Williams v Toyota Motor Corporation Australia Limited (Initial Trial)

[2022] FCA 344

FEDERAL COURT OF AUSTRALIA

Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344  

File number:

NSD 1210 of 2019

Judgment of:

LEE J

Date of judgment:

7 April 2022

Catchwords:

CONSUMER LAW – representative proceeding pursuant to Pt IVA of Federal Court of Australia Act 1976 (Cth) (Act) – consumer class action – guarantee of acceptable quality pursuant to s 54 Australian Consumer Law (ACL) – where 264,170 vehicles supplied in Australia with defective diesel particulate filter (DPF) system – where defect causes range of consequences including emission of foul-smelling white smoke, the display of excessive DPF notifications, and the need to have the vehicle inspected, serviced and repaired – defect consequences arise when vehicle subject to normal highway driving conditions – where respondent attempted a range of countermeasures – first effective countermeasure introduced in 2020 – consideration of the proper construction of s 54 of the ACL – whether guarantee in s 54 applies to first and second hand purchasers – whether guarantee applies to those who have had the effective countermeasure – consideration of s 271(6) of the ACL – consideration of matters in ss 54(2) and (3) – whether vehicles fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable – whether breach of s 54 can be determined on a common basis

CONSUMER LAW – representative proceeding – whether representations concerning vehicles misleading or deceptive – consideration of ss 18, 29 and 33 of the ACL – future representations case – failure to disclose case – whether misleading and deceptive conduct claims determinable on a common basis

CONSUMER LAW – individual claim of the second applicant for reduction in value loss and other reasonably foreseeable loss under s 272(1)(b), including excess GST, stamp duty, financing costs, lost income and excess fuel costs – individual claim of second applicant for misleading and deceptive conduct

DAMAGES – reduction in value damages pursuant to s 272(1)(a) of the ACL – proper construction of s 272(1)(a) – conceptualising reduction in value – determining the proper meaning of reduction in value – where market data incomplete – whether appropriate to have regard to concepts such as repair cost and willingness to pay when determining reduction in value – danger in overcomplicating statutory concepts and shoehorning s 272(1)(a) into a definitional corner – point in time at which reduction in value damages is to be assessed – information following date of acquisition relevant to the extent it bares upon value at the time of acquisition – identifying, calculating and applying the reduction in value – valuation an art not an exact science – consideration of expert evidence – reduction in value of 17.5 per cent appropriate – mechanics of calculating “average retail price” – income tax consequences for group members of a damages award

DAMAGES – other reasonably foreseeable loss or damage under s 272(1)(b) of the ACL – excess GST – consideration of the relevant principles – whether reduction in value better characterised as an “overpayment” or “under delivery” – impact of characterisation on GST damages – consideration of the GST consequences for group members of an award of damages under s 272(1)(b)

DAMAGES – representative proceedings – aggregate damages – where claim advanced on alternative bases under s 33Z(1)(e) and 33Z(1)(f) of the Act – whether reduction in value can be awarded on an aggregate basis – difficulty associated with secondary market – overriding principles applicable to the award of compensatory damages – whether applicants’ approach to damages under s 33Z(1)(f) cuts across the statutory purpose of s 272(1)(a) – s 33Z(1)(e) appropriate source of power

DAMAGES – individual claim of second applicant – whether second applicant suffered a reduction in value – whether second applicant entitled to damages for other reasonably foreseeable loss under s 272(1)(b) – whether second applicant entitled to damages available under s 236 for misleading and deceptive conduct – whether causal connexion between misleading and deceptive conduct and consequential loss – no double recovery

PRACTICE AND PROCEDURE – where referee appointed to inquire into and report on questions relating to the defect – where parties tendered a statement of agreed facts – where reports of referee adopted by the court without objection – where respondent contests aspects of the referee reports and agreed facts at trial – parties bound by conclusions of referee when adopted

Legislation:

A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 9-15, 19-10, 19-70, 19-80, 29-20, 134-1, 195-1

Australian Securities and Investments Commission Act 2001 (Cth)

Competition and Consumer Act2010 (Cth) s 82, Sch 2 ss 2, 4, 7, 18, 29, 33, 54, 55, 59, 236, 259, 267, 271, 272

Evidence Act 1995 (Cth) ss 136, 191

Federal Court of Australia Act 1976 (Cth) ss 33D, 33Z

Federal Court Rules 2011 (Cth) r 28.67

Income Tax Assessment Act 1997 (Cth) ss 20-20, 20-25, 20-30

Trade Practices Act 1974 (Cth) s 74D, 82 (repealed)

Fair Trading Act 1987 (NSW) s 42 (repealed)

Sale of Goods Act 1979 (UK) s 14

Cases cited:

Adcock Private Equity v Porges [2018] NSWSC 1363

Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249

Atlas Tiles Ltd v Briers (1978) 144 CLR 202

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73

Australian Competition and Consumer Commission v Google LLC [2021] FCA 367; (2021) 391 ALR 346

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

Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; (2020) 278 FCR 450

Australian Securities and Investments Commission v GetSwift [2021] FCA 1384

Blatch v Archer (1774) 1 Cowp 63

Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98; (2011) 280 ALR 639

Boral Besser Masonry Limited v Australian Competition and Consumer Commission [2003] HCA 5; (2004) 215 CLR 374

Bramhill v Edwards [2004] 2 Lloyd’s Law Reports 653

British Transport Commission v Gourley [1956] AC 185

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592

BVT20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCAFC 222

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45

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

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

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Commonwealth v Milledge (1953) 90 CLR 157

Construction, Forestry, Mining and Energy Union v Hall Creek Coal Pty Ltd [2016] FCA 1032

CPB Contractors Pty Ltd v Celsus Pty Ltd (No 2) [2018] FCA 2112; (2018) 268 FCR 590

Cullen v Trappell (1980) 146 CLR 1

Dait v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2022] FCAFC 25

Daniels v Anderson (1995) 37 NSWLR 438

Davinski Nominees Pty Ltd v I & A Bowler Holdings Pty Ltd & Ors [2011] VSC 220

Dwyer v Volkswagen Group Australia Pty Ltd [2021] NSWSC 715

Eastern Express Pty Limited v General Newspapers Pty Limited (1992) 35 FCR 43

Ethicon Sàrl v Gill [2021] FCAFC 29; (2021) 387 ALR 494

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Federal Commissioner of Taxation v Qantas Airways Ltd [2012] HCA 41; (2012) 247 CLR 286

Fisher-Price Rock ‘N Play Sleeper Marketing, Sales Practices and Products Liability Litigation, F Supp 3d (WDNY, 19 October 2021)

Gates v City Mutual Life Assurance Society Ltd [2001] HCA 52; (1986) 160 CLR 1

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

Gold Coast Selection Trust Limited v Humphrey (Inspector of Taxes) [1948] AC 459

Google v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435

Hadley v Baxendale (1854) 9 Ex 341

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

HTW Valuers v Astonland Pty Ltd [2002] HCA 54; (2004) 217 CLR 640

In Re: General Motors Llc Ignition Switch Litigation 407 F Supp 3d 212 (SDNY, 2019)

J.L.W. (Vic) Pty Ltd v Tsiloglou (1994) 1 VR 237

Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564

Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177; (2019) 377 ALR 234

MacDougall v American Honda Motor Co., Inc, (CD Cal, SACV 17-1079 JGB (DFMx), 11 September 2020)

Medtel Pty Ltd v Courtney [2003] FCAFC 151; (2003) 130 FCR 18

Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128; (2011) 196 FCR 145

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357

Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153

Moore v Scenic Tours Pty Ltd [2020] HCA 17; (2020) 268 CLR 326

Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182

Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388

Owners – Strata Plan No 87231 v 3A Composites GmbH (No 5) [2020] FCA 1576; (2020) 148 ACSR 445

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

Placer (Granny Smith)Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257

Potts v Miller (1940) 64 CLR 282

In Re: Emerson Electric Co. Wet/Dry Vac Marketing and Sales Litigation, (ED Mo ED, 4:12MD2382 HEA, 28 October 2021)

Re General Motors Llc Ignition Switch Litigation 427 F Supp 3d 374 (SDNY, 2019)

River Bank Pty Ltd v Commonwealth of Australia (1974) 4 ALR 651

Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344

Sykes v Reserve Bank of Australia (1998) 88 FCR 511

Tomonovic v One Australia Pty Ltd [2015] NSWCA 11; (2015) 104 ACSR 596

Tranquility Pools & Spas Pty Ltd v Huntsman Chemical Co Australia Pty Ltd [2011] NSWSC 75

Trilogy Funds Management Ltd v Sullivan (No 2) [2015] FCA 1452; (2015) 331 ALR 185

Trivago NV v Australian Competition and Consumer Commission [2020] FCAFC 185; (2020) 384 ALR 496

Vautin v By Winddown, Inc (formerly Bertram Yachts)(No 4) [2018] FCA 426; (2018) 362 ALR 702

Verge v Devere Holdings Pty Ltd (No 4) [2010] FCA 653

Wenco Industrial Pty Ltd v W Industries Pty Ltd [2009] VSCA 191; (2009) 25 VR 119

Williams v Toyota Motor Corporation Australia Limited [2021] FCA 1425

Australian Law Reform Commission, Grouped Proceedings in the Federal Court (Report No 46, 1988)
Australian Taxation Office, Goods and services tax: GST consequences of court orders and out-of-court settlements (GSTR 2001/4, 20 June 2001)
Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010
Federal Court of Australia, Survey Evidence Practice Note (GPN-SURV), 25 October 2016

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Number of paragraphs:

544

Date of hearing:

29 – 30 November 2021
1 – 2, 6 – 8, 20 – 21, 24 December 2021

Counsel for the Applicants:

Mr S Free SC with Mr P Meagher and Mr P Strickland

Solicitor for the Applicants:

Gilbert + Tobin

Counsel for the Respondent:

Mr R Dick SC with Mr A D’Arville and Ms X Teo

Solicitor for the Respondent:

Clayton Utz

ORDERS

NSD 1210 of 2019

BETWEEN:

KENNETH JOHN WILLIAMS

First Applicant

DIRECT CLAIM SERVICES QLD PTY LTD ACN 167 519 968

Second Applicant

AND:

TOYOTA MOTOR CORPORATION AUSTRALIA LIMITED (ACN 009 686 097)

Respondent

ORDER MADE BY:	LEE J
DATE OF ORDER:	7 APRIL 2022

THE COURT ORDERS THAT:

1.By 5pm on 19 April 2022 the parties provide to the Associate to Justice Lee an agreed minute or competing minutes of order to reflect these reasons.

2.The proceeding be adjourned part heard for the purpose of the making and entry of final orders at 10.15am on 22 April 2022.  

