods at the time of supply.

MR WALKER:   There is no doubt about that, that has always been common ground.  What we say is that that is a matter which, for people who still hold the asset, will fall to be considered in light of up‑to‑date information.  Just as with a person who has sold, the fact that they have done so much better than market value at the date of their purchase would be avoided loss.  They would not get damages on top of what they have got from their own purchaser.

EDELMAN J:   I am not sure.  That may certainly be right about (1)(b), where ‑ ‑ ‑

MR WALKER:   I am suggesting about (1)(a) ‑ ‑ ‑

EDELMAN J:   ‑ ‑ ‑ notions of avoided loss comfortably fit within the idea of consequential loss, but there is certainly a common law that proposition would be very controversial in relation to a loss of value claim.

MR WALKER:   If you have suffered a loss in value, you have retained the ownership interest, and later you sell considerably in excess of the value you have obtained by your price then, in our submission, it would be difficult to say that that is not an avoided loss.  Your ownership interest has never suffered the crystallised decrement.  I note the time, your Honours.

GAGELER CJ:   Yes.  We will adjourn until 10.00 am tomorrow.

AT 4.19 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 11 APRIL 2024