Williams v Toyota Motor Corporation Australia Limited; Toyota Motor Corporation Australia Limited v Williams

HIGH COURT OF AUSTRALIA

GAGELER CJ,
GORDON, EDELMAN, STEWARD, GLEESON, JAGOT AND BEECH‑JONES JJ

Matter No S157/2023

KENNETH JOHN WILLIAMS & ANOR  APPELLANTS

AND

TOYOTA MOTOR CORPORATION AUSTRALIA
LIMITED  RESPONDENT

Matter No S155/2023

TOYOTA MOTOR CORPORATION AUSTRALIA
LIMITED  APPELLANT

AND

KENNETH JOHN WILLIAMS & ANOR  RESPONDENTS

Williams v Toyota Motor Corporation Australia Limited
Toyota Motor Corporation Australia Limited v Williams

[2024] HCA 38

Date of Hearing: 10 & 11 April 2024
Date of Judgment: 6 November 2024

S157/2023 & S155/2023

ORDER

Matter No S157/2023

1.Appeal allowed.

2.Set aside order 3 of the orders of the Full Court of the Federal Court of Australia made on 27 March 2023.

3.Set aside order 2 of the orders of the Full Court of the Federal Court of Australia made on 12 May 2023 but only in respect of the amended answers to questions 26 to 35 posed in Sch 2 to the orders of the Federal Court of Australia made on 16 May 2022.

4.In lieu of so much of order 2 of the orders of the Full Court of the Federal Court of Australia made on 12 May 2023 that answers questions 26 to 35 posed in Sch 2 to the orders of the Federal Court of Australia made on 16 May 2022, also order that the primary judge's answers to those questions be set aside.

5.The matter be remitted to the primary judge for:

(a)the reassessment of reduction in value damages under ss 271(1) and 272(1)(a) of the Australian Consumer Law and damages for excess GST under ss 271(1) and 272(1)(b) of the Australian Consumer Law in accordance with the reasons of the High Court of Australia; and

(b)the provision of answers to questions 26 to 35 posed in Sch 2 to the orders of the Federal Court of Australia made on 16 May 2022 in accordance with the reasons of the High Court of Australia.

6.The respondent pay half of the appellants' costs of the appeal.

Matter No S155/2023

1.Appeal dismissed.

2.The appellant pay the respondents' costs of the appeal.

On appeal from the Federal Court of Australia

Representation

J T Gleeson SC with P A Meagher and T M Rogan for the appellants in S157/2023 and the respondents in S155/2023 (instructed by Quinn Emanuel Urquhart & Sullivan)

B W Walker SC with E Bathurst for the respondent in S157/2023 and the appellant in S155/2023 (instructed by Clayton Utz)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Williams v Toyota Motor Corporation Australia Limited
Toyota Motor Corporation Australia Limited v Williams

Damages – Assessment – Consumer law – Where Mr Williams and Direct Claim Services Qld Pty Ltd ("Williams parties") brought representative proceedings against Toyota Motor Corporation Australia Limited ("Toyota") on behalf of persons who acquired motor vehicles fitted with defective diesel exhaust after-treatment system – Where vehicles had propensity to experience defect consequences – Where effective fix became available in May 2020 free of charge ("repair") – Where primary judge concluded vehicles did not comply with guarantee of "acceptable quality" in s 54(1) of Australian Consumer Law ("ACL") at time of supply – Where s 271(1) of ACL provides that if guarantee under s 54 is not complied with, "an affected person in relation to the goods may ... recover damages from the manufacturer" – Where s 272(1)(a) of ACL provides that "an affected person in relation to goods is entitled to recover damages for ... any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates" – Where primary judge held assessment of damages under s 272(1)(a) to be made at time of supply and information acquired thereafter could only be considered if it bore upon "true value" at time of supply, which did not include knowledge of availability of repair – Where Full Court of Federal Court of Australia held that assessment of damages under s 272(1)(a) may require departure from time of supply or adjustment to avoid "over‑compensation" – Where Full Court held that availability and timing of repair should be considered – Whether Full Court erred in permitting an assessment of damages after time of supply rather than only using information acquired thereafter to confirm what could be foreseen at time of supply – Whether Full Court erred in failing to conclude that damages under s 272(1)(a) are recoverable where there is no ongoing reduction in value at time of trial due to availability of repair.

Words and phrases – "affected person in relation to goods", "assessment of damages", "availability of a repair", "compensation", "consumer", "damages", "defect", "defect consequences", "full knowledge of the defect", "guarantee of acceptable quality", "hypothetical reasonable consumer", "inherent features of the defect", "loss-based damages", "loss or damage", "performance-based damages", "reduction in value", "state and condition of the goods", "time of supply", "time of trial".

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

1. GAGELER CJ, GORDON, STEWARD, GLEESON AND BEECH-JONES JJ.   The motor vehicles the subject of these two appeals were supplied to "consumers" within the meaning of the Australian Consumer Law[1] ("the ACL") during the period from 1 October 2015 to 23 April 2020 ("the relevant period"). Toyota Motor Corporation Australia Limited ("Toyota") was the manufacturer of the motor vehicles.[2] The vehicles did not conform with the guarantee of acceptable quality provided for in s 54(1) of the ACL in that each had a (hidden) defect in its diesel exhaust system which carried an unacceptable propensity to cause the diesel exhaust system to malfunction.

   [1]Competition and Consumer Act 2010 (Cth), Sch 2 ("ACL"), s 3.

   [2]ACL, s 7(1)(e).

2. Section 272(1)(a) of the ACL affords to an "affected person in relation to goods" a remedy in damages for any reduction in the value of the goods resulting from their failure to comply with the guarantee of acceptable quality. The principal issue raised by these two appeals is the relevance to that assessment of the fact that, some years after the time of supply, Toyota developed a means of repairing the defect that was made available free of charge.

3. For the reasons that follow, the assessment to be made under s 272(1)(a) is of the amount by which the value of the goods is reduced at the time of supply to the consumer as a result of the failure of the goods to comply with the guarantee of acceptable quality at that time. The assessment is to be undertaken having regard to all that is known at the time of trial about the "state and condition of the goods"[3] at the time of their supply to the consumer. The effectiveness, cost, inconvenience and timing of any repair of a defect in the goods as known at the time of trial are all characteristics of the "state and condition of the goods" at the time of their supply to the consumer and are therefore all to be taken into account in the assessment.

   [3]ACL, s 54(2).

4. As neither the primary judge nor the Full Court of the Federal Court of Australia assessed the damages payable under s 272(1)(a) in accordance with this approach, the proceedings will be remitted to the primary judge to undertake that task in accordance with these reasons.

   Procedural background

5. Kenneth John Williams and Direct Claim Services Qld Pty Ltd ("Direct Claim Services"), a company of which Mr Williams is the sole director, are the appellants ("the Williams appellants") in one of the appeals ("the Williams appeal"). They are the lead applicants in representative proceedings that were brought against Toyota on behalf of those who had acquired motor vehicles in the Prado, Fortuner or HiLux ranges during the relevant period that had been fitted with a "1GD-FTV" or "2GD-FTV" diesel combustion engine. There were 264,170 such vehicles ("the relevant vehicles"). Toyota is the appellant in the other appeal ("the Toyota appeal").

6. Both appeals concern that part of the judgment of the Full Federal Court (Moshinsky, Colvin and Stewart JJ)[4] that varied the assessment made by the primary judge (Lee J) of the damages payable by Toyota under s 272(1)(a) of the ACL in favour of Direct Claim Services and the group members (except for certain categories).[5] The hearing of both appeals was immediately followed by the hearing of the appeal in Capic v Ford Motor Company of Australia Pty Ltd,[6] which raised similar issues in relation to the proper construction of s 272(1)(a) of the ACL. The submissions made by the appellant (Biljana Capic) and respondent (Ford Motor Company of Australia Pty Ltd ("Ford")) in Capic concerning the construction of the ACL are addressed in this judgment.

   [4]See Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 ("Toyota") at 520-521 [20]-[21], 580 [317].

   [5]See [15]-[16].

   [6][2024] HCA 39.

   Factual background

7. In an endeavour to comply with national emissions standards, each of the affected Toyota vehicles was supplied with a diesel exhaust after-treatment system ("DPF System"), which was designed to capture and convert the pollutant emissions into carbon dioxide and water vapour through a combination of filtration, combustion (ie, oxidation) and chemical reactions.[7] Two key components of the DPF System are the diesel particulate filter ("DPF") and the diesel oxidation catalyst ("DOC"). The DPF captures and stores diesel particulate matter in the exhaust gas prior to its release. The captured particulate matter must be burnt off periodically in a process described as "regeneration".[8] The DOC comprises a honeycomb ceramic flow-through monolith substrate with a catalyst coating. One of its functions is to increase the temperature in the DPF during regeneration to enable the captured particulate matter to be burnt off. This process is impeded if the DOC becomes clogged or blocked.[9]

   [7]Williams v Toyota Motor Corporation Australia Ltd [2022] FCA 344 ("Williams") at [6], [15(1)-(2)].

   [8]Williams [2022] FCA 344 at [15(3)-(4)].

   [9]Williams [2022] FCA 344 at [15(5)-(6)].