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

REASONS FOR JUDGMENT

CONTENTS:

A        INTRODUCTION	[1]
B        THE RELEVANT FACTS AND EVIDENCE	[14]
B.1  Agreed Facts	[15]
B.2  The evidence generally	[18]
B.2.1      Mr Williams	[19]
B.2.2      Messrs Nelson, Jones, Gray and Berndt	[20]
B.2.4      The expert evidence	[24]
Mr Cuthbert and Mr O’Mara	[25]
Mr Stockton and Dr Pleatsikas	[26]
Mr Boedeker and Dr Rossi	[28]
B.3  Additional findings	[30]
B.3.1      Was the Core Defect present in vehicles which had the 2018 Production Change?	[32]
The Referee Reports and the Agreed Facts	[40]
Effectiveness of 2018 Production Change	[49]
B.3.2      Did all Relevant Vehicles have a propensity to suffer the consequences of the Core Defect?	[58]
The Defect Consequences	[59]
Increased fuel consumption	[66]
B.3.3      What was the significance of the Core Defect and the Defect Consequences?	[75]
B.3.4      Market Awareness of the Core Defect and Defect Consequences	[87]
Print and online media	[95]
Knowledge derived from prior ownership	[102]
Disclosure by dealers	[106]
TMCA’s ‘DPF Webpage’	[113]
Conclusions on market awareness of Defect Consequences	[114]
B.3.5      Mr Williams and the Relevant Prado	[118]
Purchase decision	[121]
Purchase, trade-in and financing	[128]
Use of the Relevant Prado	[133]
Problems with the Relevant Prado	[134]
Excessive white smoke and foul-smelling exhaust	[135]
Increased fuel consumption	[148]
Servicing and repairs	[149]
Income forgone	[152]
C        ACCEPTABLE QUALITY CASE	[153]
C.1  The relevant provisions	[154]
C.2  Does the guarantee in s 54 apply?	[155]
C.3Was the guarantee in s 54 was complied with?	[164]
C.3.1      Construing s 54 of the ACL	[164]
C.3.2      Section 54(2) factors	[173]
Fit for all the purposes for which goods of that kind are commonly supplied (ACL 54(2)(a))	[174]
Acceptable in appearance and finish (ACL 54(2)(b))	[181]
Free from defects (ACL 54(2)(c))	[182]
Durable (ACL 54(2)(e))	[188]
Conclusion on s 54(2) factors	[189]
C.3.3      Section 54(3) factors	[190]
C.4  Determining the question of acceptable quality on a common basis	[199]
C.5  Was the guarantee in s 54 complied with in respect of the Relevant Prado?	[213]
D        MISLEADING AND DECEPTIVE CONDUCT CASE	[214]
D.1  The representations	[215]
D.2  Were the representations misleading or deceptive?	[218]
D.2.1      The relevant principles	[220]
D.2.2      Examining the representations	[232]
The Vehicle Representations and the DPF System Representations	[232]
The Future Vehicle Representations and the Future DPF System Representations	[234]
D.3  The omissions case	[244]
D.4  Determining the misleading and deceptive conduct case on a common basis	[251]
E        LOSS AND DAMAGE	[263]
E.2.1      The proper construction of s 272(1)(a) of the ACL	[271]
Conceptualising “reduction in value”	[273]
The meaning of “reduction in the value”	[277]
The point in time by reference to which reduction in value damages must be assessed	[298]
Whether information obtained after the time of supply can be taken into account	[327]
E.2.2      Identifying any reduction in value	[330]
E.2.3      Quantifying the reduction in value	[338]
The valuation evidence	[346]
Valuation evidence cannot support reduction in value for group members	[357]
The conjoint analysis	[360]
The economic evidence	[380]
Conclusions on quantifying the reduction in value	[391]
E.2.3      Applying the reduction in value	[395]
The meaning of “price paid or payable” and “average retail price” in s 272(1)(a)(i)–(ii)	[397]
Preliminary issues	[401]
The mechanics of calculating “average retail price”	[405]
Aggregate Damages	[416]
General principles that govern the assessment of damages	[421]
Overarching observations and findings	[424]
Entire Period Group Members	[437]
E.2.4      Income tax consequences for group members of a damages award	[448]
E.2.5      Conclusion on whether group members are entitled to damages under s 272(1)(a)	[461]
E.3  Other loss and damage	[462]
E.3.1      The proper construction of s 272(1)(b)	[465]
E.3.2      GST consequences for group members of a damages award	[475]
E.3.3      Whether group members are entitled to damages under s 272(1)(b)	[492]
E.4  Pre-judgment interest	[494]
E.5  Duty to mitigate	[495]
F         THE CLAIM OF DCS FOR LOSS AND DAMAGE	[509]
F.1   Acceptable quality	[510]
F.1.1       Whether there was a reduction in value of the Relevant Prado	[510]
F.1.2       Whether DCS suffered other consequential loss	[514]
Excess GST, stamp duty and financing costs	[516]
Lost income	[519]
Excess fuel	[522]
F.2   Misleading and deceptive conduct	[531]
G        CONCLUSION AND ORDERS	[542]

LEE J:

A        INTRODUCTION

1. If there was ever a case demonstrating unnecessary and bewildering complication in the law, it is this one. On one level, it is difficult to imagine a simpler dispute. Picture the familiar scene: a man goes into a car showroom and buys a car. He haggles and settles upon one he likes. He is happy with the look of it, and he is told it is a very good car. He hands over his money and contentedly drives out of the dealership. In his excitement, he is more interested in breathing in the ambrosial new car smell than reflecting on the reality that, as soon as he drove out of the dealership, the market value of the car had diminished.

2. But he was not told something. Unbeknownst to him, and indeed to the dealer, his car had a problem. Although apparently safe to drive, it was not designed to function properly during all driving conditions and, even if driven normally, there was a substantial likelihood that white smoke would come out of the car’s exhaust, along with a malodour. This problem also meant it was likely the car would use more petrol than expected and he would receive excessive notifications requiring him to service the car. Although he bought the car in ignorance of the problem, he did appreciate that if there were any such issues, the cost of fixing them would not be his responsibility.

3. If he had of known the true position, there is no question in my mind that he would likely have paid less for the car. After all, it was not the problem-free car he thought he had purchased.

4. One would intuitively think that such a case should not be in the least complex. This has not proven to be the case. This is partly because a class action has been brought, and partly because of the lamentable drafting of some statutory provisions. Further, the parties (the respondent, Toyota Motor Corporation Australia Limited (TMCA), in particular) have maintained issues, which should have either been conceded or agreed. The result was a hearing taking weeks and hundreds of pages of submissions.

5. Before turning to consider the minutiae of the claims advanced, by way of introduction, it is worth sketching the broad outline of the case.

1. It is not in dispute that between 1 October 2015 and 23 April 2020 (Relevant Period), 264,170 Toyota cars in the Prado, Fortuner and HiLux ranges and fitted with so-called “1GD-FTV” or “2GD-FTV” diesel combustion engines were supplied to consumers in Australia (Relevant Vehicles). Each Relevant Vehicle was supplied with a diesel exhaust after-treatment system (DPF System), which was defective because it was not designed to function effectively during all reasonably expected conditions of normal operation and use of the vehicle.

2. The first applicant in this class action is Mr Kenneth John Williams. The second applicant is a company of which Mr Williams is the sole director, Direct Claim Services Qld Pty Ltd (DCS), and through which he conducts his business as a motor vehicle accidents assessor. It is common ground that DCS acquired a Prado (Relevant Prado) during the Relevant Period and paid the associated tax, financing and fuel costs. The evidence establishes that the Relevant Prado has been plagued with problems associated with the defective DPF System.

3. As it turned out, and despite some initial confusion, any cause of action that exists belongs to DCS. The claim of Mr Williams was dismissed at the conclusion of oral argument (although both Mr Williams and DCS remain representative applicants, pursuant to s 33D(2) of the Federal Court of Australia Act 1976 (Cth) (Act)).

4. TMCA is the “manufacturer” of the Relevant Vehicles for the purpose of s 7 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act2010 (Cth). TMCA also marketed the Relevant Vehicles in Australia, and in doing so made representations about the quality and characteristics of those vehicles and the DPF System to prospective consumers.

5. The group members whom the applicants represent are persons who acquired a Relevant Vehicle during the Relevant Period (and otherwise meet the description of group members in the second further amended statement of claim (2FASOC)).

6. The claims made by DCS on its own behalf, and by both Mr Williams and DCS on behalf of group members are, in summary, that:

   (1)the Relevant Vehicles as supplied were not of “acceptable quality” and therefore failed to comply with the statutory guarantee in s 54 of the ACL; and

   (2)TMCA made misleading representations and omissions about the Relevant Vehicles, in contravention of ss 18, 29(1)(a) and (g), and 33 of the ACL.

7. A number of subsidiary issues arise when considering these causes of action and the relief that should be obtained from those actions, but at a general level, this is the case advanced.

8. Finally, by way of introduction, given the size of the record, I have adopted the expedient of incorporating some references to agreed facts and other documents in these reasons (although I should caveat this by noting that a reference is often illustrative, rather than identifying an exclusive source).

   B        THE RELEVANT FACTS AND EVIDENCE

9. Following the adoption of two reports of a referee (the first dated 15 October 2020 (First Referee’s Report) and the second dated 31 August 2021 (Second Referee’s Report) (together, referee’s reports)), and the preparation of a statement of agreed facts (Agreed Facts or AF) and supplementary statement of agreed facts (SAF) for the purposes of s 191 of the Evidence Act 1995 (Cth) (Evidence Act), one would have thought there would only be a simulacrum of a dispute remaining as to the facts. As it transpired, this assumption was somewhat optimistic, and it is necessary to deal with a number of contested factual issues. Before doing so, however, it is convenient to canvass briefly the facts upon which the parties agreed and provide an overview of the evidence adduced at the trial.

   B.1     Agreed Facts

10. Drawing upon the detailed Agreed Facts (which delve into issues with technicality and granularity), it is useful to summarise the DPF System, the Core Defect and the effective remedy:

    (1)Each of the Relevant Vehicles contained either a 1GD-FTV or a 2GD-FTV diesel combustion engine. Such diesel combustion engines generate pollutant emissions: AF 34]. The DPF System is designed to capture and convert the pollutant emissions into carbon dioxide and water vapour through a combination of filtration, combustion (that is, ‘oxidation’) and chemical reactions: AF [42].

    (2)All Relevant Vehicles were fitted with a DPF System: AF [33], [39]. This was necessary at least because the Relevant Vehicles, throughout the Relevant Period, were required to comply with national emissions standards prescribed by the applicable Australian Design Rules, which standards regulated the emission of Pollutant Emissions: AF [35]–[39].

    (3)The nature of the DPF System in the Relevant Vehicles is described in detail in the Agreed Facts: AF [33]–[66]. Two core components of the DPF System are the diesel particulate filter (DPF) and the diesel oxidation catalyst (DOC), which sit together in the DPF Assembly: AF [46]–[47]. The basic design of the DPF Assembly in the Relevant Vehicles is illustrated by the following image (showing a cross section):

    (4)The DPF is designed to capture what is called diesel particulate matter in the exhaust gas prior to its release, and to store it: AF [42], [47]. The DPFs in the Relevant Vehicles have a finite capacity to capture and store particulate matter: AF [51]. As such, in order for the DPF to function effectively, the particulate matter captured by and stored in the DPF must be burned off periodically in a process called regeneration: AF [53]. Regeneration requires the exhaust temperature to increase to the level required for the particulate matter to oxidise: AF [57], [73(g)].

    (5)The DOC comprises a honeycomb ceramic flow-through monolith substrate with a catalyst coating containing precious metals: AF [46(a)]. One of the functions of the DOC is to increase the temperature in the DPF during regeneration: AF [46(b)(ii)]. When the DOC becomes clogged or blocked, the DPF is impeded from regenerating effectively: First Referee’s Report (at [8], [39], [47], [55]).

    (6)When regeneration does not occur, or is ineffective, the DPF becomes blocked with particulate matter, and the vehicles experience a range of problems. Indeed, the Core Defect was described by the referee in his initial report in the following terms (at [8]):

    The DPF System was defective for the whole of the Relevant Period. The core defect was that the DPF System was not designed to function effectively during all reasonably expected conditions of normal operation and use in the Australian market. In particular, under certain conditions the DPF System was ineffective in preventing the formation of deposits on the DOC surface or coking within the DOC. The deposits and/or coking of the DOC prevented the DPF filter from effective automatic or manual regeneration, and led to excessive white smoke and foul-smelling exhaust during regeneration and/or indications from the engine’s onboard diagnostic (OBD) system that the DPF was “full”.

    This defect was inherent in the design of the DPF System. The design defect was comprised of both mechanical defects and defective control logic and associated software calibrations.

    (Emphasis in original).

    (7)A key occurrence which caused the Core Defect to manifest was the exposure of a Relevant Vehicle to regular continuous driving at approximately 100km per hour (High Speed Driving Pattern): AF [67].

    (8)During the Relevant Period, in Relevant Vehicles in which the Core Defect was present, if the Relevant Vehicles were exposed to the High Speed Driving Pattern and/or subject to the countermeasures other than those referred to below (at [15(10)]):

    (a)the DOC became blocked by deposits forming on the face of the DOC;

    (b)regeneration events failed to remove sufficient particulate matter from the DPF to prevent the DPF from becoming or remaining full or blocked;

    (c)the DPF System failed to prevent the DPF from becoming full or blocked;

    (d)the DOC and DPF did not function effectively;

    (e)the catalytic efficiency of the DOC was diminished; and

    (f)the exhaust in the DPF did not reach a sufficiently high temperature to effect thermal oxidation (the chemical reaction of particulate matter with oxygen at a sufficiently high temperature, resulting in carbon dioxide and water vapour) (see AF [73]).

    (9)In the Relevant Vehicles that experienced the effects of the Core Defect, symptoms included excessive white smoke and foul-smelling exhaust being emitted from the vehicle’s exhaust during regeneration, and DPF notifications displaying on an excessive number of occasions or for an excessive period of time. It will be necessary to address with precision the consequences of the Core Defect in further depth below.

    (10)TMCA attempted a series of countermeasures to fix the problem. Two countermeasures are presently relevant: first, the countermeasure introduced and applied to all new Relevant Vehicles at the time of production (2018 Production Change); and secondly, the countermeasure introduced from May 2020 (2020 Field Fix). It is common ground that the 2020 Field Fix was effective and will continue to be effective in remedying the Core Defect and its consequences in all Relevant Vehicles: see AF [180].

    (11)Similarly, from June 2020, all Relevant Vehicles were produced with the countermeasure preventing the Core Defect from manifesting (2020 Production Change): AF [175].

11. TMCA’s knowledge concerning these matters, and the development of the issues in relation to the Relevant Vehicles generally, are detailed comprehensively in the Agreed Facts: see AF [125]–[179]. There is no need to set them out here. It sufficies to note that, essentially, from February 2016, TMCA was aware that some Relevant Vehicles were being presented to dealers by customers (called by TMCA, somewhat oddly, as “guests”) who reported concerns with, among other things, the emission of excessive white smoke during regeneration and the illumination of DPF notifications. Over the next four years before the introduction of the 2020 Field Fix; the number of complaints increased dramatically; the issues were escalated to the top levels of TMCA and its parent company in Japan, Toyota Motor Corporation (TMC); and a number of countermeasures were introduced, tested and failed. I will expand upon the relevance of TMCA’s knowledge of the Core Defect and its consequences where necessary below.

12. Despite the parties’ constructive approach to the production of the Agreed Facts, as I foreshadowed, some residual issues relevant to the question of liability remain in dispute.

    B.2     The evidence generally

13. It is also convenient here to survey briefly the evidence that was given at trial. It may be observed from the outset that most of the evidence led concerned issues of loss and damage, and in particular, the quantification of the “reduction in value” resulting from the Core Defect.

    B.2.1   Mr Williams

14. Mr Williams swore two affidavits and gave evidence for approximately half a day. His first affidavit was sworn on 11 December 2020 (First Williams Affidavit). He was a witness whose credit was not impeached and his affidavit evidence was essentially unchallenged. Mr Williams’ evidence is primarily relevant to three broad issues remaining in dispute, namely:

    (1)the Core Defect and its consequences, when those consequences manifested, and the impact of those consequences upon the use and enjoyment of the Relevant Vehicles;

    (2)the extent to which he relied upon the representations made by TMCA; and

    (3)any consequential loss and damage he suffered by reason of the Core Defect and its consequences, particularly with respect to increased fuel consumption experienced by the Relevant Prado.

    B.2.2   Messrs Nelson, Jones, Gray and Berndt

15. Mr Martin John Nelson is the Divisional Manager of TMCA’s Guest First Division, a position he has held since late 2017. He affirmed one affidavit on 5 October 2021 (Nelson Affidavit) concerning communications between TMCA and dealers, and TMCA and customers, and the roll out of the countermeasures, as well as amounts paid and replacement vehicles provided to customers under TMCA’s consumer redress programme. He gave evidence for approximately half a day.

16. Mr Nelson’s evidence indicated that TMCA, at least internally, recognised that the Core Defect and its consequences interfere with the use and enjoyment of the Relevant Vehicles. The findings of fact that emerge from Mr Nelson’s evidence in this respect will be explored in greater detail below, but it is convenient to note here that his evidence establishes that:

    (1)TMCA recognised, from an early stage in the Relevant Period, that the issues affecting the DPF System in the Relevant Vehicles posed a serious threat to TMCA’s market reputation: Nelson Affidavit (at [82]);

    (2)TMCA has approached the DPF issues as a serious matter deserving of the urgent attention of TMC, and has dedicated substantial resources to attempting to remedy the issues (T84.22–25); and

    (3)since the commencement of this proceeding, TMCA has offered refunds and replacement vehicles to “hundreds” of consumers, in recognition of the failure of the vehicles to comply with statutory guarantees under the ACL (T98.25–99.13; 103.39–40).

17. TMCA also relies on the affidavits of three further witnesses:

    (1)Mr Brent Andrew Jones, the Manager, Digital Marketplace of TMCA, who gave evidence in relation to webpages published on TMCA’s website about DPF issues and the number of times they were accessed (Jones Affidavit);

    (2)Mr Nathanael David Gray, the Manager, National Business Fleet Sales of TMCA, who gave evidence in relation to the categories of purchasers of Relevant Vehicles (Gray Affidavit); and

    (3)Mr David Berndt, an employee of TMCA’s solicitors, who gave evidence of what was set out in a spreadsheet which contained details of the Relevant Vehicles (Berndt Affidavit).

18. The evidence of these witnesses was relatively uncontroversial and will be elaborated upon where necessary below.

    B.2.4   The expert evidence

19. The primary contest relates to the expert evidence adduced in respect of the quantification of a reduction in value of the Relevant Vehicles for the purposes of the applicants’ case concerning acceptable quality under s 54 of the ACL. It is convenient to introduce the general nature of that evidence here and the ambit of the dispute, which I will expand upon in Part E.2.3 below.

    Mr Cuthbert and Mr O’Mara

20. Both sides adduced valuation evidence. Mr Graeme Cuthbert, engaged by the applicants, is a licensed motor vehicle trader and car valuer with 50 years’ experience. He provided two reports before the trial: one dated 23 July 2021 (First Cuthbert Report) and one dated 22 October 2021 (Second Cuthbert Report). Mr Tim O’Mara, whom TMCA engaged, is a valuer and the Managing Director of O’Maras, a valuation and auction house. Mr O’Mara specialises in valuing company assets for the purposes of merger and acquisition transactions and bank financing. He provided a first report dated 30 September 2021 (First O’Mara Report) and a second dated 26 November 2021 (Second O’Mara Report). Both experts participated in a joint conference and provided a further report dated 10 November 2021 in response to a series of questions put to them by the Court during their concurrent oral evidence. Both valuers gave evidence principally about the true value of the Relevant Prado as at the date of acquisition (8 April 2016), having regard to the presence of the Core Defect and a propensity for the consequences associated with it in the Relevant Prado.

    Mr Stockton and Dr Pleatsikas

21. Both sides also adduced expert evidence in the field of economics. Mr Edward Stockton, a Vice President and Director of Economic Services at the Fontana Group, is an economist and econometrician with expertise in automobile markets and studies of the impact of defects on motor vehicle prices. Mr Stockton was engaged by the applicants and provided two reports: one dated 23 July 2021 (First Stockton Report) and another dated 22 October 2021 (Second Stockton Report). Dr Christopher Jon Pleatsikas, an economist and a Vice President at Charles River Associates, was called by TMCA, and provided a report dated 30 September 2021 (Pleatsikas Report). Both experts participated in a joint expert conference, out of which they produced a joint report dated 5 November 2021 (Stockton and Pleatsikas Joint Report).

22. Generally speaking, the economic evidence was directed to Mr Stockton’s repair cost model analysis, which essentially used the warranty repair cost that TMCA reimbursed to dealers for performing the 2020 Field Fix as a proxy for the amount of money that would have been required, at the time of purchase, to restore group members to the position they would have been in had there been compliance with the statutory guarantee.

    Mr Boedeker and Dr Rossi

23. The applicants also adduced evidence from Mr Stefan Boedeker, an economist with specialist expertise in conjoint analysis and Managing Director of the Berkeley Research Group. Conjoint analysis, in simple terms, is a survey-based statistical technique deployed in market research to determine how people value different attributes in a product or service. Mr Boedeker prepared three reports: a first dated 23 July 2021 (First Boedeker Report); a second dated 28 October 2021 (Second Boedeker Report); and a third dated 4 December 2021 (Third Boedeker Report). Dr Rossi, an econometrician and Professor of Marketing, Statistics and Economics at the University of California, Los Angeles, was instructed by TMCA and prepared a report dated 4 October 2021 (Rossi Report). Mr Boedeker and Dr Rossi participated in a joint expert conference and produced a joint report dated 19 November 2021, including separate statements summarising the issues between them (Boedeker and Rossi Report).

24. The evidence of Mr Boedeker and Dr Rossi concerned a “choice-based conjoint” survey created by Mr Boedeker for the purposes of assessing any reduction in value resulting from the Core Defect and its consequences. Mr Boedeker engaged a third party vendor (Amplitude) to programme, host and implement the survey and relied on another third party provider (Dynata) to select participants for the survey. Over 4,000 participants were surveyed, and Mr Boedeker’s final analysis considered 3,565 responses (Analysed Responses). Dr Rossi’s evidence was responsive to Mr Boedeker’s evidence.

    B.3     Additional findings

25. The factual issues in dispute on the question of liability are largely concerned with the scope and frequency of the Core Defect and its consequences. With some degree of simplification, the following four issues remain for determination:

    (1)Was the Core Defect present in vehicles which had the 2018 Production Change?

    (2)Did all Relevant Vehicles have a propensity to suffer from the consequences of the Core Defect?

    (3)What was the significance of the Core Defect and its consequences?

    (4)Was the market aware of the Core Defect and its consequences during the Relevant Period?

26. I will deal with each of these contested issues in turn.

    B.3.1   Was the Core Defect present in vehicles which had the 2018 Production Change?

27. While it may have been thought that the findings made by the Court upon adoption of the reports of the referee and recorded in the Agreed Facts were clear, TMCA seeks to draw a distinction between the Relevant Vehicles:

    (1)produced prior to June 2018 (Pre-MY2018 Production Vehicles); and

    (2)produced between 1 June 2018 and 23 April 2020 (MY2018 Relevant Vehicles).

28. The relevance of the date 1 June 2018 is that, as foreshadowed above (at [15(10)–(11)]), the 2018 Production Change countermeasure was introduced by TMCA and applied to all new Relevant Vehicles on this date.

1. Initially, TMCA sought to contend, in its defence, that vehicles that were subject to the 2018 Production Change did not suffer from the Core Defect at the time they were supplied: Defence to Second Further Amended Statement of Claim (D2FASOC) (at [52(a)], [100(c)]; see also [39(c)–(d)], [41(b)]). In TMCA’s opening submissions, however, it was accepted that any submission to the effect that the 2018 Production Change remedied the Core Defect “is unlikely to be accepted”. Accordingly, TMCA initially stated that, “for the purposes of the initial trial, TMCA does not dispute that the Core Defect was present in the DPF Systems of all Relevant Vehicles until such time as they received/receive the 2020 Field Fix”.

2. TMCA now contends that the Core Defect was not present in vehicles which had the 2018 Production Change (that is, the MY2018 Relevant Vehicles), or alternatively that the 2018 Production Change was effective to prevent Relevant Vehicles from suffering from the Core Defect. The issue affects 37 per cent (98,861) of the Relevant Vehicles. In support of this contention, it is said that the referee’s conclusions with respect to the vehicles to which the 2018 Production Change was applied were ambiguous and, in these circumstances, the Court can and should find that the Core Defect was not present in the MY2018 Relevant Vehicles: see T4.12–44.

3. Whether the 2020 Countermeasures included the 2018 Production Change and whether the 2018 Production Change had been effective are matters that were debated by the parties in the submissions provided to the referee as part of the Second Referee’s Report: see Annexure A [50]; Annexure E [13]–[15]; Annexure F [24]–[25]. TMCA submits that notwithstanding those submissions, and while the referee specifically asked for information about the 2018 Production Change, he did not express any indication in his Second Report about the effectiveness of that change, nor did he state whether or not the 2020 Countermeasures (which he defined as the “countermeasures implemented after the Relevant Period”) included the 2018 Production Change. The so-called ambiguity in the First Referee’s Report is said to arise from the following statements (at [12] and [50]):

   12. The countermeasures put in place after the Relevant Period appear to remedy the defects in the DPF System, in those Relevant Vehicles which have received the most recent countermeasures.

   …

   50. Countermeasures released after the Relevant Period appear to have been designed to eliminate the root causes of the core defect in the DPF System identified in the above paragraph.

   (Emphasis added).

4. On the assumption this construction will be favoured, TMCA submits the following evidence demonstrates the 2018 Production Change was effective in remedying the Core Defect:

   (1)As at 31 July 2021, only 636 MY2018 Relevant Vehicles had DPF-related reimbursement claims made by dealers, comprising 0.64 per cent of MY2018 Relevant Vehicles and 0.24 per cent of the total number of Relevant Vehicles. This is of importance, it is said, given the referee noted in his Second Report (at [33]) that the “primary indicator” that the “2020 Countermeasures” were effective is that only 1.13 per cent of vehicles which had the 2020 Field Fix had any DPF-related claim in the year after it was applied, and the percentage of MY2018 Relevant Vehicles that had DPF-related reimbursement claims made by dealers was lower (0.64 per cent), evidencing the effectiveness of design changes made.