8. The DPF System "was not designed to function effectively during all reasonably expected conditions of normal operation and use in the Australian market" ("the core defect")[10] in that, under certain conditions, the DPF System was ineffective in preventing the formation of deposits on the DOC surface, which prevented the DPF from effective regeneration.[11] The core defect was inherent in the design of the DPF System and was comprised of both mechanical defects and defective control logic and associated software calibrations.[12]

   [10]Williams [2022] FCA 344 at [15(6)]; Toyota (2023) 296 FCR 514 at 519 [13].

   [11]Williams [2022] FCA 344 at [15(6)].

   [12]Williams [2022] FCA 344 at [15(6)].

9. The effect of the core defect was that, if a relevant vehicle was exposed to regular continuous driving at approximately 100 km/h ("the High Speed Driving Pattern"), it might experience one or more of various so-called "defect consequences". The defect consequences included: the emission of excessive white smoke and foul-smelling exhaust from the vehicle's exhaust when the engine was running during and immediately following regeneration; the need to have the vehicle inspected, serviced or repaired by a service engineer for the purpose of cleaning, repairing or replacing the DPF System; the display of DPF notifications on an excessive number of occasions or for an excessive period of time, or both; and an increase in fuel consumption and decrease in fuel economy.[13]

   [13]Williams [2022] FCA 344 at [59].

10. The primary judge found that, although not every relevant vehicle suffered the defect consequences, because the core defect was present in all the vehicles they each had a propensity to experience one or more of the defect consequences and there was a high likelihood they would do so.[14] His Honour found that those consequences "substantially interfere[d] with the normal use and operation" of the relevant vehicles.[15]

    [14]Williams [2022] FCA 344 at [62]-[64].

    [15]Williams [2022] FCA 344 at [81].

11. Direct Claim Services acquired a Toyota Prado motor vehicle on 8 April 2016. At that time, Mr Williams was ignorant of the core defect and the defect consequences. Throughout the period that the group members acquired the relevant vehicles, the "market" was not informed of those matters either. The vehicle acquired by Direct Claim Services developed problems relating to the DPF System soon after it was acquired. Sometime around late 2016, Mr Williams first experienced the vehicle emitting foul-smelling, white smoke. The problem reoccurred thereafter despite Toyota attempting to repair it through numerous services of the vehicle. The primary judge found that the defect consequences that manifested had a "substantial impact" on Mr Williams' use and enjoyment of the vehicle.[16]

    [16]Williams [2022] FCA 344 at [134].

12. From February 2016, Toyota became aware that vehicles were being presented to dealers by customers who reported concerns about the emission of excessive white smoke during regeneration and the illumination of DPF notifications. Over the following four years, the number of complaints increased dramatically. Toyota attempted a series of countermeasures to fix the problem, which were ineffective.[17]

    [17]Williams [2022] FCA 344 at [16].

13. Only in May 2020 did an effective countermeasure ("the 2020 Field Fix") become "available" in the sense of being first available to some group members. It was common ground that, when applied, the 2020 Field Fix was effective and would continue to be effective in remedying the core defect and its consequences in all the relevant vehicles.[18] However, the logistics of its rollout to hundreds of thousands of group members was not explored in the evidence.

    [18]Williams [2022] FCA 344 at [15(10)].

    The primary judgment

14. The primary judge concluded that the relevant vehicles were not of an "acceptable quality" within the meaning of s 54(2) of the ACL at the time of supply because they were not: fit for all the purposes for which goods of that kind are commonly supplied;[19] acceptable in appearance and finish;[20] free from defects;[21] and durable.[22] His Honour found that a reasonable consumer fully acquainted with the state and condition of the relevant vehicles at the time of supply, including any "hidden defects", would not have regarded the vehicles as "acceptable", especially having regard to the nature and price of the vehicles.[23] The primary judge found that such a consumer was taken to be fully acquainted with the nature of the core defect, the defect consequences and the manner in which the relevant vehicles would malfunction when exposed to the High Speed Driving Pattern.[24] However, the primary judge concluded that the state and condition of the relevant vehicles at the time of supply was otherwise not determined by anything occurring after that time, such as whether the defect consequences materialised or whether there was any knowledge that an effective fix would ultimately become available.[25]

    [19]ACL, s 54(2)(a); Williams [2022] FCA 344 at [177]-[180].

    [20]ACL, s 54(2)(b); Williams [2022] FCA 344 at [181].

    [21]ACL, s 54(2)(c); Williams [2022] FCA 344 at [183]-[187].

    [22]ACL, s 54(2)(e); Williams [2022] FCA 344 at [188].

    [23]ACL, s 54(2), (3)(a)-(b); Williams [2022] FCA 344 at [189], [196]-[197].

    [24]Williams [2022] FCA 344 at [166].

    [25]Williams [2022] FCA 344 at [168]-[170].

15. In determining the damages payable under s 272(1)(a) of the ACL to Direct Claim Services and group members (except certain categories such as those who had their vehicle fixed or disposed of during the relevant period), the primary judge considered that an assessment under s 272(1)(a) was to be made at the time of acquisition[26] and that information acquired thereafter could only be considered if it bore upon the "true value" of the relevant vehicle at the time of acquisition.[27] This did not extend to knowledge of a repair that was only made available four years after the date of acquisition and implemented "more than a reasonable time after being requested".[28] According to the primary judge, because such a repair was not expected at the time of acquisition, it was "an extraneous event, irrelevant to the true value at that time".[29] His Honour found that the reduction in value resulting from the breach of the guarantee of acceptable quality was 17.5% of the average purchase price,[30] with the individual amounts of damages to be determined having regard to the lesser of the average retail price or the price paid by each consumer.[31]

    [26]Williams [2022] FCA 344 at [309].

    [27]Williams [2022] FCA 344 at [320]-[321].

    [28]Williams [2022] FCA 344 at [328].

    [29]Williams [2022] FCA 344 at [328].

    [30]Williams [2022] FCA 344 at [393], [513(1)].

    [31]ACL, s 272(1)(a)(i)-(ii).

16. The primary judge answered common questions in accordance with these findings. His Honour assessed the damages payable to Direct Claim Services under s 272(1)(a) and (b) to be a total of $18,401.76. His Honour made orders awarding damages to each group member except certain categories including: those who had opted out of the proceedings; those who had received the 2020 Field Fix; and those who had disposed of their vehicle during the relevant period.

    The Full Court's judgment

17. The basis upon which the Full Court rejected Toyota's appeal against the primary judge's findings that the relevant vehicles did not comply with the guarantee of acceptable quality is not of present relevance.[32] Toyota also appealed the primary judge's assessment of damages for the reduction in value payable under s 272(1)(a) of the ACL. The Full Court upheld that aspect of Toyota's appeal.[33] The Full Court identified two errors on the part of the primary judge. First, the Full Court found that the primary judge erred in not taking into account the fact that either a repair had become available or a repair might become available.[34] Second, the Full Court found that, in arriving at the figure of 17.5% as the appropriate figure for the reduction in value, the primary judge erred in relying on the evidence of a valuer called on behalf of Mr Williams, Mr Cuthbert.[35]

    [32]Toyota (2023) 296 FCR 514 at 530 [65].

    [33]Toyota (2023) 296 FCR 514 at 577 [295]-[296].

    [34]Toyota (2023) 296 FCR 514 at 546 [133].

    [35]Toyota (2023) 296 FCR 514 at 560 [202]-[204], 577 [295].

18. In so finding, the Full Court concluded that the use of the word "damages" in s 272(1)(a) indicates that "the provision is concerned with compensation for loss or damage", that is, "compensation for actual damage suffered".[36] According to their Honours, this meant that "a departure from [assessing damages by reference to] the time of supply or an adjustment to avoid over‑compensation" might be required.[37] Their Honours then considered that "in most instances, the intrinsic value of consumer goods to a retail buyer will lie in their utility rather than the price at which they [are sold]",[38] such that the "general law [that] has developed in assessing loss in cases concerning the defective supply of valuable assets ... is not apposite" to consumer goods.[39] According to the Full Court, "the value of many consumer goods ... is more accurately understood to lie in their utilisation value (or life-of-use value) as reflected in the purchase price".[40]

    [36]Toyota (2023) 296 FCR 514 at 539 [99]-[100].

    [37]Toyota (2023) 296 FCR 514 at 539 [99].

    [38]Toyota (2023) 296 FCR 514 at 542 [111].

    [39]Toyota (2023) 296 FCR 514 at 543 [118].

    [40]Toyota (2023) 296 FCR 514 at 543 [117].

19. Their Honours concluded that, if a repair was not available at the time of the trial, then an assessment of damages for the reduction in value should take into account "the possibility of the availability of a fix", including the uncertainty as to whether there would be a fix and, if so, how long it might take for such a fix to be "made available".[41] However, as a repair was available at the time of the trial (ie, the 2020 Field Fix), the fact of that repair and the time of its availability should be considered in assessing damages for the reduction in value at the time of supply to the consumer.[42]

    [41]Toyota (2023) 296 FCR 514 at 545-546 [128].

    [42]Toyota (2023) 296 FCR 514 at 546 [129]-[131].

20. The Full Court ordered that the assessment of damages for the reduction in value be remitted to the primary judge on the basis that the reduction in value of the relevant vehicles prior to taking into account the availability of a repair (the 2020 Field Fix) was 10%.[43] The balance of the assessment was to be conducted "in a way that takes into account the period of time that the particular consumer held their vehicle before the fix became available".[44] A formula set out in a letter sent to the parties, which was extracted in the Full Court's judgment, suggests that the Full Court contemplated the primary judge determining the damages payable under s 272(1)(a) by multiplying the reduction of 10% by the fraction that the period of time the relevant group member held their vehicle before the repair "became available" bears to the effective life of the vehicle.[45] The Full Court also ordered that the primary judge's answers to the common questions concerning damages under s 272(1)(a) be amended to reflect its judgment.[46]

    [43]Toyota (2023) 296 FCR 514 at 580-581 [317]-[319].