   (2)The referee concluded in the First Reference Report (at [18]) that only Pre-MY2018 Production Vehicles required unusual or abnormal maintenance, stating:

   All Relevant Vehicles produced from the start of production through the end of MY 2017 [i.e. model year 2017] required unusual or abnormal maintenance according to the criteria set out in paragraph 16.(b) because they were included in at least one CSE to address the DPF System.

   (3)Given this conclusion did not apply to MY2018 Production Vehicles, it is said that this indicates the referee accepted that the 2018 Production Change was effective.

   (4)Mr Nelson gave unchallenged evidence that “all indications we had was [sic] the 2018 production fix was very effective”: T98.23. Given the effectiveness of the 2018 Production Change, it made sense, it is said, for the action taken after 1 June 2018 to be focussed on Pre-MY2018 Production Vehicles (e.g., the “Special Policy Adjustment + letter” sent only to owners of Pre-MY2018 Production Vehicles extended the warranty for Pre-MY2018 Production Vehicles to 10 years from the first delivery date for DPF issues): AF [178].

5. Finally, it is said that even if the Court finds the Core Defect existed in MY2018 Relevant Vehicles, it is clear that the MY2018 Relevant Vehicles are no more prone to suffer from any of the consequences of the Core Defect than the vehicles that had the 2020 Field Fix.

6. These submissions are devoid of merit and must be rejected. They misconstrue the referee’s reports and the Agreed Facts. Further, any contention that the 2018 Production Change was effective in remedying the Core Defect is unsupported by the evidence. I will deal with each of these topics in turn.

   The Referee Reports and the Agreed Facts

7. The contentions advanced by TMCA are inconsistent with the referee’s conclusions and the proper understanding of the Agreed Facts.

8. No complaint was made by TMCA, in the course of adoption of the referee’s reports, that the referee’s findings were ambiguous, materially incomplete, or otherwise failed to have regard to important evidence that TMCA put before the referee. Indeed, TMCA advocated for the adoption of the reports. Having been adopted, the referee’s conclusions constitute findings of the Court, and the parties are bound by them: CPB Contractors Pty Ltd v Celsus Pty Ltd (No 2) [2018] FCA 2112; (2018) 268 FCR 590 (at 604–6 [55]–[62] per Lee J). As such, it is not open to TMCA to seek to contradict those findings at trial, nor advocate a finding which, as a critical step in its reasoning, depends upon a proposition of fact or law which contradicts those findings: Tranquility Pools & Spas Pty Ltd v Huntsman Chemical Co Australia Pty Ltd [2011] NSWSC 75 (at [36], [38(8)] per Einstein J); Wenco Industrial Pty Ltd v W Industries Pty Ltd [2009] VSCA 191; (2009) 25 VR 119 (at 124 [11] per Redlich and Bongiorno JJA and Beach AJA).

9. Additionally, TMCA is not permitted to adduce evidence to contradict or qualify a fact upon which the parties have agreed unless the Court grants it leave to do so: s 191(2)(b) Evidence Act.

10. The inconsistencies between TMCA’s new contentions, on the one hand, and the referee’s findings and the Agreed Facts on the other, are borne out by an analysis of the specifics.

11. The difficulty with TMCA’s contentions is that the referee concluded in his First Report (at [8], [10], [38]–[39], [43]) that the Core Defect was present in all Relevant Vehicles, including those produced from 2018 onwards, and that the DPF System in the Relevant Vehicles was defective for the whole of the Relevant Period. Indeed, it is an agreed fact that the DPF System “was defective for the whole of the Relevant Period” (AF [67] emphasis added), and that this constituted a Core Defect inherent in the design of the DPF System: AF [67]–[69]. The referee also noted in his First Report (at [11]–[12]) that:

    11.The countermeasures attempted by the Respondent during the Relevant Period were ineffective to remedy the problem, and in some cases caused the DPF System to malfunction in Relevant Vehicles which had not previously suffered from any defect consequences.

    12. The countermeasures put in place after the Relevant Period appear to remedy the defects in the DPF System, in those Relevant Vehicles which have received the most recent countermeasures. The documents provided for my review do not indicate if the [Relevant Prado] has received the most recent countermeasures. If this is not the case, the defects remain present in that vehicle.

    (Emphasis added).

12. Similarly, the referee considered that the “[c]ountermeasures released after the Relevant Period appear to have been designed to eliminate the root causes of the core defect in the DPF System”: First Referee’s Report (at [50], emphasis in original).

13. There is nothing ambiguous about the referee’s conclusion. TMCA is wrong to submit that “whether or not the 2018 Production Change was effective was not the subject of any express findings by the Referee”. The conclusion in the First Referee’s Report (at [11]) that the countermeasures attempted by TMCA during the Relevant Period were ineffective and in some cases caused the DPF System to malfunction in Relevant Vehicles which had not previously suffered from any of the consequences of the Core Defect, applies to the 2018 Production Change. Mr Nelson’s evidence confirms what is otherwise obvious; namely, that the 2018 Production Change meets the description of a “countermeasure attempted by [TMCA] during the Relevant Period”: Nelson Affidavit (at [104]–[105], emphasis added).

14. This conclusion is supported by the fact that:

    (1)in the First Referee’s Report (at [50]), the countermeasures that the referee concluded to be effective are described as countermeasures “released after” the Relevant Period;

    (2)in the Second Referee’s Report (at [32]), the referee enumerates the specific elements of the “2020 Countermeasures” which he considered to be effective, namely “ECM reflash, DPF assembly replacement, Additional Injector Housing Assembly replacement”, which mirror the 2020 Field Fix elements, and do not align with the elements of the 2018 Production Change; and

    (3)the referee’s finding the Second Referee’s Report (at [34]) that the 2020 Countermeasures were equally effective for Relevant Vehicles with or without the 2018 Production Change is difficult to reconcile with any submission that 2020 Countermeasures were intended to include the 2018 Production Change itself.

15. Properly read, there is no ambiguity in the referee’s reports or the Agreed Facts.

    Effectiveness of 2018 Production Change

16. Even if it were open to TMCA to seek to relitigate the effectiveness of the 2018 Production Change, TMCA has not adduced evidence capable of supporting a finding that the 2018 Production Change was effective in remedying the Core Defect, or rendering the vehicles subject to it less prone to the consequences of the Core Defect.

17. First, the only evidence that TMCA has sought to adduce on this issue is hearsay in the form of a submission made to the referee. Even if this evidence were admissible for a hearsay purpose (and notwithstanding r 28.67(2) of the Federal Court Rules 2011 (Cth)), the document simply establishes that vehicles which had the 2018 Production Change have experienced a relatively low incidence of DPF issues in their first three years of service. The fact remains that: (a) the Core Defect is present in these vehicles; and (b) the referee concluded in his First Report (at [43]) that by reason of the presence of the Core Defect, these vehicles will experience one or more consequences of the Core Defect when exposed to the High Speed Driving Pattern. In order to prove that the incidence of consequences associated with the Core Defect in the MY2018 Relevant Vehicles will remain low (because the 2018 Production Change was substantially effective in remedying the Core Defect and/or the associated consequences) TMCA would have needed to lead evidence to this effect, which it did not.

18. Secondly, TMCA submits that a significant indicator that the referee accepted that the 2018 Production change was effective is the fact that the referee did not make any finding to the effect that vehicles which had received the 2018 Production Change required unusual or abnormal maintenance. This submission proceeds upon a false premise. The referee noted that the consequences of the Core Defect included that: (a) “Affected Vehicles must be inspected, serviced and/or repaired by a service engineer for the purpose of cleaning, repairing or replacing the DPF, the DPF System, (or components thereof)”; and (b) “Affected Vehicles must be inspected, serviced and/or repaired more regularly than would be required absent the Vehicle Defects”: see First Referee’s Report (at Annexure F [41(o)–(p)]). Those conclusions applied to all Relevant Vehicles and are not limited to those that did not receive the 2018 Production Change.

19. Thirdly, TMCA seeks to draw support from Mr Nelson’s evidence that “all indications we had was [sic] the 2018 production fix was very effective”: T98.23. At best, that is evidence of TMCA’s understanding of the effectiveness of the 2018 Production Change at the particular point in time that Mr Nelson was addressing (that is, August 2019), and falls short of evidence capable of supporting a finding that the 2018 Production Change was in fact effective. In any event, the evidence is inconsistent with the referee’s conclusions for the reasons I have explained.

20. Fourthly, while I do not place a great deal of reliance on this factor, the contention that the 2018 Production Change was itself effective to remedy the Core Defect is inconsistent with TMCA’s own conduct, internal records and analysis. Even after developing the 2018 Production Change, TMCA recognised that the technical changes at the heart of those countermeasures were ineffective to remedy the Core Defect: AF [152]­–[155]. As such, TMCA continued to pursue an effective fix and, upon developing the 2020 Field Fix, issued instructions to dealers to apply the 2020 Field Fix to vehicles that had had the 2018 Production Change. Surely this would have been unnecessary if the 2018 Production Change had itself been effective to remedy the Core Defect.

21. Fifthly, TMCA submits that its attempt to extend the warranty of certain Relevant Vehicles in August 2020 (in order to offer the 2020 Field Fix free of charge) was directed only to vehicles produced prior to June 2018 because the 2018 Production Change was effective. In TMCA’s submission, this obviated the need to offer the same extension to vehicles that had had the 2018 Production Change. But Mr Nelson did not proffer this as an explanation for the issuance of the warranty extension letter for vehicles produced prior to June 2018 only. A more plausible explanation is, that having regard to the three year per 100,000km warranty that TMCA provided in respect of new vehicles (until 1 January 2019), the warranty coverage in respect of most vehicles produced prior to June 2018 would have expired (or would soon expire) by August 2020; whereas the warranty coverage in respect of most vehicles produced after June 2018 would not have expired (noting in particular that since 1 January 2019, TMCA has provided a five year warranty for new vehicles): see SAF [10].

22. Hence, even if, contrary to my view, it was open to TMCA to seek to reagitate the effectiveness of the 2018 Production Change, I would not be satisfied that it was effective in remedying the Core Defect.

23. Finally, I should note for completeness that TMCA’s submission that even if the Court finds, consistent with the referee’s reports, that the Core Defect was present in the Relevant Vehicles that had 2018 Production Change, the Court should nevertheless find that those vehicles experience the Core Defect differently from other Relevant Vehicles, should too be rejected. Once it is appreciated that the Core Defect was present in all Relevant Vehicles, including vehicles produced with the 2018 Production Change, it must also be accepted that those vehicles, just like the Pre-MY2018 Production Vehicles, malfunctioned when exposed to the High Speed Driving Pattern and had an inherent propensity to experience the associated consequences: AF [73], [75]. The referee’s conclusions concerning the nature of the Core Defect and its consequences, and the Agreed Facts concerning the effect of the Core Defect on Relevant Vehicles in which it is present, apply equally in respect of all Relevant Vehicles.

24. It is highly regrettable that, despite the sensible approach to engaging in the reference process and agreeing to the adoption of the referee’s reports, TMCA persisted with this rather arid dispute. Such a course was devoid of merit and contrary to facilitating the dictates of the overarching purpose in Pt VB of the Act. Nevertheless, this is a convenient segue into the next factual issue in dispute: the nature of the consequences occasioned by the Core Defect.

    B.3.2   Did all Relevant Vehicles have a propensity to suffer the consequences of the Core Defect?

25. The parties are in dispute as to whether all the Relevant Vehicles had a propensity to suffer from the Core Defect and the consequences occasioned by the Core Defect. There is also a debate as to the issue of fuel consumption. It is convenient to first deal with the overarching contention as to the consequences occasioned by the Core Defect, before turning to the issue of increased fuel consumption.

    The Defect Consequences

26. In the light of the referee’s conclusions and the Agreed Facts, it can be said that if a Relevant Vehicle was exposed to the High Speed Driving Pattern, the Relevant Vehicle would experience one or more of the following consequences, by reason of the Core Defect (AF [75]):

    (1)damage to the DOC;

    (2)the flow of unoxidised fuel through the DPF and the emission of white smoke from the vehicle’s exhaust during and immediately following regeneration;

    (3)the emission of excessive white smoke and foul-smelling exhaust from the vehicle’s exhaust during regeneration;

    (4)partial or complete blockage of the DPF;

    (5)the emission of foul-smelling exhaust from the exhaust pipe when the engine was on during and immediately following automatic regeneration;

    (6)the need to have the Relevant Vehicle inspected, serviced and/or repaired by a service engineer for the purpose of cleaning, repairing or replacing the DPF, DPF System (or components thereof);

    (7)the need to have the Relevant Vehicle inspected, serviced and/or repaired more regularly than would be required absent the Core Defect;

    (8)the need to programme the engine control module (ECM) more often than would be required absent the Core Defect;

    (9)the display of DPF notifications on an excessive number of occasions and/or for an excessive period of time;

    (10)blockage of the fifth fuel injector in the Relevant Vehicles (Additional Injector) due to carbon deposits on its tip;

    (11)the Additional Injector causes deposits forming on the face of the DOC, causing white smoke; and

    (12)an increase in fuel consumption and decrease in fuel economy (Second Referee’s Report (at [21], [28]–[29]); see below (at [66]–[74])).

    (collectively, the Defect Consequences).

27. It seems that in written closing submissions, the applicants contend for a slight variation of these consequences. No explanation was provided as to why the findings in the Agreed Facts should be departed from, and in any event, there does not appear to be any meaningful difference between the consequences as outlined in the applicants’ closing submissions and those defined above.

28. TMCA submits that the referee did not find that all of the Defect Consequences would occur during the High Speed Driving Pattern, but rather, only one or more of them in many instances. In TMCA’s submission, this is evidenced by the referee’s conclusion in his First Report (at [55]) that “many of the Relevant Vehicles … would have experienced one or more of those consequences” if subjected to the High Speed Driving Pattern (emphasis added). It is said that the referee did not seek to quantify the extent to which each of the Defect Consequences might be or was likely to eventuate whenever the High Speed Driving Pattern was engaged in, given he concluded (at [43]) that “[w]ith the exception of the [Relevant Prado], I am unable to identify which of the Relevant Vehicles experienced symptoms of the core defect during the Relevant Period” (emphasis added). Further, it is said that some group members may not have driven in line with the High Speed Driving Pattern and therefore may have never been affected.

1. It may be accepted that each of the Relevant Vehicles did not actually suffer from the Defect Consequences. However, I reject the contention that only some, not “all”, of the Relevant Vehicles had the propensity to suffer one of the Defect Consequences if exposed to the High Speed Driving Pattern. This proposition is clearly established by the referee’s conclusions in his First Report:

   (1)as to the class of consequences associated with the Core Defect (see [75]);

   (2)that (at [43]):

   [the Core Defect] was a feature of all of the Relevant Vehicles during the Relevant Period (at least in latent form) and would result in one or more of the following consequences in vehicles exposed to the high-speed pattern and/or which were the subject of the ineffective countermeasures introduced by the Respondent during the Relevant Period:

   (a) excessive white smoke in exhaust during regeneration;

   (b) foul odor [sic] during regeneration; and/or

   (c) DPF Notifications and MILs being displayed when the DPF became full as a result of ineffective regeneration.

   (Emphasis added).

   (3)that (at [47]):

   [n]umerous Toyota documents recording its investigations into what the [r]espondent has called the ‘DPF issues’ describe the following mechanism(s) and physical manifestations of the core defect which, when a vehicle was exposed to the high-speed pattern and/or ineffective countermeasures, led to defect consequences”;

   (4)that (at [28]–[29]) “the Vehicle Defects likely have some negative impact on fuel economy” such that “the fuel consumption of the Relevant Vehicles [is] increased and/or their fuel economy decreased”.

2. By reason of the fact that the Core Defect was present in each Relevant Vehicle at the time it was supplied, each Relevant Vehicle had a propensity to experience one or more of the Defect Consequences. This is because if the Relevant Vehicles were exposed to the High Speed Driving Pattern (a normal form of usage of the vehicles) the DPF System would malfunction in the manner described above (at [15(8)]), which in turn caused the vehicles to experience one or more of the Defect Consequences described above (at [59]).

3. Indeed, the likelihood or probability that any given Relevant Vehicle would suffer from one or more Defect Consequences was relatively high. In April 2017, TMCA prepared a “Field Action Proposal” form, in which TMCA sought permission from TMC to implement a “Customer Service Campaign” to address the DPF issues experienced by Relevant Vehicles: Nelson Affidavit (at [91]); T89.38–90.5. The purpose of the Field Action Proposal form was “to demonstrate to TMC the level of importance, severity and potential impact upon guests” of the DPF issues being experienced by the Relevant Vehicles: Nelson Affidavit (at [91]). The Field Action Proposal form included a statistical assessment of the proportion of Relevant Vehicles that would “fail” within five and 10 years of service respectively (that is, would be the subject of a DPF-related complaint concerning excessive white smoke or DPF malfunction, indicated by the illumination of the Malfunction Indicator Lamp (MIL) on the dashboard): Nelson Affidavit (at [92]–[95]); T89.30–91.13. The analysis indicated that 50 per cent of Relevant Vehicles would fail after five years in service, and 94 per cent would fail after 10 years in service: T90.35–91.13.

4. As the evidence before the Court indicates, TMCA’s forecasts in April 2017 were well founded. A large proportion of Relevant Vehicles have in fact already experienced one or more of the Defect Consequences within five years of service. This is borne out by TMCA’s records of warranty claims made in respect of some of the Relevant Vehicles: AF [18]. As at 31 July 2021, at least 154,916 Relevant Vehicles have received servicing related to issues with the DPF System: AF [186].

   Increased fuel consumption

5. As a subset of this factual dispute, the parties are in contest as to whether the referee’s findings establish that fuel consumption increased and fuel economy decreased in all Relevant Vehicles.

6. TMCA submits that the referee’s conclusions do not establish that fuel consumption increased and fuel economy decreased in all Relevant Vehicles. Relevantly, the referee noted in his Second Report that (at [27]–[28]):

   27.While the simple average of the mean fuel consumption increase estimates of the vehicles in the Toyota Fuel Consumption Study is 3%, more than half of the vehicles are estimated to have no more than a marginal impact on fuel consumption, as I expected in my earlier report. I note, however, that the driving patterns associated with the ECM downloads and the corresponding regeneration/non-regeneration distances reported in the TFCS are unknown and may not be directly comparable to the driving pattern of the NEDC used for the Fuel Consumption values from Type Approval, adding uncertainty to the estimates. Further, the ECM downloads reported in the TFCS do not represent a statistically significant sample of any vehicle type or model.

   28.Nonetheless, the estimates do suggest that the Vehicle Defects likely have some negative impact of fuel economy in Affected Relevant Vehicles and this conclusion is further supported by the following additional considerations:

   (a) the core defect and the impact of the core defect on regeneration frequency and duration (as discussed in my first report);

   (b) the Applicant’s affidavit evidence concerning the increased fuel use of his vehicle during periods in which it was emitting excessive white smoke; and

   (c) records of customer complaints concerning increased fuel consumption in Relevant Vehicles.

   (Citations omitted).

7. Further, TMCA accepts that by reference to the 11 vehicle Toyota Fuel Consumption Study (TFCS), the referee concluded that the vehicles in which the Core Defect was present suffered from increased fuel consumption or decreased fuel economy by reason of the Core Defect and Defect Consequences. However, it is said that it was made plain in the Second Referee’s Report that whether or not each vehicle actually experienced an increase in fuel consumption depended on, inter alia, the driving style and pattern of the individual driver (at [30]):

   30.As my observations at 27 above suggest, I am unable to answer the second part of question 3(a) based on the materials available to me. In particular, I cannot provide a reliable single estimate for increased fuel consumption to be applied globally for all Relevant Vehicles for the reasons identified in that paragraph and the following further reasons:

   (a) as discussed in my first report, the level of increased regeneration affecting each of the Relevant Vehicles will be dependent on a range of variables, including the driving style and pattern of the individual driver; and

   (b) it appears likely that the driving style of the owners of the vehicles in the TFCS may explain much or all of the significant variation of fuel consumption results among the individual vehicles in my analysis of the TFCS as:

   (i) the two vehicles with the highest increase in fuel consumption in the sample were the two manual transmission models; and

   (ii) of the 10 remaining vehicles in the sample (all of which have automatic transmissions), 7 had only de minimis fuel consumption variations within +/-2% of the Type Approval result for that vehicle (with the remaining 3 showing increased fuel consumption of 5-6% from the Type Approval result).

   (Emphasis added).

8. TMCA submits that given the applicants did not pursue a case based on excess fuel consumption at the initial trial, and because the referee could not report on how much fuel consumption increased on an aggregate basis, there is no evidence before the Court about the extent to which fuel consumption was increased in the Relevant Vehicles, or indeed the extent to which all of the Relevant Vehicles experienced such an increase.

9. I reject this submission for the following two reasons.

10. First, TMCA’s submission that the referee did not conclude that all of the Relevant Vehicles experienced an increase in fuel consumption is incorrect. In the Second Referee’s Report, the referee was presented the following question:

    3.Is the fuel consumption of the Relevant Vehicles increased and/or their fuel economy decreased, by reason of:

    a. the Vehicle Defects and/or Vehicle Defect Consequences to which a “D” or “C” was allocated in Annexure F of the Referee’s Report and, if so, by how much; and/or

    b. if Supplementary Question 1 is answered “yes”, the Relevant Vehicles’ reliance on Automatic Regeneration and Manual Regeneration, rather than Passive Regeneration, to regenerate the DPF and, if so, by how much?

11. The referee’s answer to question 3(a) was ‘yes’”: see [29]. While it is true that the referee was unable to determine the answer to the second part of the question (“by how much”) on the materials at his disposal, that does not alter his conclusion in relation to the first part of the question, or his finding in the First Referee’s Report that the Core Defect did “have some negative impact on fuel economy” in the Relevant Vehicles: see [28].

12. Secondly, to the extent it is said the “[a]pplicants [did] not pursue a case based on excess fuel consumption at the initial trial”, that submission should too should be rejected. The applicants do contend that a consequence of the Core Defect was that fuel consumption increased, and that this is relevant in a number of respects, including to assessing: (a) whether the Relevant Vehicles were of acceptable quality at the time of supply, having regard to the class of consequences associated with the Core Defect (which was present in all Relevant Vehicles); and (b) the amount of the reduction in value of the Relevant Vehicles resulting from the Core Defect.

13. Thirdly, insofar as TMCA is to be understood as accepting that the class of consequences associated with the Core Defect included that “the fuel consumption of the Relevant Vehicles increased and/or their fuel economy decreased”, but not accepting that every single vehicle in fact experienced increased fuel consumption, then TMCA’s submission, for present purposes, is not really to the point. At the initial trial, the applicants seek damages on behalf of group members for the reduction in value resulting from the defect under s 272(1)(a) of the ACL (in which case it is not necessary to prove which individual vehicles experienced which specific consequences and to what extent), not under s 272(1)(b) for the cost of the additional fuel actually consumed by each Relevant Vehicle as a result of the Core Defect. This is because the applicants accept that damages for the costs of the additional fuel actually consumed would need to be determined on an individualised basis. The only caveat to this comment is that Mr Williams and DCS do seek damages of this type. I address this aspect of the claim separately below: see [522]–[530].

    B.3.3   What was the significance of the Core Defect and the Defect Consequences?

14. The parties dispute the significance of the Core Defect and the Defect Consequences.

15. A subset of this contention is that the Core Defect was a defect of the DPF System, not a defect of the entire vehicle. In making this submission, TMCA places reliance on two passages of the First Referee’s Report which state (at [8] and [38], emphasis added):

    (1)“[t]he DPF System was defective for the whole of the Relevant Period. The core defect was that the DPF System was not designed to function effectively during all reasonably expected conditions of normal operation and use in the Australian market”; and

    (2)“[a]s explained below, the DPF System was defective for the whole of the Relevant Period”.

16. The distinction is important, it is said, because the Court is required to assess whether the good that was purchased was defective, and the group members did not purchase a DPF System – rather, they purchased a HiLux, Prado or Fortuner vehicle.

17. Further, TMCA advances the following submissions which it says militate against the significance of the Core Defect and the Defect Consequences:

    (1)none of the Defect Consequences affect the operation of the Relevant Vehicles (the ability to get from A to B safely) and they remained able to be driven in all environments;

    (2)the DPF System is not essential to the operation of the Relevant Vehicles;

    (3)it is not suggested that the problems with the DPF System caused any safety issue; and

    (4)notwithstanding the Core Defect, the Relevant Vehicles operated in a non-defective manner and the condition of each vehicle as a whole was “indisputably sound”.