    [44]Toyota (2023) 296 FCR 514 at 581 [319].

    [45]Toyota (2023) 296 FCR 514 at 538 [95].

    [46]Toyota Motor Corporation Australia Ltd v Williams [No 2] [2023] FCAFC 70 ("Toyota No 2") at [8].

21. At the hearing of the appeals, attention was focussed on the following finding of the Full Court in relation to the availability of a repair and its effect on the value of the relevant vehicles:[47]

    "[B]y the time of the initial trial [before the primary judge], it was known that the 2020 [F]ield [F]ix was available and the experts agreed that, in consequence, there was no ongoing reduction in value. It may be observed that the prospective reinstatement of value reflected the fact that the fix would restore the utility of the vehicle, noting that for some buyers there remained a considerable period when the utility of the vehicle had been diminished." (emphasis added)

    [47]Toyota (2023) 296 FCR 514 at 544-545 [123].

22. The Williams appellants challenged this finding. They contended that, contrary to the finding, none of the experts who gave evidence before the primary judge agreed that the application of the 2020 Field Fix had the effect of retrospectively restoring value from the time of supply. They further contended that the expert they relied on (Mr Cuthbert) simply stated that a reduction in value on account of a defect would not be applied if the repair was available and carried out and that, even on the Full Court's approach, the time frame over which such repairs to hundreds of thousands of relevant vehicles could take place ("quite a few years") also had to be taken into account. Toyota contended that Mr Cuthbert conceded in cross‑examination that the mere availability of a free repair would eliminate any reduction in value. That interpretation of Mr Cuthbert's evidence was not reflected in any finding of the primary judge, who observed and heard the evidence being given.

23. There is considerable force in the Williams appellants' criticisms of the above finding. However, ultimately it is not necessary to resolve their challenge. The Full Court is not to be understood as having found that the supposed "restoration" in value was retrospective to the time of supply, but instead as only removing any reduction in value that was prevalent at the time the repair became "available".

24. Putting aside the difficulty in describing the repair as being "available" when it had to be rolled out to hundreds of thousands of relevant vehicles, the utility of this finding was the support it provided for the Full Court's approach to the assessment of damages payable under s 272(1)(a). That approach was predicated on any ongoing reduction in value ceasing when the repair became available because the vehicle's "utility" was restored. The effect of the Full Court's approach was that the 10% loss in value should be reduced by reference to the proportion of the vehicle's life for which the repair was "available". The precise formula to be applied was to be identified by the primary judge on remitter.

25. In this Court, none of the parties sought to uphold this aspect of the Full Court's approach. They were correct to take that course. As explained later, the Full Court's approach was premised on an incorrect interpretation of the meaning of "damages" in s 272(1) and a mistaken understanding that a court can depart from an assessment at the time of supply to avoid "over‑compensation" by considering whether subsequent events transpired to increase or decrease the value of the goods over time. Otherwise, there is no basis in the ACL for adopting the concept of the "utilisation value" of goods referred to by the Full Court.[48] As submitted by the Williams appellants, s 272(1)(a) protects the interest of the consumer in having ownership and control of goods that met the guarantee of acceptable quality at the time of supply. The utility of the goods is simply an aspect of that ownership and control and is reflected in the price paid at the time of supply.

    [48]Toyota (2023) 296 FCR 514 at 543 [117].

    The appeals

26. The Williams appellants and Toyota were each granted special leave to appeal from that part of the Full Court's judgment that concerned the assessment of damages payable under s 272(1)(a) of the ACL. The Williams appellants sought the restoration of the primary judge's orders and answers to common questions, including his Honour's assessment of a 17.5% reduction in value of all the relevant vehicles resulting from the failure to comply with the guarantee of acceptable quality. They contended that the Full Court erred in failing to assess the reduction in the value of the vehicles by reference to the time of supply and only using information acquired thereafter as hindsight confirming what could have been foreseen at the time of supply. The Williams appellants also contended that the Full Court erred in construing s 272(1)(a) so as to permit an assessment at some later time after the date of supply or an "adjustment" of the assessment "to reflect a future event unknown and unknowable at the date of supply". They further contended that the Full Court erred in varying the primary judge's assessment of a 17.5% reduction in value of the relevant vehicles.

27. Toyota contended that the Full Court erred in failing to conclude that damages under s 272(1)(a) were not recoverable in circumstances where there was (supposedly) "no ongoing reduction in [the] value [of the vehicles] at the time of trial due to the availability of a repair free of charge". This contention seeks to take advantage of the impugned finding noted above, although Toyota accepted that there was an inherent difficulty in the concept of the repair being "available" in circumstances where findings about the logistics, especially the timing, of a repair for all the relevant vehicles had not been made. Toyota also propounded an alternative case, namely that damages for the reduction in value should be assessed at the time of supply taking into account what is known at the trial about the capacity to repair the defect, including the time from supply until such a repair would in fact be "available", that is, "implemented".

    The Australian Consumer Law

28. The ACL has no separate statement of objectives. They are subsumed in a short statement of the object of the Competition and Consumer Act 2010 (Cth), namely "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection".[49] Both the Explanatory Memorandum accompanying the ACL's introduction[50] and a report of the Commonwealth Consumer Affairs Advisory Council referred to in the Explanatory Memorandum[51] emphasised the need for clarity in relation to both consumer guarantees and remedies, including avoiding or minimising the necessity for businesses and consumers to resort to the law of contract to understand consumer rights.[52]

    [49]Competition and Consumer Act 2010 (Cth), s 2.

    [50]Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum.

    [51]Commonwealth Consumer Affairs Advisory Council, Consumer Rights: Reforming Statutory Implied Conditions and Warranties, Final Report (2009) ("CCAAC Report"); Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum at 177-178 [7.7].

    [52]Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum at 18, 617 [25.85]; CCAAC Report at 31, 47, 65.

    Acceptable quality and knowledge acquired after supply

29. Division 1 of Pt 3-2 in Ch 3 of the ACL is entitled "[c]onsumer guarantees". Subdivision A of Div 1 provides for guarantees relating to the supply of goods in trade or commerce to a "consumer". Subject to exceptions that are presently irrelevant,[53] a person is taken to have acquired particular goods as a "consumer" if, and only if: the amount paid or payable for the goods did not exceed $40,000 or a greater amount if prescribed; the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.[54]

    [53]ACL, s 3(2).

    [54]ACL, s 3(1).

30. Within Subdiv A, s 54(1) provides that if a person supplies, in trade or commerce, goods to a consumer and the supply does not occur by way of sale by auction, "there is a guarantee that the goods are of acceptable quality". Section 54(2)-(3) define the concept of "acceptable quality" for the purpose of the guarantee as follows:

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

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

    (b)acceptable in appearance and finish; and

    (c)free from defects; and

    (d)safe; and

    (e)durable;

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

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

    (a)the nature of the goods; and

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

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

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

    (e)any other relevant circumstances relating to the supply of the goods." (emphasis in bold added, emphasis in italics in original)

31. Section 54(4) provides that if goods supplied to a consumer are not of acceptable quality, and the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before they agreed to the supply, the goods are taken to be of acceptable quality. Section 54(7) provides that goods do not fail to be of acceptable quality if: (a) the consumer examines the goods before agreeing to their supply; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality. The balance of s 54 describes other circumstances in which goods either are taken to be of acceptable quality or do not fail to be of acceptable quality, which are not relevant to these appeals.

32. Although the primary judge found that each of s 54(2)(a), (b), (c) and (e) was not complied with,[55] the critical conclusion was that the relevant vehicles were affected by a "defect". Neither "defect" nor "hidden defect" as used in s 54(2) is defined in the ACL. The reference in s 54(2) to "hidden defects" and a reasonable consumer being "fully acquainted" with the state and condition of the goods appears to draw on Dixon J's description of the condition that goods be of merchantable quality in Australian Knitting Mills Ltd v Grant, namely that the goods be in a "state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist ... would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms".[56] While s 54(2) provides a far more extensive guarantee than the various statutory prescriptions that goods be of merchantable quality,[57] of present relevance is Dixon J's description of a hidden defect as a defect not reasonably discoverable by a buyer on examination at the time.[58] This description coheres with s 54(7)(b) of the ACL and otherwise suffices in the present context. On any view, the core defect was not reasonably discoverable to a consumer from an examination of the relevant vehicles at the time of supply.

    [55]Williams [2022] FCA 344 at [177]-[184], [188]-[189].

    [56](1933) 50 CLR 387 at 418.

    [57]See, for example, Sale of Goods Act 1923 (NSW), s 64(3); Trade Practices Act 1974 (Cth) ("TPA"), s 66(2).

    [58]Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 417-418.

33. Section 54(2) posits a hypothetical inquiry as to what a reasonable consumer at the time of supply would regard as acceptable if the reasonable consumer was "fully acquainted with the state and condition of the goods", including any "hidden defects". At least in a case involving a hidden defect, an inquiry into whether the guarantee has been complied with requires attributing to a reasonable consumer, at the time of supply, later acquired knowledge of the defect that renders the goods below an acceptable quality. The attributed knowledge of the defect must be knowledge that would render a reasonable consumer "fully acquainted" with the true state and condition of the goods; it follows that this must include full knowledge of or acquaintance with the defect, including later acquired knowledge of the propensity of the defect to occasion adverse consequences and the nature of those consequences, even if understandings of those matters vary over the period of time leading up to the trial.

34. If such knowledge is attributed to a reasonable consumer at the time of supply, there is no reason why later acquired knowledge of the capacity to repair the defect or ameliorate its consequences, including when, how and at what cost those repairs or ameliorative steps could be undertaken, should not also be attributed. Those matters are characteristics of the nature and seriousness of the defect and, in turn, the state and condition of the goods. Knowledge of those matters cannot be divorced from what constitutes the relevant "defect", even though they may not necessarily preclude the defect from rendering the goods in breach of the guarantee in s 54.

35. The position can be illustrated by reference to Henry Kendall & Sons v William Lillico & Sons Ltd,[59] in which the House of Lords considered, inter alia, the relevance of knowledge acquired after the time of supply to a claim that goods were not of merchantable quality at the time of supply by reason of a latent defect.[60] The relevant goods were compounded "feeding stuff" which contained extracted groundnut that was discovered to be contaminated by a toxic substance that rendered the goods unsuitable to be included in food for poultry.[61] It was later discovered that the goods could be included in food for cattle, provided its content did not exceed 5% of the whole.[62] The significance of such a use is that the test for merchantable quality held to be applicable in the United Kingdom required an assessment of whether the goods, in the form in which they were sold, "were of no use for any purpose for which such goods would normally be used".[63]

    [59][1969] 2 AC 31.

    [60]Pursuant to the Sale of Goods Act 1893 (UK), s 14(2).

    [61]HenryKendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 ("Kendall") at 39, 75.

    [62]Kendall [1969] 2 AC 31 at 75.

    [63]Kendall [1969] 2 AC 31 at 76-77; cf Sale of Goods Act 1923 (NSW), s 64(3); TPA, s 66(2).

36. Lord Reid held that, in determining whether the goods were of merchantable quality, it would be "very artificial to bring in some part of the later knowledge and exclude other parts" such that the later acquired knowledge of an acceptable use of the goods affected an assessment of whether they were of merchantable quality at the time of supply.[64] Lord Guest held that "[t]he defect as ultimately discovered must be taken with its qualifications" and "[i]t is not possible to stop halfway and say '[w]e know there is a defect' without proceeding to say '[a]lthough there is a defect we know it can be cured by a limited rate of inclusion'".[65] According to their Lordships, the later acquired knowledge that the goods could be safely fed to cattle qualified the characterisation of the nature and seriousness of the defect in the goods at the time of supply.

    [64]Kendall [1969] 2 AC 31 at 75-76.

    [65]Kendall [1969] 2 AC 31 at 109.

37. Lord Pearce, with whom Lord Wilberforce agreed,[66] took a different view. Lord Pearce did not accept that all "after-acquired knowledge" at the time of trial should be brought to account.[67] His Lordship accepted Dixon J's approach in Australian Knitting Mills of assuming knowledge of the hidden defects at the date of delivery but stated as follows:[68]

    "But what additional after-acquired knowledge must one assume? Logic might seem to indicate that the court should bring to the task all the after-acquired knowledge which it possesses at the date of trial. But I do not think that this is always so. For one is trying to find what market the goods would have had if their subsequently ascertained condition had been known. As it is a hypothetical exercise, one must create a hypothetical market. Nevertheless the hypothetical market should be one that could have existed, not one which could not have existed at the date of delivery. Suppose goods contained a hidden deadly poison to which there was discovered by scientists two years after delivery a simple, easy, inexpensive antidote which could render the goods harmless. They would be unmarketable at the date of delivery if the existence of the poison was brought to light, since no purchaser could then have known the antidote to the poison." (emphasis in bold added; emphasis in italics in original)

    [66]Kendall [1969] 2 AC 31 at 126.

    [67]Kendall [1969] 2 AC 31 at 118-119.

    [68]Kendall [1969] 2 AC 31 at 118-119.

38. Lord Pearce did not exclude all after-acquired knowledge from being attributed to a purchaser at the time of delivery but confined it to knowledge that could be utilised in a hypothetical market that could have existed at the time of delivery but did not exist, as opposed to a hypothetical market that could not have existed. Thus, with the example of poisoned goods, the position would have been presumably different if the existence of an antidote to the poison was known at the time of delivery. In that circumstance, knowledge of the poison and the existence of the antidote would be imputed to the purchaser at the time of delivery because a hypothetical market with knowledge of the poison and antidote could have existed, even if it did not exist.

39. The distinction between markets that could have existed but did not and markets that could not have existed does not assist. The indisputable starting point is the attribution of a full acquaintance with the state and condition of the goods at the time of supply to a reasonable consumer, including full knowledge of any hidden defect. Such an exercise is completely hypothetical, and the better inquiry is one that is focussed on bringing to account at the time of supply the best available information that is known about the defect at the time of trial. Lord Pearce's initial suggestion that logic might seem to indicate that a court should bring to account all the after‑acquired knowledge it possesses at the time of trial was correct. In the example of poisoned goods, the relevant after‑acquired knowledge brought to account as at the time of supply is not just the existence of the antidote but the knowledge that the antidote will not be available for two years such that the relevant hypothetical market is for goods that were poisonous and would remain so for two years. Assuming the goods in the example are consumables such as "feeding stuff", then a conclusion that they were not of merchantable quality at the time of supply would inevitably follow.

40. The primary judge relied on the decision in Medtel Pty Ltd v Courtney,[69] in which a heart pacemaker was found not to be of merchantable quality. The pacemaker was manufactured with a yellow spool solder, which had a tendency to attract contaminants that caused partial short circuits and accelerated battery depletion.[70] This created a "superadded risk of premature failure" in the pacemaker.[71] Branson J preferred the view of Lord Pearce in Kendall and observed that former s 74D of the Trade Practices Act 1974 (Cth) "calls for the quality, or fitness for purpose, of the goods to be measured ... in the light of information concerning the goods available at the time of the trial", but said that the ultimate issue remained "whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer".[72] The latter approach can be accepted but it extends to include such information as is known at the time of the trial about the defect and its capacity to be repaired, as well as when, how and at what cost that repair would take place.

    [69](2003) 130 FCR 182.

    [70]Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at 189-190 [12]-[13].

    [71]Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at 204 [60].

    [72]MedtelPty Ltd v Courtney (2003) 130 FCR 182 at 206 [70].

41. In a case such as Medtel where the consequences of the "superadded risk" materialising are extreme, it may be that any attribution of later acquired knowledge of a repair, even if it is at no cost, would not affect a conclusion that the goods were not of merchantable, much less acceptable, quality. With other types of goods, it might be that the availability of a free and convenient repair within a short period of time after the supply is such that a reasonable consumer armed with that knowledge and having regard to the matters set out in s 54(3) would regard them as being of acceptable quality.

42. None of the grounds of appeal in the Full Court or in this Court challenged the primary judge's finding that the relevant vehicles failed to comply with the statutory guarantee in s 54(1) of the ACL. Even though the primary judge's analysis of whether the vehicles were of acceptable quality did not involve attributing to a reasonable consumer any later acquired knowledge of the capacity to repair the core defect as well as when, how and at what cost that repair would be undertaken, given his Honour's findings on those topics there is no reason to suggest that they would have affected his Honour's finding that the guarantee of acceptable quality was not complied with. That finding is not to be disturbed. Instead, as explained below, the present relevance of those matters concerns the analysis of the damages payable under s 272(1)(a) of the ACL.

    Assessment of damages for reduction in value under s 272(1)(a)

43. Part 5-4 of the ACL provides for remedies relating to consumer guarantees. Subdivision A of Div 1 of Pt 5-4 provides for actions against suppliers of goods. If a supplier's failure to comply with a guarantee specified in Subdiv A of Div 1 of Pt 3-2 of the ACL[73] (which includes s 54(1)) cannot be remedied or is a so-called "major failure",[74] then the consumer may reject the goods or take action against the supplier to "recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods".[75] Irrespective of whether the failure cannot be remedied or is a major failure, the consumer may also recover "damages for any loss or damage" they have suffered because of the failure "if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure".[76]

    [73]Other than ss 58 and 59(1) of the ACL.

    [74]ACL, s 260.

    [75]ACL, s 259(3).

    [76]ACL, s 259(4).

44. Division 2 of Pt 5-4 of the ACL provides for remedies against manufacturers of goods. Unlike Div 1 of Pt 5-4, these remedies can be invoked by "an affected person in relation to the goods" even though they relate to breaches of guarantees given to consumers by suppliers. An "affected person ... in relation to goods" is defined as: "(a) a consumer who acquires the goods; or (b) a person who acquires the goods from the consumer (other than for the purpose of re-supply); or (c) a person who derives title to the goods through or under the consumer".[77] This is not materially different to the analogous provisions of the former Trade Practices Act, which provided remedies for the consumer or a person who acquired the goods from, or derived title to the goods through or under, the consumer.[78]

    [77]ACL, s 2(1).

    [78]TPA, ss 74B(1), 74C(1), 74D(1), 74E(1).