18. TMCA’s attempt to downplay the significance of the Core Defect and the Defect Consequences does not withstand scrutiny.

19. First, the DPF System performs a vital function in the Relevant Vehicles and any attempt to divorce issues with the DPF system from the Relevant Vehicles is entirely superficial. As TMCA itself submitted, the DPF System is in place to ensure compliance with emissions rules: AF [39]. If a vehicle does not comply with the applicable rules, it is in breach of a range of statutory requirements, including that it cannot be registered by a state or territory registering authority for use, or driven, on Australian roads. It does not matter that the applicants have not sought to prove that by reason of the Core Defect, the Relevant Vehicles in fact failed to comply with emissions standards. The point is that, contrary to the thrust of TMCA’s submissions, the DPF System is a critically important component of the Relevant vehicles, the proper functioning of which is likely to be of concern to a reasonable consumer.

20. Secondly, even adopting the starting point that the acceptable quality of a brand new motor vehicle costing around $50,000 is to be measured only by reference to whether it is still capable of being used to drive from A to B, the consequences of the Core Defect are such as to substantially interfere with the normal use and operation of the Relevant Vehicles. Take, for example, the following implication of the Core Defect:

    (1)by reason of the Core Defect, if the Relevant Vehicles were exposed to the High Speed Driving Pattern, regeneration events failed to remove sufficient particulate matter from the DPF to prevent the DPF from becoming or remaining full or blocked (AF [73(b)]);

    (2)when the DPF becomes full or blocked, the vehicle “warns” the driver of this fact by displaying DPF notifications and/or illuminating the MIL on the vehicle’s dash and consistently with instructions in the Owner’s Manual, owners are directed to take the Relevant Vehicle to an authorised dealership for unscheduled maintenance to have the DPF System inspected, repaired, or replaced (First Referee’s Report (at [43(c)], [47(b)(iv)(A)], [55(b)], [56], [63]–[64]));

    (3)if the driver continues to operate the Relevant Vehicle despite those warnings, the ECM causes the vehicle to go into Limp Mode, whereby the ECM will prevent the vehicle from going into fifth gear and will limit acceleration (Nelson Affidavit (at [76]); D2FASOC (at [17(b)(xvi)])); and

    (4)if Limp Mode occurs, the vehicle must be taken to a dealer and various TMCA instruction materials state that damage may be caused to a Relevant Vehicle, or an accident may occur, if a Relevant Vehicle continues to be driven when the DPF warning light is flashing or the DPF system warning message appears.

21. TMCA submits that Limp Mode is not a consequence of the Core Defect, but rather a consequence of improper usage. This is superficial. One of the Defect Consequences is triggering DPF notifications to the driver: AF [75(i)]. Once those notifications appear, the driver must take their vehicle in for servicing to address the problem, or the vehicle will go into Limp Mode. What TMCA’s submission appears to imply is that if a driver gets to the point of experiencing Limp Mode triggered by the Core Defect, it is the fault of the driver. That submission should be rejected.

22. This also casts further light on TMCA’s submission that the Relevant Vehicles are not defective because they are still capable of getting people from A to B. Is one to limp from A to B unless they respond promptly to the warnings that are triggered by the Core Defect? I reject any contention that the Core Defect does not impact upon or interfere with the operation of the Relevant Vehicles, or that the Relevant Vehicles continued to be suitable for use in all driving conditions, including the High Speed Driving Pattern, even with the Core Defect present.

23. Thirdly, while I accept that no case was advanced on the basis that the Core Defect gave rise to any issue of safety, plumes of dense white smoke are hardly conducive to a safe driving environment. TMCA’s contemporaneous records of complaints made by Mr Williams about the Relevant Prado record Mr Williams’ view that the white smoke entering the cabin of the car was “dangerous”: First Williams Affidavit (at [173]). Mr Williams was not challenged on this evidence. Needless to say, I place minimal weight on this factor in reaching my conclusion.

24. Fourthly, tens of thousands of customer complaints illustrate the obvious point that the Defect Consequences are not trivial. They have a significant impact upon consumers’ use and enjoyment of the Relevant Vehicles: see, for example, those referred to at [183] below. Indeed, TMCA ignores Mr Williams’ unchallenged evidence of the lived experience of the excessive white smoke issue: First Williams Affidavit (at [117]–[119]).

25. Fifthly, TMCA’s attempt to downplay the significance of the Core Defect is inconsistent with its contemporaneous conduct and internal communications. TMCA had significant concerns about how the problems experienced by the Relevant Vehicles would impact upon TMCA’s brand and reputation; it apprehended that the issues experienced by the Relevant Vehicles were of a serious nature and materially affected consumers’ use and enjoyment of the Relevant Vehicles. For example, the Global Registration Notice issued on 31 August 2016, in explaining that a countermeasure was “urgently necessary”, referred to “several customers getting stopped by the police, and also other road users”.

    B.3.4   Market Awareness of the Core Defect and Defect Consequences

26. A key issue in dispute between the parties is whether (and to what extent) consumers were aware of the Core Defect and Defect Consequences during the Relevant Period.

27. The relevance of this fact to TMCA’s case arises as follows. Mr Stockton gave evidence that he analysed the secondary market data from the vehicle valuation and information website RedBook, and vehicle auctions both for Relevant Vehicles and the vehicles he identified as comparator vehicles: First Stockton Report (at [254]–[260]). He compared resale prices as a percentage of manufacturers’ suggested retail price (MSRP) for Relevant Vehicles and comparator vehicles over time, including through regression analysis: First Stockton Report (at tab DVI 2). Mr Stockton found that the retained value of Relevant Vehicles in the resale market exceeded that of comparator vehicles: First Stockton Report (at [262(a)]). He also found that the relative value retention of Relevant Vehicles was higher in 2020 and 2021 than in earlier periods: First Stockton Report (at [262(b)]). Mr Stockton determined these results to be inconsistent with a mature market response to information about the Core Defect and in part counterintuitive, and so did not finalise his analysis and instead investigated whether the market was maturely informed of the Core Defect: First Stockton Report (at [250], [265]).

28. TMCA seizes upon the preliminary conclusions reached by Mr Stockton as proof that:

    (1)a reasonable consumer fully acquainted with the Core Defect and Defect Consequences would nevertheless regard the Relevant Vehicles as being of acceptable quality; and

    (2)the presence of the Core Defect in the Relevant Vehicles did not result in a reduction in the value of the Relevant Vehicles at the time they were supplied.

1. The ultimate result under s 19-80 of the GST Act is that group members will have an “increasing adjustment” to make, equal to the difference between the corrected tax input credit amount and the previously attributed input tax credit amount. This will need to be refunded to the ATO in their BAS: see also the examples provided in the Australian Taxation Office’s Goods and Services Tax Ruling 2001/4: Goods and services tax: GST consequences of court orders and out-of-court settlements (GSTR 2001/4, 20 June 2001) (at [123]–[125]).

2. In opening submissions, TMCA accepted that group members would need to make an increasing adjustment to their BAS if they received a further payment that changed the consideration for the supply or acquisition. It now contends that a damages award paid by TMCA would not be “in connection with” the acquisition of the Relevant Vehicle (in the sense that it reduces the consideration paid), because TMCA was not the supplier of the Relevant Vehicle if the group member acquired the Relevant Vehicle from a dealer. However, that submission fails to grapple with the breadth and commercial substance of the phrase “in connection with”. The damages award in this case would be akin to a person receiving a cashback rebate from the manufacturer upon purchase from a dealer. Such a payment would be made “in connection with” the consideration for the acquisition of the Relevant Vehicle.

3. This is also made clear by Div 134 of the GST Act which relates to “Third party payments” and provides for this particular circumstance. Section 134-1 provides:

   You may have a decreasing adjustment if you make a payment to an entity that acquires something that you had supplied to another entity. The entity receiving the payment may have an increasing adjustment.

   (Emphasis added).

4. Section 134-10 concerns increasing adjustments for payments received by third parties, and relevantly provides:

   (1)      You have an increasing adjustment if:

   (a)you receive a payment from an entity (the payer) that supplied a thing that you acquire from another entity (whether or not that other entity acquired the thing from the payer); and

   (b)your acquisition of the thing from the other entity:

   (i)was a creditable acquisition; or

   (ii)would have been a creditable acquisition but for a reason to which subsection (3) applies; and

   (c)       the payment is one or more of the following forms:

   (i) payment of money or digital currency;

   (ii)an offset of an amount of money or digital currency that you owe to the payer;

   (ii)a crediting of an amount of money or digital currency to an account that you hold; and

   (d)the payment is made in connection with, in response to or for the inducement of your acquisition of the thing; and

   (e)       the payment is not consideration for a supply you make.

   (Emphasis added).

5. To the extent a group member acquired their Relevant Vehicle from a dealer, any damages payment by TMCA would be in connexion with the group member’s acquisition of a Relevant Vehicle that TMCA supplied, and that the group member acquired from another entity. This would be so whether the Relevant Vehicle was new or used. Therefore, the group member would have an increasing adjustment, even if they purchased their Relevant Vehicle from a dealer, not TMCA.

6. Finally, I should note that there is also no applicable time limit that would preclude a group member from being obliged to make this increasing adjustment. Pursuant to s 29-20(1) of the GST Act, the adjustment that a group member would need to make would be attributed to the tax period when they become aware of the adjustment. The adjustment is included in their BAS for the period in which they receive the damages.

7. Accordingly, this issue can be put to one side, because it does not affect the amount of any group member’s loss. Most relevantly, it is not a logical reason to refrain from awarding damages to any group member in respect of GST that has been overpaid as a result of the overpayment in respect of the Relevant Vehicles.

   E.3.3   Whether group members are entitled to damages under s 272(1)(b)

8. Given I am satisfied there was a reduction in value of the Relevant Vehicles of 17.5 per cent resulting from the failure to comply with s 54 of the ACL, it follows from what I have explained above that group members are entitled to recover the excess GST they paid on that reduction in value. The GST damages are to be calculated as 10 per cent of the reduction in value.

9. The complication is whether such damages should be awarded on an aggregate basis and to whom. Given GST damages are derivative of the reduction in value of the Relevant Vehicles, consistently with my findings above, the appropriate course is to award such damages on an aggregate basis under s 33Z(1)(e) of the Act. The only group members who I am not satisfied should be awarded GST damages at this stage, for the same reasons I expressed in relation to reduction in value damages, are the Partial Period Group Members. The 2020 Field Fix Group Members are, however, entitled to GST damages.

   E.4     Pre-judgment interest

10. In accordance with s 51A of the Act, group members are entitled to pre-judgment interest on any reduction in value and GST damages award. This is not disputed by TMCA. There is no reason why the award of pre-judgment interest should not also be made on an aggregate basis pursuant to s 33Z(1)(e) to the relevant group members entitled.

    E.5     Duty to mitigate

11. TMCA alleges that the applicants and group members: first, had a duty to mitigate their claimed losses; and secondly, failed to mitigate their losses by failing to cause TMCA to repair their Relevant Vehicles under their express warranties. Although not expressly pleaded, it may be inferred that TMCA also contends that any damages to be awarded should be reduced on account of such failure.

12. This submission as to “mitigation” is based on TMCA’s assertion that where a claimant is otherwise entitled to recover damages for misleading or deceptive conduct, any damages award may be reduced by reason of the claimant’s failure to mitigate, that is, to take reasonable steps to reduce the losses arising from the misleading or deceptive conduct.

13. But a point should be made at the outset: in a statutory cause of action, speaking of a “duty to mitigate”, a concept drawn from the common law, is apt to distract from the required statutory task. Contrary to TMCA’s submissions, the common law duty to mitigate has no role to play in an action for compensation under statute: see, analogously, Trilogy Funds Management Ltd v Sullivan (No 2) [2015] FCA 1452; (2015) 331 ALR 185 (at 330–331 [712]–[716] per Wigney J and the authorities cited by his Honour). To the contrary, in Henville v Walker, McHugh J said in respect of ss 53 and 82 of the TPA (at 505 [140]) that:

    Nothing in the common law, in s 52 or s 82 or in the policy of the [TPA] supports the conclusion that a claimant’s damages under s 82 should be reduced because the loss or damage could have been avoided by the exercise of reasonable care on the claimant’s part. 