45. Section 271(1) provides that, if the guarantee under s 54 applies to a supply of goods to a consumer and is not complied with, then "an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer". Section 271(2) excludes the application of s 271(1) in circumstances that are not presently material. Section 271(3)-(5) make a similar provision to s 271(1) in relation to other guarantees that may apply to a supply of goods to a consumer, namely s 56 (supply of goods by description), s 58 (repairs and spare parts) and s 59(1) (express warranties).

46. Section 271(6) provides:

    "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."

47. Section 272 is central to these appeals. It provides:

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

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

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

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

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

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

    (2)Without limiting subsection (1)(b), the cost of inspecting and returning the goods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected person as a result of the failure to comply with the guarantee.

    (3)Subsection (1)(b) does not apply to loss or damage suffered through a reduction in the value of the goods."

48. An action for damages against manufacturers of goods under Div 2 must be commenced "within 3 years after the day on which the affected person first became aware, or ought reasonably to have become aware, that the guarantee to which the action relates has not been complied with".[79]

    [79]ACL, s 273.

    "Damages" and the time of assessment

49. Both the Williams appellants and Ms Capic invoked Edelman J's discussion in Moore v Scenic Tours Pty Ltd[80] of the equivalent provision to s 272(1)(a) for the suppliers of services. In Moore, his Honour treated that analogous provision as conferring a measure of damages similar to that measure of damages in contract, being "the difference between the value of what was promised and the value of what was received".[81] The reduction referred to in s 272(1)(a) does not precisely correspond to that measure in that it is determined by reference to the reduction in the value of the goods resulting from the failure to comply with the guarantee and the lesser of the two figures specified in s 272(1)(a)(i) and (ii).

    [80](2020) 268 CLR 326.

    [81]Moore v Scenic Tours Pty Ltd (2020) 268 CLR 326 at 348-349 [64].

50. Nevertheless, reference to that contractual measure of damages is germane in that it highlights that Toyota's and Ford's submission that consumers and affected persons will be overcompensated if they obtain both a repaired vehicle and a monetary award under s 272(1)(a) assumes, as the Full Court found, that s 272(1)(a) is directed to compensating for loss or damage resulting from the "reduction in the value of the goods" as a result of the failure to comply with the guarantee.[82] Those submissions and that assumption only beg the question: what are the "damages" in s 272(1)(a) being awarded "for"?

    [82]Toyota (2023) 296 FCR 514 at 539 [99].

51. "Damages" have been defined as an "award in money for a civil wrong".[83] While this Court has referred to their "fundamental character" as "compensatory",[84] it would be a "mistake" to consider that "damages and compensation are synonymous" given that not all damages awards are compensatory.[85] There is no textual or other support for a construction of s 272(1)(a) that imports a requirement to establish loss or damage in addition to the "reduction in the value of the goods" resulting from the failure to comply with the relevant guarantee. Section 272(1)(a) refers to "damages for ... any reduction in the value of the goods". Section 272(1)(b) confers an entitlement to "damages for ... any loss or damage", which would not make sense if "damages" imported a separate concept of "loss". Other provisions of the ACL distinguish between "damages"[86] and "loss or damage",[87] and use the phrase "damages for any loss or damage".[88] The phrase "loss or damage" is defined to include "a reference to injury".[89] To construe "damages" in s 272(1)(a) as containing an additional element of loss or damage would be inconsistent with that usage. The equivalent provision to s 272(1)(a) for suppliers of goods provides for the recovery of "compensation" for "any reduction in the value of the goods".[90] There is no difference between "compensation" and "damages" in this context. Otherwise, where the statutory regime specifies what the damages and compensation are "for", there is no justification for importing an additional requirement of loss or damage. The statutory provisions provide their own measure of "damages".

    [83]Edelman, McGregor on Damages, 22nd ed (2024) at 1 [1‑001].

    [84]Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71 at 80; cf Edelman, McGregor on Damages, 22nd ed (2024) at 4-5 [1‑008]-[1‑009].

    [85]Burrows, Remedies for Torts, Breach of Contract, and Equitable Wrongs, 4th ed (2019) at 35; see, for example, Lewis v Australian Capital Territory (2020) 271 CLR 192 at 231-233 [110]-[117].

    [86]See, for example, ACL, ss 99(3), 138(3)(a).

    [87]See, for example, ACL, ss 41(1)(b), 106(7), 239.

    [88]See, for example, ACL, ss 259(4), 267(4).

    [89]ACL, s 13.

    [90]ACL, s 259(3)(b).

52. A consideration of the extrinsic materials referable to s 272(1)(a) supports this construction.[91] The statutory predecessor to Div 2 of Pt 5-4[92] included provisions creating separate rights of action against manufacturers and importers of goods in respect of different non-compliances with various conditions, including goods being of "unmerchantable quality" (as relied on in Medtel).[93] Those provisions expressly provided a consumer or a person who acquired the goods from, or derived title to the goods through or under, the consumer with a right of recovery for "loss or damage" for those non-compliances.[94]

    [91]Acts Interpretation Act 1901 (Cth), s 15AB.

    [92]TPA, Pt V, Div 2A.

    [93]TPA, s 74D.

    [94]TPA, ss 74B(1), 74C(1), 74D(1), 74E(1).

53. In describing the effect of s 272(1)(a), the Explanatory Memorandum to the introduction of the ACL noted that the "damages that are recoverable from a manufacturer of goods include the reduction in value of goods below the lower of the price paid or the average retail price of the goods at the time of the supply" and added that "[t]his approach ensures that manufacturers are not required to provide excessive compensation to consumers if suppliers charge high prices for goods".[95] There was no suggestion in the Explanatory Memorandum of any additional requirement to show loss or damage arising from that reduction in value of the goods. If there were such a requirement, it would undermine the simplification of the remedies sought to be achieved by the ACL. It would also undermine the intention to limit the manufacturer's exposure under s 272(1)(a), as the loss or damage resulting from the reduction in value below the lower of the price paid or average retail price could exceed that price.

    [95]Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum at 205 [7.122].

54. Once it is appreciated that s 272(1)(a) provides its own measure of damages, then the Full Court's concerns about avoiding "over-compensation" by departing from the time of supply in assessing damages under s 272(1)(a) fall away.[96] There is no scope for any alteration of the date at which the reduction in value is to be assessed to avoid "over‑compensation".

    [96]Toyota (2023) 296 FCR 514 at 539 [99].

55. Section 272(1)(a) is exclusively directed to the time of supply to a "consumer". It would be incongruous for s 272(1)(a)(i) to refer to the price paid by the consumer and s 272(1)(a)(ii) to adopt the average retail price at the time of some other supply. Similarly, it would be incongruous for s 272(1)(a)(i) to award damages for the reduction in value of the goods resulting from a breach of a guarantee that occurred at the time of supply to the consumer below a level fixed by reference to that time, yet somehow ascertain that value at some other time. "[T]he consumer" in s 272(1)(a)(i) must be referring to the consumer who acquires the goods described in s 54. The Full Court erred in construing s 272(1)(a) by allowing for the assessment of damages at a time other than the time of supply to the consumer.

    "Reduction in value" and repairs to defects

56. In contrast to s 272(1)(b), the measure of damages provided for in s 272(1)(a) of the ACL involves an objective assessment of the "reduction in the value of the goods" as opposed to any particular harm occasioned to the affected person, which, subject to s 272(3), is addressed by s 272(1)(b).

57. The concept of "value" in s 272(1)(a) is not defined. There is a distinction described as "sometimes difficult to draw, but [nevertheless] old and fundamental" between "market value" on the one hand and "real" or "intrinsic" value on the other.[97] Market value is assessed by reference to the price that a purchaser would have paid at the relevant date to a vendor, both of whom are willing but not anxious to trade, with all circumstances subsequently arising ignored.[98] With "real" or "intrinsic" value, assessments are commonly made taking into account all matters known at the trial that illuminate the value of the goods as at the relevant earlier date, which in this context is the time of supply.[99]

    [97]HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 657 [36] (footnote omitted), citing Potts v Miller (1940) 64 CLR 282 at 289, 300.

    [98]Spencer v The Commonwealth (1907) 5 CLR 418 at 440-441.

    [99]Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 291-296, cited in HTW Valuers(Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 658 [39].

58. It was common ground in these appeals and in Capic that in ascertaining the reduction in value for the purposes of s 272(1)(a), one attributes knowledge of the relevant hidden defect at the time of supply to a hypothetical reasonable consumer, including the likelihood of its consequences materialising. However, from that point, the parties differed strongly. The Williams appellants contended that the only relevance of the availability of a repair is to confirm the existence of the possibility, rather than availability, of a repair at the time of supply. Ms Capic went further and submitted that, while it might be accepted that a hypothetical reasonable consumer would purchase a vehicle with knowledge that some defects might be repaired, there could be no attribution of any knowledge to the parties of any information known after the time of supply other than the nature of the defect and the likelihood of its consequences materialising. Toyota contended that all knowledge concerning the defect, including its capacity to be repaired, should be brought to account as at the time of supply. Ford contended that the effectiveness, cost, availability and timing of a repair is a characteristic of the defect itself and is associated with the "intrinsic quality" of the vehicle, knowledge of which is imputed to a reasonable consumer considering the state and condition of the goods for the purposes of s 54(2) of the ACL.

59. The resolution of this dispute flows from the conclusion that later acquired knowledge of the capacity to repair a defect (including a hidden defect) or ameliorate its consequences as well as when, how and at what cost those repairs or ameliorative steps would be undertaken cannot be divorced from any analysis of what constitutes the relevant "defect". Upon being informed that particular goods had a defect that carried a particular propensity to cause the goods to perform sub‑optimally, a hypothetical reasonable consumer acquiring such goods could be expected to inquire whether the defect could be remedied and, if so, the effectiveness, cost, inconvenience and timing of a repair. If that information was known at the time of trial and not brought to account at the time of supply, then there would truly be a risk of the consumer receiving more or less than could be justified on the basis of the facts then known. A consumer would receive less if the court awarded damages on a flawed understanding that, at the time of supply, repair of such defects at a moderate cost was possible when subsequent events revealed the defects were in fact unfixable and would receive more if subsequent events demonstrated that the defects could be fixed quickly at no cost.

60. The result is that, at least so far as a consideration of any defects (including any hidden defects) is concerned, the analysis of the damages for the reduction in value provided for in s 272(1)(a) invokes a concept of "value" that is similar or analogous to the concept of "intrinsic" value referred to in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd.[100] The Williams appellants were critical of relying on that concept because it is often invoked in a context where loss or damage is being compensated for,[101] whereas s 272(1)(a) establishes its own measure. So much can be accepted, but the above approach does not follow from a direct translation of the concept of "intrinsic" value referred to in HTW Valuers into s 272(1)(a). Instead, it follows from an analysis of what knowledge is attributed to a reasonable consumer as part of the assessment of the extent of non-compliance with the guarantee of acceptable quality in s 54(1), which is compensated for by the measure of damages provided for in s 272(1)(a).

    [100](2004) 217 CLR 640 at 657 [36].

    [101]See, for example, Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281.

61. The Full Court correctly observed that it was "appropriate to use the known information as to the availability of a fix at the time of trial to reach a conclusion as to the reduction in value".[102] However, the Full Court was otherwise in error in departing from the time of supply as the appropriate time to assess damages and considering the loss in the utility of the vehicles over their working life until a fix became available. In assessing the reduction in value at the time of supply, it was necessary to take into account the "availability" of the 2020 Field Fix, but that analysis also required taking into account how long after the time of supply that fix would become practically available as well as the inconvenience and cost that would be occasioned to a hypothetical reasonable consumer in the meantime. Any particular cost and inconvenience occasioned to an individual consumer above and beyond that assumed by a reasonable consumer at the time of supply is potentially recoverable under s 272(1)(b).[103] Leaving aside the circumstances in which s 271(6) is invoked, a consumer who refuses to take up an effective repair that is practically available is in no different position to a consumer who did.

    [102]Toyota (2023) 296 FCR 514 at 546 [130].

    [103]ACL, s 272(3).

62. In this case, leaving aside any particular inconvenience or cost occasioned to Direct Claim Services, it seems inherently unlikely that a hypothetical reasonable consumer of its vehicle in 2016 would have paid the same purchase price as Direct Claim Services had they been informed of the existence and nature of the core defect, the likelihood of the defect consequences materialising, the likely number of attendances that might be required to obtain a fix and the fact that no effective fix would be available until at least four and a half years later. Ultimately, however, this will be a matter for the primary judge to assess. It follows that a remittal may yield different assessments for different group members, although the only factor that is likely to vary is the time between supply to an individual consumer and the practical availability of an effective repair.

    Materialisation of the defect consequences

63. Given that the proceedings will be remitted to the primary judge for the reassessment of damages, it is necessary to explain the relevance, if any, of the materialisation of the defect consequences to that process.

64. The relevant defect in the present case was not the mere propensity for the defect consequences to materialise.[104] Rather, like the yellow spool solder in Medtel, the core defect was the design of the DPF System itself and other related faults. In both this case and Medtel, the defect and risk of the relevant defect consequences materialising rendered the goods in breach of the relevant statutory guarantee. In such cases, it is irrelevant to an assessment of damages under s 272(1)(a) whether those consequences materialised beyond what subsequent events may demonstrate was the actual propensity at the time of supply. The materialisation of the risks carried by the defect does not add anything to a hypothetical reasonable consumer's knowledge of the defect or the goods at the time of supply.

    [104]See Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338; Dwyer v Volkswagen Group Australia Pty Ltd (2023) 381 FLR 32 at 66 [155].

65. For example, a vehicle may have a defect in the design of its braking system that carries a 50% risk of the brakes failing in five years. All other matters being equal, there will be no difference between the damages payable for two such vehicles under s 272(1)(a) which were purchased for the same amount on the same day even if the brakes subsequently fail on one vehicle but not the other. The fact that the brakes failed on one vehicle but not the other does not of itself affect the conclusion that, at the time of supply, both vehicles were affected by the same defect that carried the same propensity to yield brake failure and rendered both vehicles non‑compliant with the statutory guarantee. The owner of the vehicle whose brakes subsequently failed may be able to recover "any loss or damage" suffered from that failure under s 272(1)(b), although those damages would be reduced under s 272(3) by the amount of damages payable under s 272(1)(a) that are referable to the 50% likelihood of the brakes failing.

    Section 271(6) and affected persons

66. Both the Williams appellants and Ms Capic contended that s 271(6) of the ACL supported their respective contentions concerning the relevance of a subsequently available repair for a defect to the assessment of damages under s 272(1)(a). They contended that s 271(6) was the exclusive means by which the capacity of the manufacturer to repair the goods might impact on the recovery of damages under s 272(1)(a). That submission should be rejected.

67. Section 271(6) is only engaged if the manufacturer gave an "express warranty". The provision appears to provide manufacturers with an incentive to comply with that warranty in that, if it is invoked by the relevant affected person and complied with by the manufacturer within a reasonable time, the manufacturer can avoid exposure to an award of damages under s 272(1)(a) in favour of the affected person who had their goods repaired or replaced (but not under s 272(1)(b)). In a case where there is no such warranty, or the warranty cannot be invoked, then s 271(6) cannot be engaged. There is nothing in the text of the ACL or the extrinsic materials accompanying its introduction that would support attributing to s 271(6) the construction contended for by the Williams appellants and Ms Capic.

68. In support of its submission that s 272(1)(a) is only directed to recovery for loss and damage resulting from the "reduction in the value of the goods" for failing to comply with a statutory guarantee such as in s 54, Ford pointed to an apparent anomaly arising from the conferral of rights to invoke the remedies in Div 2 of Pt 5‑4 of the ACL on "affected person[s] in relation to goods". As noted, the definition of an "affected person ... in relation to goods" has three limbs: (a) a consumer who acquires the goods; (b) a person who acquires the goods from the consumer (other than for the purposes of resupply); or (c) a person who derives title to the goods through or under the consumer.[105] Ford contended that, if damages under s 272(1)(a) are not compensatory in the sense that some loss or damage had to be demonstrated in addition to a reduction in the value of the goods, then successive owners of the same goods would each be entitled to recover an award of damages under s 272(1)(a) calculated by reference to the reduction in value arising from the breach of the relevant guarantee at the time of the original supply to the consumer.

    [105]ACL, s 2(1).

69. The assumption behind Ford's submission is that the entitlement to invoke all of the remedies in Div 2 of Pt 5-4 is maintainable by all persons who satisfy the definition of "affected person ... in relation to goods" regardless of whether they have disposed of the goods. If that is so, then the spectre of a manufacturer facing multiple actions for the same reduction in value of the goods from successive owners of the same goods arises regardless of the proper construction of the phrase "damages for ... any reduction in the value of the goods, resulting from the failure to comply" in s 272(1)(a).

70. The three limbs of the definition of "affected person ... in relation to goods" are separated by "or".[106] If that definition is read into each of ss 271 and 272,[107] then the provisions are ambiguous as to whether the right to invoke those remedies is only conferred on the affected person who currently has title or ownership of the goods or is conferred on all persons who satisfy the definition of affected persons in relation to the same goods. If the position is the former, then all rights of recovery under s 271 for both types of damages referred to in s 272(1)(a) and (b) would run with the goods and be lost on disposal. That construction would remove the possibility of indeterminate liability, although, as will be explained, the removal of the right to recover damages for consequential loss under s 272(1)(b) in those circumstances would be inconsistent with the balance of the statutory scheme.

    [106]ACL, s 2(1).

    [107]Kelly v The Queen (2004) 218 CLR 216 at 253 [103]; Qantas Airways Ltd v Transport Workers' Union of Australia (2023) 97 ALJR 711 at 725 [80]; 412 ALR 134 at 152.

71. The better view is that, within the confines of the definition of an "affected person ... in relation to goods", the right to invoke the remedy for reduction in value of the goods in s 272(1)(a) against a manufacturer runs with title or ownership of the goods but that claims for consequential loss by affected persons in s 272(1)(b) are not tied to the affected person's title or ownership of the goods. There are various textual and contextual matters that support that construction.