14. Having said this, in respect of statutory compensation, the basal notion called in aid by TMCA arises from the statutory requirement of necessary connexion or causation, that is, that damage be caused “by” the conduct of the defendant: Henville v Walker (at 505 [140] per McHugh J); Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182 (at 197–198 [47] per Branson J); Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 (at 414 [68] per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ).

15. In the present case, the same requirement arises from the statutory language of ss 236 and 272 of the ACL: in ss 236 and 272(1)(b) it arises by reason of the words “because of”; and in s 272(1)(a) it arises by reason of the words “resulting from”. It is said that both forms of statutory wording identify the need for the claimed loss to result from the statutory contravention, and where a claimant fails to take reasonable steps to reduce such losses, the damages that would have been avoided by those steps are not recoverable.

16. TMCA submits that these principles apply in the present proceeding in respect of group members who have not taken advantage of the 2020 Field Fix. Relevantly, it is said that:

    (1)TMCA gave express warranties to all group members with respect to their vehicles. There were two sets of warranties – the New Vehicle Warranty and the Toyota Warranty Advantage. The parties agree those documents are representative of the warranties provided to purchasers of new vehicles throughout the Relevant Period (SAF [9]–[10]); and

    (2)in August 2020, TMCA sent letters to group members who owned Pre-MY2018 Production Vehicles which extended the warranties so as to apply to DPF repairs for 10 years from delivery of the vehicle. That letter provided links to a webpage and booklet with information about the DPF issues and invited group members to contact their dealers, stating: “[i]f required, they will organize [sic] a replacement system that incorporates changes made to address the operational issues that some guests have experiences [sic] … at no cost to you.” (AF [178](c)–(d)]).

17. TMCA asserts it made it known to group members that they were able to have the defect repaired at no cost to them and group members who have not taken up that offer have behaved unreasonably such that they should not be compensated for loss attributable to that unreasonable behaviour. It is said that because the 2020 Field Fix removed the defect it also eliminated any reduction in value such that group members are prima facie not entitled to any damages for loss in value at all. Alternatively, it is said that if the Court found that a loss of value arises from the use of the vehicles prior to August 2020, there would need to be a proportionate reduction in damages by reference to the fraction of the vehicle’s working life constituted by the period between purchase and August 2020.

18. Irrespective of the precise words of statutory causation, it must be right that if part of the loss would not have occurred but for the applicant’s own unreasonable conduct, it is reasonable for the Court to consider how much of the loss was caused by the contravening conduct and to award damages accordingly. But such a concept does not apply on the facts of this case, where TMCA relies upon the failure by group members to take advantage of a repair – the 2020 Field Fix – years after they purchased a Relevant Vehicle. This is because there can be no suggestion that the failure to take up the repair caused any part of a group member’s reduction in value loss, when that loss resulted from the presence of the Core Defect at the date of acquisition, before the 2020 Field Fix was available. Nor do I accept TMCA’s assertion that the loss suffered by group members could have been cured by taking up the 2020 Field Fix. The fix cannot change the historical fact that at the time of supply each Relevant Vehicle was not of acceptable quality and was less valuable as a result.

19. This analysis is also supported by the scheme provided for under ss 271 and 272 of the ACL. The notion that where a manufacturer of goods offers to remedy defective goods under an express warranty, and the consumer of the goods does not take up that offer, the consumer has failed to mitigate its loss, such that its “reduction in value” damages are nil is incompatible with the statutory regime.

20. Section 271(6) deals specifically with the circumstance of repairs under warranty. It provides:

    (6)If an affected person in relation to goods has, in accordance with an express warranty given or made by the manufacturer of the goods, required the manufacturer to remedy a failure to comply with a guarantee referred to in subsection (1), (3) or (5):

    (a)       by repairing the goods; or

    (b)       by replacing the goods with goods of an identical type;

    then, despite that subsection, the affected person is not entitled to commence an action under that subsection to recover damages of a kind referred to in section 272(1)(a) unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the failure within a reasonable time.

21. The proper construction of s 271(6) of the ACL was considered at length in Capic (at 392–402 [694]–[740]). There is nothing in s 271(6) that compels a consumer to request that their goods be repaired under warranty, where an effective repair is available: see Capic (at 398–399 [717]–[723]). Rather, the consumer may make an election between requiring the manufacturer to repair their goods, or bringing an action against the manufacturer for damages of the kind described in s 272(1)(a). As Perram J explained in Capic (at 399 [719]):

    The operation of s 271(6) (and s 271(1)) is that one cannot get the benefit of repair or replacement of goods under an express warranty and then, having done so, sue for damages on the very defect which has been remedied. It is one or it is the other. But that dichotomy is mute when there is no express warranty in the first place or, even where there is, where the consumer has not exercised his or her rights under it. This conclusion springs from common sense but also from the fact that the provision begins with the word ‘if’ combined with the unavoidable fact that one cannot extract from a statement in the form ‘If A then B’ the proposition A.

    (Emphasis added).

22. Indeed, his Honour rejected the argument that the ACL, and specifically Pt 5-4 Div 2 (in which ss 271 and 272 appear) “in general abhors the consumer seeking compensation as a first step”: Capic (at 399 [720]). Reading into the statutory regime an obligation upon the consumer to “mitigate” its loss by requiring the manufacturer to repair goods under warranty would do violence to the statutory scheme embodied in Pt 5-4 Div 2 of the ACL.

23. Accordingly, neither ss 271 nor 272 of the ACL, properly construed, impose upon consumers a so-called duty to mitigate of the kind for which TMCA contends (or, more relevantly, impact upon the quantum of casually related loss as TMCA contends).

24. In any event, even assuming that there was some obligation to “mitigate” damage, it cannot sensibly be said that a failure to take up the invitation to have the 2020 Field Fix applied is unreasonable in circumstances where TMCA asserts that to take up that invitation has the effect, under s 271(6), of extinguishing altogether any entitlement to damages under s 272(1)(a). TMCA submits that it is unjust for consumers to obtain monetary damages for reduction in value instead of taking up a repair years later. However, this argument misses the point, because the statutory provisions are clear: see Capic (at 399 [721]). In any event, the result compelled by the statute is not unjust – a later repair does not compensate the consumer for having paid more than the vehicle was worth at the time of supply.

    F         THE CLAIM OF DCS FOR LOSS AND DAMAGE

25. It is then necessary to turn to the claim of DCS for loss and damage.

    F.1      Acceptable quality

    F.1.1    Whether there was a reduction in value of the Relevant Prado

26. DCS brings an individual claim under s 272(1)(a) of the ACL for reduction in value damages resulting from the non-compliance with the statutory guarantee. As noted, it is common ground that DCS owned the vehicle and it was the party that therefore suffered any reduction in value loss. Given the reduction in value I have found of 17.5 per cent is the same across all Relevant Vehicles, that figure applies to the Relevant Prado. The way in which that percentage is applied in order to determine the quantum of damages under s 272(1)(a) of the ACL is explained above: see Section E.2.3.

27. The Relevant Prado was purchased on 8 April 2016: First Williams Affidavit (at [78]). It cost $60,315, inclusive of GST, stamp duty, “Perfexion Window Tint 2 Windows”, dealer delivery, registration fee and Compulsory Third Party insurance: First Williams Affidavit (at [82]–[83]). The price exclusive of GST, stamp duty, other statutory charges and window tint, but inclusive of dealer delivery which forms part of the consideration for the vehicle, was $52,214.32. Dealer delivery should be included in the purchase price, because it is an amount paid for the acquisition of the vehicle itself, in contrast to a tax or other benefit such as CTP insurance or registration: see definition of “price” in s 2(1) of the ACL. This analysis is also consistent with the Agreed Facts, which records the total “drive away” price, and the amount of GST and stamp duty: AF [80]. While the Agreed Facts does not identify the tax exclusive purchase price without accessories, the identification of that amount from the evidence does not contradict the Agreed Facts.

28. There was no disclosure of the Core Defect or Defect Consequences to Mr Williams (and hence DCS) before the Relevant Prado was purchased: First Williams Affidavit (at [96]–[97]). The agreed purchase price was therefore not based on a common appreciation of the existence of the Core Defect. Accordingly, for the reasons described above in Sections E.2.2 and E.2.3, the Relevant Prado was worth less than an identical vehicle without the Core Defect at the time of acquisition.

29. As to the amount of that reduction in value, it is necessary to descend into an exercise of calculation. I note that all figures are rounded to two decimal places. The reduction in value for damages for DCS is $7,474.59, which is calculated by applying the following methodology derived from the statutory formula in s 272(1)(a):

    (1)the reduction in value is 17.5 per cent;

    (2)the MSRP applicable to the Relevant Prado was $61,990: AF [78]. The average retail price (excluding tax) applicable to the Relevant Prado can be calculated using Mr Stockton’s evidence, which identifies average purchase price as a percentage of MSRP for each model and time period. For the 2016 Prado, the average purchase price was 96.23 per cent of MSRP: First Stockton Report (at tab 8, p 2). The formula is therefore 96.23 per cent of $61,990, divided by 1.1 (in order to remove GST from the MSRP). This equates to an average purchase price for the 2016 Prado of $54,229.98;

    (3)the “true” value of the Relevant Prado (that is, the value of the goods had the existence of the Core Defect been known at the time of purchase) is derived by reducing the average purchase price, $54,229.98, by 17.5 per cent. This equals $44,739.73

    (4)the “price paid” for the Relevant Prado, being the actual tax exclusive purchase price paid by DCS, was $52,214.32;

    (5)for the purposes of s 272(1)(a) of the ACL, in the case of the Relevant Prado, the “lower” of the “price paid” and the “average retail price” was the “price paid”; and

    (6)the recoverable reduction in value, therefore, is the difference between the “price paid” ($52,214.32) and the “true” value of the Relevant Prado (as reduced on account of the Core Defect ($44,739.73)); that is, $7,474.59.

    F.1.2    Whether DCS suffered other consequential loss

30. DCS claims damages under s 272(1)(b) for other reasonably foreseeable loss or damage resulting from the non-compliance with s 54 of the ACL, namely: (1) excess GST, stamp duty and financing costs incurred because of the Core Defect; (2) lost income on days when Mr Williams could not work (for the benefit of DCS) because the vehicle was being serviced due to the Core Defect; and (3) excess fuel costs incurred because of the Core Defect.

31. I will consider each of these heads of damage in turn.

    Excess GST, stamp duty and financing costs

32. For the reasons described above (at Section E.3), the excess GST, stamp duty and financing costs (that is, excess interest) are all derivative of the reduction in value amount, because this amount is akin to an overpayment at the time of acquisition. Had DCS paid only what the vehicle was worth, it would not have incurred these additional amounts.

1. On the basis that the reduction in value percentage is 17.5 per cent and that the recoverable reduction in value is $7,474.59:

   (1)the excess GST is 10 per cent of the reduction in value amount – $745.46; and

   (2)the excess stamp duty is 3 per cent of the sum of the reduction in value amount and the excess GST – $246.60.

2. The excess financing costs are in substance the interest paid on the additional amount borrowed because of the overpayment. This is calculated by multiplying the tax inclusive reduction in value, on a month by month basis, using the percentage figures set out in Mr Stockton’s excess interest amortisation schedule: Second Stockton Report (at tab KAW 4, p 1U). I will leave it to the parties to calculate this exact figure, which is somewhat complex. TMCA does not dispute the arithmetic involved.

   Lost income

3. On three occasions when the Relevant Prado had to be serviced for issues associated with its DPF System, Mr Williams was unable to conduct his usual work, on behalf of DCS, of performing inspections for AAMC. This occurred on 27 April 2018, 12 April 2019 and 20 March 2020, causing DCS to lose, on each occasion, between $1,350 and $1,800 (excluding GST) in revenue: First Williams Affidavit (at [237]–[239]).

4. These amounts were reasonably foreseeable losses that resulted from the failure to comply with the statutory guarantee of acceptable quality. Indeed, it is reasonably foreseeable that the owner of a defective vehicle will take steps to try to have the vehicle fixed, and that this may cause that person to lose work opportunities as a result. Mr Williams agreed to take those bookings for a service because they were the first available dates offered, and he was understandably frustrated with the condition of his vehicle and wanted the issues addressed as soon as possible: First Williams Affidavit (at [236]). There was nothing put to Mr Williams in cross-examination to suggest that it was unreasonable for him to have taken this course.