72. In the context of s 272(1)(a), the reference to "the value of the goods", when read with the words of the chapeau concerning a recovery of damages by "an affected person in relation to goods", is at least capable of implying that the damages are for the reduction in the value of the affected person's goods. On that construction, if the relevant "affected person in relation to goods" does not currently have title or ownership of the goods, then they have no remedy under s 272(1)(a). By contrast, s 272(1)(b) allows claims for "any loss or damage suffered by the affected person" (emphasis added). The reference to "the affected person" in this context is to the affected person who invokes ss 271 and 272 and includes all categories of "affected person[s] in relation to goods", even those who no longer have title or ownership of them, provided the affected person has suffered some consequential loss because of the failure to comply with the relevant guarantee. The loss of the right to recover under s 272(1)(a) that accompanies the loss of title or ownership of the relevant goods is consistent with s 272(1)(a) vindicating the interest of the current owner in having goods that conformed with the relevant guarantee at the time of supply to the consumer. Where a person no longer has title or ownership of the goods but is "an affected person in relation to goods", that person may be able to recover any relevant loss on resale, but that would be pursuant to s 272(1)(b) and would depend on the circumstances of the resale.

73. This construction is supported by s 271(6). As noted, when "an affected person in relation to goods" invokes any express warranty in the circumstances referred to in s 271(6), they are precluded from commencing an action to recover damages of the kind referred to in s 272(1)(a), but not damages of the kind referred to in s 272(1)(b).[108] Section 271(6), in terms, does not preclude an affected person who had their goods repaired or replaced from recovering any consequential loss they suffered under s 272(1)(b). As a practical matter, the only person who could require a manufacturer to repair or remedy the failure is the person who has title or ownership of the particular goods at a particular time. If all rights under ss 271 and 272 cease with loss of title or ownership of the relevant goods, then an affected person who had their goods replaced under s 271(6) would lose their right to recover damages of the kind referred to in s 272(1)(a) and (b), as they would have ceased to own the goods. Those consequences could not have been intended.

    [108]See 2 Elizabeth Bay Road Pty Ltd v The Owners – Strata Plan No 73943 (2014) 88 NSWLR 488 at 508 [90]-[91].

74. There is a wider problem with the proposition that the capacity to recover damages under s 272(1)(b) ceases with the loss of title or ownership of the relevant goods. It would mean that, in the common example of an affected person whose goods were so defective that they were consumed, destroyed or sold for scrap, that person would lose their right to claim for any consequential loss they may have suffered. Alternatively, an affected person whose goods were defective would be required to retain the goods until the finalisation of the claim against the manufacturer, including any litigation, so as to avoid losing their right to claim any consequential loss. That would not provide a cost-effective and simple remedy.[109] A statutory regime that denies consumers of goods rights of recovery against manufacturers for consequential loss suffered because the goods the manufacturer produced were consumed, destroyed or sold or because they no longer have title or ownership of the goods would be of limited utility.     

    [109]Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum at 609-610 [25.56]-[25.57].

75. This construction is also supported by the overall scheme of Pt 5-4 of the ACL. As explained earlier in these reasons, s 271 is found in Div 2 of Pt 5-4, which is concerned with "[r]emedies relating to guarantees". Division 1 of Pt 5-4 is concerned with "[a]ction[s] against suppliers". Section 259(3) relevantly provides that a consumer may reject goods and, by action against a supplier, recover compensation "for any reduction in the value of the goods below the price paid or payable by the consumer for the goods". Then, the liability of the supplier for consequential loss under s 259(4) applies even if the consumer has rejected the goods so that "property in those goods revests in the supplier".[110]

    [110]ACL, s 263(6).

76. Section 274(1) then provides for a right of indemnification of suppliers by manufacturers. The indemnity covers claims made by consumers for consequential loss against suppliers under s 259(4), but only where "the manufacturer is or would be liable under section 271 to pay damages to the consumer for the same loss or damage" (emphasis added).[111] If the entitlement to recover consequential loss under s 272(1)(b) were to be lost in circumstances where a consumer who acquired goods from a supplier ceases to have title or ownership of the goods (because, for example, they have been rejected, replaced, sold or destroyed), then the consumer may be able to recover consequential loss from the supplier under s 259(4), but the supplier would be precluded from obtaining indemnity for the consumer's claim from the manufacturer under s 274(1). In that event, the manufacturer would not be "liable under section 271 to pay damages to the consumer for the same loss or damage" (being that provided for in s 272(1)(b)).[112] Such a result would be irrational.

    [111]ACL, s 274(1)(b).

    [112]ACL, s 274(1)(b).

77. Finally, little assistance on this question of construction can be gained from considering the extrinsic materials. The wording "affected person ... in relation to goods" was drawn from earlier provisions in the Trade Practices Act. Former s 74D of the Trade Practices Act was inserted in 1978 and extended the right to seek redress for any loss or damage from the consumer to "the consumer or person who ... derives title to the goods [through or under the consumer]".[113] In the parliamentary debates concerning that amendment, the relevant Minister stated that its effect was that "a manufacturer's liability, where his goods are of unmerchantable quality, will be extended to the successors in title to a consumer" (emphasis added).[114] The Explanatory Memorandum was in similar terms.[115] This statement is ambiguous as to whether the extension of a manufacturer's liability was at the expense of or in addition to the rights of the original consumer. The same ambiguity attaches to the cognate provisions introduced in 1986, which conferred rights of redress on "the consumer" or "a person who acquires the goods from, or derives title to the goods through or under, the consumer".[116]

    [113]Trade Practices Amendment Act 1978 (Cth), s 14.

    [114]Australia, House of Representatives, Parliamentary Debates (Hansard), 17 October 1978 at 1922.

    [115]Australia, House of Representatives, Trade Practices Amendment Bill 1978, Explanatory Memorandum on Amendments to the Bill, amendments (5)-(7).

    [116]Trade Practices Revision Act 1986 (Cth), ss 40-43.

78. Nothing in the extrinsic materials accompanying the introduction of the ACL reveals that any consideration was given to the interaction between the new remedies conferred by Div 2 of Pt 5-4 and the definition of "affected person". To the contrary, the Explanatory Memorandum to the Bill wrongly described Div 2 of Pt 5-4 as providing that "consumer[s] may recover damages from manufacturers in respect of failures that relate to acceptable quality".[117] Not much can be gained from this reference to "consumers" rather than "affected persons", save to observe that there was no statement that consumers lose all rights against a manufacturer of faulty goods if the goods are replaced, sold or otherwise disposed of.

    [117]Australia, House of Representatives, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum at 205 [7.121].

    The Williams appeal

79. In light of the above, the first two of the Williams appellants' three grounds of appeal can be dealt with briefly. The Full Court did not err in failing to assess the reduction in the value of the goods by reference to the true value of the goods at the time of supply and in only using information acquired thereafter as hindsight to confirm what could be foreseen at the time of supply. As discussed above, the correct approach was to assess the reduction in value at the time of supply by reference to all the information that was known at the trial concerning the core defect, including its capacity to be repaired as well as when, how and at what cost a repair might take place. However, the Williams appellants' contention that the Full Court erred in construing s 272(1)(a) so as to permit departing from the time of supply as the time of the assessment should be upheld. As explained, the error in so finding followed in part from the Full Court's erroneous approach to the concept of "damages" in s 272(1)(a). Otherwise, leaving aside the challenge to the Full Court's conclusion that a 10% reduction in value was warranted, the errors in the Full Court's approach, including its reliance on the "utility" of the relevant vehicles, have already been described.

80. The result of the Williams appellants' partial success on these issues does not yield a restoration of the primary judge's orders and findings as his Honour did not assess damages under s 272(1)(a) in accordance with the approach outlined above. Instead, the matter will need to be remitted to his Honour for reassessment in accordance with this judgment.

81. As noted, the Williams appellants also challenged the Full Court's conclusion that the primary judge erred in assessing the reduction in value of the relevant vehicles as 17.5%. Given that both the primary judge's assessment and the Full Court's review of that assessment were not undertaken in accordance with the above approach, it is not strictly necessary to address this challenge. However, to avoid scope for further argument about the status of the Full Court's findings concerning the primary judge's approach, it can be addressed briefly.

82. The Williams appellants identified four errors on the part of the Full Court in overturning this finding of the primary judge. The first error was said to be the Full Court's construction of s 272(1), which, as explained above, was an erroneous construction. The second error was said to be the Full Court's conclusion that the primary judge did not take into account, at the time of the supply of the relevant vehicles, the possibility that a repair for the core defect might have become available. The Full Court erred in attributing that failure to the primary judge.[118] The primary judge correctly described Mr Cuthbert as having had regard to the possibility that there may have existed purchasers who would have purchased Direct Claim Services' vehicle "in the hope that they could find someone to fix the [c]ore [d]efect".[119]

    [118]Toyota (2023) 296 FCR 514 at 544-545 [123].

    [119]Williams [2022] FCA 344 at [348(3)].

196. Even this classic statement of principle, if read literally, is inaccurate, however. For example, it has never been that "all" circumstances subsequently arising are to be ignored in determining market value. Subject to any applicable contrary prescription, it has always been open to a valuer (judicial or otherwise) to have regard to sales after the date of valuation if those sales are "comparable". This is a logical necessity. For example, the best comparable sale may be a sale that occurs the day after the date of valuation.

197. The common law conception of market value is that of the price point at which a hypothetical, prudent, willing but not anxious, and fully informed buyer and seller would meet to transact the notional sale on the date of valuation. In this context, "fully informed" means "perfectly acquainted with the land [or good], and cognizant of all circumstances which might affect its value".[227] This conception of market value remains relevant in many circumstances, but the extent to which it may be applied will depend on the terms of the statute, instrument, or agreement under which the valuation is made.

     [227]Spencer v The Commonwealth (1907) 5 CLR 418 at 440‑441.