5. The applicants submit that the Court should find that DCS suffered lost income on each occasion in the amount of $1,575, being the mid-point of the range between $1,350 and $1,800, meaning the total amount recoverable under s 272(1)(b) for lost income would be $4,725. This figure appears to be common ground, and I accept it to be appropriate.

   Excess fuel

6. I have already determined the contest in respect of the referee’s report on this topic, finding that the referee concluded that there was an increase in fuel consumption, but that he was unable to settle on a “reliable single estimate for increased fuel consumption to be applied globally for all Relevant Vehicles”: see [68]. This creates some difficulties in approaching the individual claims of group members, including that of DCS.

7. The applicants contend that the Court should apply a 3 per cent average increase in fuel consumption in respect of the Relevant Prado, in the light of the findings of the referee and Mr Williams’ evidence. While I have dealt with the findings of the referee on this point above, it is necessary to recall that the referee concluded in his Second Report (at [27]):

   While the simple average of the mean fuel consumption increase estimates of the vehicles in the Toyota Fuel Consumption Study is 3%, more than half of the vehicles are estimated to have no more than a marginal impact on fuel consumption, as I expected in my earlier report. I note, however, that the driving patterns associated with the ECM downloads and the corresponding regeneration/non-regeneration distances reported in the TFCS are unknown and may not be directly comparable to the driving pattern of the NEDC used for the Fuel Consumption values from Type Approval, adding uncertainty to the estimates. Further, the ECM downloads reported in the TFCS do not represent a statistically significant sample of any vehicle type or model.

   (Emphasis added).

8. Further, Mr Williams’ evidence in respect of increased fuel consumption was as follows (see First Williams Affidavit (at [127]–[128])):

   127. During this period between the 18 month/30,000 km service on 7 November 2016 and the 24 month/40,000 km service on 1 February 2017, I also started to notice other issues with the Prado.

   128. First, I noticed that the Prado was using more fuel than it had previously. I had not previously noticed the Prado’s fuel consumption or looked at the average fuel consumption recorded on the vehicle’s trip computer. However, I recall noticing at around this time that I was having to refuel the Prado more often than I had previously and needing to use a greater amount of fuel to “top up” the Prado than I had previously. I recall checking the average fuel consumption recorded in the Prado’s trip computer at around this time. I did this because I had noticed the Prado using more fuel than it had previously. I do not specifically recall the average fuel consumption I observed in the Prado’s trip computer in late 2016 or early 2017. However, since this time, I have periodically checked the average fuel consumption recorded in the Prado’s trip computer and, to the best of my recollection, the average fuel consumption I have observed from time to time in the Prado’s trip computer has been in the range of 10.5 U100 kms to 10.8 L/100 kms. I do not recall ever seeing an average fuel consumption outside this range recorded in the Prado’s trip computer. I have not observed any improvement in the Prado’s fuel consumption since around the time the Prado started to emit white smoke.

9. Notably, Mr Williams was not challenged on this evidence, nor was this evidence the subject of a limitation under s 136 of the Evidence Act (limiting its use to the fact of the representation not its truth).

10. TMCA submits that with respect to the referees conclusions, within those “statistically insignificant” results, the only Prado which was considered by the Referee showed 0 per cent increased fuel consumption, which is of significance given the vehicle in question is a Prado. It is said that the referee’s more generalised findings (based on mean values across all vehicles) cannot support a conclusion that the Relevant Prado was the subject of any increased fuel consumption particularly in light of the referee’s comments about the limitations of his analysis. TMCA further submits that a failure to cross-examine Mr Williams on his evidence in this respect, or seek a limitation in relation to this evidence, is unimportant. That is because, even if it could be said the Relevant Prado did suffer an increase in fuel consumption as a result of the Core Defect, Mr Williams’ evidence is so hopelessly vague that it cannot form a rational basis upon which to reach an affirmative state of satisfaction as to the precise increase in fuel consumption. Alternatively stated, on the current state of the evidence, quantifying the increase in fuel consumption is nothing but speculation.

11. DCS, on the other hand, submits that the parties co-operated with a view to extracting data from the Electronic Control Unit (ECU) in the Relevant Prado concerning the increased rate of active regeneration experienced by the Relevant Prado as a result of the Core Defect. If this data could be obtained, it would enable the excess fuel costs to be quantified in accordance with the methodology endorsed by the referee, but the diagnostic analysis performed has not been able to identify the relevant data on the ECU of the Relevant Prado, meaning that precise quantification of the excess fuel costs has not been possible. In the circumstances, DCS submits that the most appropriate course is for the Court to assess the recoverable excess fuel costs by reference to the referee’s findings concerning increased fuel consumption and Mr Williams’ evidence as to the fuel costs that DCS incurred. This is an example, it is said, of a situation “where the Court must do the best it can”.

12. DCS submits that the fact that the only Prado in the sample of 12 vehicles in TMCA’s fuel study had 0 per cent excess fuel consumption does not gainsay that the Core Defect had a propensity for a negative impact on fuel consumption in Relevant Vehicles including the Relevant Prado, particularly in circumstances where: (1) an owner’s driving style could affect the level of fuel consumption (Second Referee’s Report (at [30(a)])); and (2) Mr Williams gave unchallenged evidence that the Relevant Prado’s fuel consumption increased at times when it was suffering the Defect Consequences. Indeed, senior counsel for the applicant was cautious to emphasise that the Prado assessed in the TFCS should not be taken to be representative of Prado’s generally.

13. This issue has caused me some pause. On the one hand, one must appreciate the finding of the referee that the Core Defect caused an increase in fuel consumption. On the other hand, one must appreciate the lacuna in the evidence in quantifying what this increase in fuel consumption is in relation to the Relevant Prado with any degree of specificity. I accept that as a matter of logic, the increase in fuel consumption should be assessed as somewhere between 0 per cent and 3 per cent, and that Mr Williams’ evidence provides a basis to infer that there was an increase in fuel consumption. But there is simply no indication of what that increase actually was. Indeed, Mr Williams’ reference to the fact he “observed from time to time … the Prado’s trip computer has been in the range of 10.5 U100 kms to 10.8 L/100 kms” is hollow without a comparator figure before the Defect Consequences manifested. In all the circumstances, the evidence does not allow me to reach a state of reasonable satisfaction as to the Relevant Prado’s increase in fuel consumption caused by the Core Defect. To proceed otherwise on the evidence adduced would be to engage in impermissible speculation.

14. This head of damage must fail. I stress that this is an individual assessment in relation to DCS, and it may be that other group members are able to prove, to the relevant standard, that they suffered loss due to increased fuel consumption.

    F.2      Misleading and deceptive conduct

15. DCS also seeks damages pursuant to s 236 of the ACL for the difference between the purchase price and the true value of the Relevant Prado as at the date of purchase and other consequential losses (namely, the excess GST and stamp duty paid on the overpayment at the time of acquisition, excess financing costs, lost income and excess fuel expenses).

16. On any view, the measure of damages in respect of the misleading and deceptive conduct case would be the same as I have found in respect of the acceptable quality case. One might then sensibly ask: why is the claim for misleading and deceptive conduct being pressed?

17. The reason advanced by the applicants relates to the interaction of the relevant statutory provisions. Relevantly, s 236(1) of the ACL provides:

    236     Actions for damages

    (1)      If:

    (a)a person (the claimant) suffers loss or damage because of the conduct of another person; and

    (b)the conduct contravened a provision Chapter 2 or 3;

    the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

18. It is said that if it is the case that s 271(6) disentitles the 2020 Field Fix Group Members to an award of reduction in value damages pursuant to s 272(1)(a)(i) (a matter that does not currently arise for determination), the claim for damages under s 236 is brought into sharp focus. This is because the award of damages under s 236 is unaffected by s 271(6) or any like provision. It is said that the case of DCS therefore provides an example of a claim for misleading and deceptive conduct and should be determined. Given the individual misleading and deceptive conduct claim of DCS is pressed and could be of utility, I propose to deal with it notwithstanding the measure of damages is the same as the acceptable quality case.

19. The use of the phrase “because of” indicates that the entitlement to damages under s 236(1) is predicated on a causal connexion between the misleading or deceptive conduct on the one hand (which amounts to a contravention of Chapter 2 or 3 of the ACL) and the loss or damage suffered on the other hand: see Campbell v Backoffice (at 341 [102] per Gummow, Hayne, Heydon and Kiefel JJ).

20. The appropriate measure of damages in a claim under s 236(1) concerning a good acquired by misrepresentation has long been said to be the difference between purchase price and the true value of the good as at the date of acquisition: Potts v Miller (at 297–298 per Dixon J); Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 (at 291 per Brennan, Deane, Dawson, Gaudron and McHugh JJ). However, this is not an inflexible rule: HTW Valuers (at 657 [36] per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). Nor did Dixon J even suggest it was inflexible in Potts v Miller. The Court can, where appropriate, take into account subsequent events to illuminate what the goods were worth at the date of acquisition: Potts v Miller (at 298–299); Kizbeau (at 291); HTW Valuers (at 658–659 [39]). In doing so, the Court needs to be careful to distinguish between possible causes of the decline in value after the date of acquisition: HTW Valuers (at 659 [40]). If the cause is inherent in the thing itself, then its existence should be taken into account in arriving at the true value at the time of acquisition: Potts v Miller (at 298); HTW Valuers (at 659 [40]). However, if the cause is “independent”, “extrinsic”, “supervening” or “accidental”, then the additional loss is not the consequence of the misrepresentation: Potts v Miller (at 298); HTW Valuers (at 659 [40]).

21. Further, the Court needs to be discerning before relying on “market values” at the time of acquisition or subsequent to acquiring the good. For example, it would not be appropriate to use market values as the basis for assessing the true value as at the time of acquisition if those market values were infected by misinformation or were mistaken: HTW Valuers (at 657–658 [37]). To the extent that TMCA seeks to rely on resale market data in the present case, it suffers from this problem for the reasons dealt with above: see [87]–[117].

22. It is common ground that TMCA made the representations, including in brochures such as the Toyota Prado e-Brochure printed October 2015. TMCA also admits that it engaged in the Omissions Conduct, including failing to disclose the Core Defect and Defect Consequences to prospective purchasers. These representations and omissions were misleading for the reasons described above: see Section D.

23. Mr Williams’ evidence, summarised above (at [118]–[152]), establishes that he relied on the Vehicle Representations, Future Vehicle Representations and the Omissions Conduct in deciding to cause DCS to purchase the Relevant Prado. Accordingly, I am satisfied that TMCA’s misleading conduct has caused DCS’ reduction in value loss.

24. In addition to reduction in value damages, DCS seeks compensation for other consequential loss, namely excess GST and stamp duty paid on the overpayment at the time of acquisition, excess financing costs, lost income and excess fuel expenses. The excess tax and financing costs have a sufficient causal connexion with the misleading conduct because they are derivative of the difference between the purchase price and the true value. Lost income also has a sufficient causal connexion with the misleading conduct, because those losses would not have occurred but for that conduct. That is, but for the misleading conduct, the Relevant Prado would not have been purchased, so those losses would not have been incurred. Any contention in respect of increased fuel costs runs into the same difficulty I have canvassed in respect of the acceptable quality case.

25. Of course, it is necessary to stress that the question of reliance is an inherently subjective matter and whether it can be made out by group members can only be determined on a case by case basis. Nor, even though DCS has been successful on both fronts, can DCS engage in an exercise of double recovery: see [422].

    G        CONCLUSION AND ORDERS

26. In short, by reason of the Core Defect, the Relevant Vehicles were worth less at the time of supply than they would have been worth if they were not defective. The conduct in marketing the vehicles as being of acceptable quality was misleading. The individual claim of DCS should succeed. So should the representative claims made on behalf of group members with regard to common issues. These conclusions accord with what might have been thought to be the intuitive, common sense response to the facts presented, and it is regrettable the case has become more complicated than it ought to have been.

27. The parties were largely in agreement as to the common questions to be determined at the initial trial. I can see no reason why those common questions, and the answers to those common questions, should now not be the subject of agreement. Accordingly, the parties are to file an agreed minute or competing minutes of order reflecting these reasons, in the form of answers to common questions, and any ancillary orders that are necessary.

28. Finally, despite my views as to length of the submissions, and whether concessions should have reduced the ambit of the liability dispute, I should note that counsel and the solicitors for the parties conducted the hearing with great efficiency, courtesy and professionalism, which has been of great assistance in preparing these reasons.  

I certify that the preceding five-hundred-and-forty-four (544) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

Associate:

Dated:       7 April 2022