     The primary judge's reasoning

198. The primary judge correctly attributed to the hypothetical reasonable consumer at the time of supply full acquaintance with the Core Defect and the relatively high prospect of the Defect Consequences manifesting in every Relevant Vehicle in ordinary driving conditions.

199. As judicial valuer, the primary judge: (a) did not accept the entirety of any of the expert evidence relevant to the reduction in value; (b) treated Mr Cuthbert's valuation evidence as no more than a "helpful indication of the likely reduction in value to be applied generally";[228] and (c) treated the economic and related evidence of other experts as no more than "of some limited utility in coming to a landing on a figure for any reduction in value"[229] and as "of some use"[230] respectively.

     [228]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [359].

     [229]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [377].

     [230]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [390].

200. Further, the primary judge: (a) gave weight to "the entirety of the expert evidence and the submissions advanced by the parties in respect of that evidence";[231] (b) recognised the "evaluative and imprecise exercise" which he was performing;[232] (c) considered that, on the whole of the evidence and as a matter of common sense, the reduction in value must be "a figure of significance";[233] and (d) assessed, doing the best he could, the range of any such reduction to be in the order of 15 per cent to 20 per cent, and settled in the middle of that range on 17.5 per cent.[234] Moreover, the primary judge did so in circumstances where, as he said, Toyota's experts did not provide his Honour with "any real analysis of their own as to the reduction in value that was suffered by group members".[235]

     [231]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [392].

     [232]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [393].

     [233]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [393].

     [234]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [393].

     [235]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [394].

     The Full Court's reasoning

201. The Full Court's reasons record that "by the time of the initial trial, it was known that the 2020 field fix was available and the experts agreed that, in consequence, there was no ongoing reduction in value".[236] According to the Full Court, "the prospective reinstatement of value reflected the fact that the fix would restore the utility of the vehicle".[237]

     [236]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 544 [123].

     [237]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 544-545 [123].

202. The Full Court concluded that the primary judge: (a) in applying a "broad brush approach", "failed to have regard to the extent of the validity of the main criticisms raised by Toyota, namely the focus upon the salvage value and the associated (implicit) view that the vehicle was so defective it needed to be repaired before it had any real utility as a motor vehicle";[238] and (b) should have treated "Mr Cuthbert's percentage reduction in value with considerable circumspection" and not used it "as a useful guide to valuation without making due allowance for the matters to which"[239] the Full Court had referred (that is, Mr Cuthbert overly relying on salvage value and ignoring "utility value").

     [238]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [203].

     [239]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [204].

203. The Full Court also said that: (a) "assessment of the reduction in value resulting from a failure to comply with the consumer guarantee should not be made on the basis of an unadjusted resale value";[240] and (b) Mr Cuthbert failed "to grapple with the effect on an aggregate assessment of reduction in value damages of the possibility that a free fix may become available" in circumstances where the representative example, Mr Williams' Relevant Vehicle, was purchased in 2016 but other Relevant Vehicles were purchased later in the Relevant Period.[241]

     [240]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [206].

     [241]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [207]. See also 560‑561 [208].

     Limits on appellate review of judicial valuation

204. As identified in Warren v Coombes,[242] in an appeal under s 24(1)(a) of the Federal Court of Australia Act 1976 (Cth) the Full Court "is to decide the case – the facts as well as the law – for itself. In so doing it must recognize the advantages enjoyed by the judge who conducted the trial. But if the judges of appeal consider that in the circumstances the trial judge was in no better position to decide the particular question than they are themselves, or if, after giving full weight to [the trial judge's] decision, they consider that it was wrong, they must discharge their duty and give effect to their own judgment."[243]

     [242](1979) 142 CLR 531.

     [243](1979) 142 CLR 531 at 552.

205. In this case, the primary judge alone had the advantage of seeing and hearing Mr Cuthbert give evidence. Mr Cuthbert gave evidence in a concurrent session with Mr O'Mara, a valuer specialising not in vehicle valuations (as Mr Cuthbert did), but in the valuing of company assets for the purpose of merger and acquisition transactions and bank financing. Mr Cuthbert not only gave an opening statement in the concurrent session, but also was cross‑examined at some length. In dealing with valuation evidence of the kind which Mr Cuthbert gave, and which Mr Cuthbert rightly described as "impressionistic", the views the primary judge formed reflected his Honour's distinct advantage in seeing and hearing Mr Cuthbert give evidence. These views included his Honour's acceptance of: (a) Mr Cuthbert's denial in cross‑examination that he did not apply his own methodology;[244] and (b) Mr Cuthbert's explanation in cross‑examination that he did not start from the salvage value and work upwards but used salvage value only to "bookend the analysis", as a yardstick to which it was "appropriate to have regard".[245]

     [244]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [354].

     [245]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [354].

206. Moreover, having seen and heard Mr Cuthbert give extensive evidence, the primary judge had a distinct advantage over the Full Court in ascertaining the weight to be given to the fact that Mr Cuthbert was "a professional car valuer with 50 years' experience".[246] That advantage meant that the primary judge did not err in concluding that Mr Cuthbert's evidence could "serve as a helpful indication of the likely reduction in value to be applied generally".[247] As Allsop J said in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd, "[t]he advantages of the trial judge may be more subtle and imprecise, yet real, not giving rise to a protection of the nature accorded credibility findings, but, nevertheless, being highly relevant to the assessment of the weight to be accorded the views of the trial judge".[248]

     [246]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [356].

     [247]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [359].

     [248](2001) 117 FCR 424 at 437 [28].

207. The Full Court's conclusion that the primary judge erred in the use he made of Mr Cuthbert's evidence is also difficult to reconcile with the Full Court's (accurate) recognition that the primary judge considered the parties had placed "too much emphasis upon expert evidence when the task that was required to be undertaken involved a much more practical and common sense approach"[249] and (correct) view that the primary judge did not err in considering that reasonable buyers of a Relevant Vehicle would treat the Core Defect as "very significant when reaching a conclusion as to an appropriate percentage reduction" to the sale price at the time of supply.[250]

     [249]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 548 [139].

     [250]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 575 [285].

208. The Full Court's ultimate view was that the primary judge erred by not treating "Mr Cuthbert's percentage reduction in value with considerable circumspection",[251] but it is clear from the primary judge's reasons that his Honour treated all the expert evidence, including that of Mr Cuthbert, with a high degree of circumspection. As the primary judge put it, "[a]fter trudging manfully through the expert evidence, it is necessary to recall the basic proposition ... 'valuation is an art, not an exact science'".[252] The same high degree of circumspection is apparent also from the fact that the primary judge's reduction in value of 17.5 per cent, representing the middle of a range of 15 per cent to 20 per cent, is substantially lower than Mr Cuthbert's range of reduction in value of 23.5 per cent to 27 per cent.

     [251]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [204].

     [252]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [391].

209. The primary judge referred[253] to several well‑known observations about judicial and other valuations which remain important, including that: (a) "[v]aluation is an art, not an exact science. Mathematical certainty is not demanded, nor indeed is it possible";[254] and (b) valuation is "a jury question, in the sense that it was to be decided, not by a strict adherence to precise arithmetical calculations, but by a commonsense endeavour, after consideration of all the material before the court, to fix a sum satisfactory to the mind of the court as representing the value".[255] To these observations may be added:[256]

     "[I]n all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would the very unfair to require an exact exposition of reasons for the conclusions arrived at."

     [253]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [339]-[343].

     [254]Gold Coast Selection Trust Ltd v Humphrey (Inspector of Taxes) [1948] AC 459 at 473.

     [255]The Commonwealth v Milledge (1953) 90 CLR 157 at 162.

     [256]Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391.

210. A court also "should be slow to reject any method [of valuation] that, in expert hands, is capable of yielding a result within bounds that are not unreasonable", though "[t]he limitations of every method must, of course, always be kept clearly in mind".[257] The primary judge's approach, of giving some (albeit variable) weight to the entirety of the expert evidence, accorded with this orthodoxy of judicial valuation.

     [257]Bronzel v State Planning Authority (1979) 21 SASR 513 at 516. See also Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 at 268 [283]; 167 ALR 575 at 653.

211. The nature of valuation as "an imprecise, opinionative activity involving the consideration of many variables, sometimes with equally legitimate outcomes"[258] explains why, in assessing damages (based on valuation or otherwise), a court must do the "best it can",[259] even if the state of the evidence leaves the court to engage in estimation and even "guess work".[260]

     [258]Electricity Commission of New South Wales (trading as Pacific Power) v Arrow (1994) 85 LGERA 418 at 419.

     [259]The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83.

     [260]eg, Jones v Schiffmann (1971) 124 CLR 303 at 308. See also Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at 774 [38]; 196 ALR 257 at 266.

212. Further, given the nature of valuation, judicial or otherwise, and as Gageler J put it, albeit in a different context:[261]

     "The appellate court needs to be conscious that '[n]o judicial reasons can ever state all of the pertinent factors; nor can they express every feature of the evidence that causes a decision‑maker to prefer one factual conclusion over another'. The more prominently limitations of that nature feature in a particular appeal, the more difficult it will be for the appellate court to be satisfied that the primary judge was in error."

     [261]Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541 at 557 [33] (footnotes omitted). See also Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 435‑436 [24]-[26]; Costa v Public Trustee of NSW (2008) 1 ASTLR 56 at 64-69 [14]-[19], 73 [42]-[43], 86 [101]-[102].

213. In the context of judicial valuation, provided the valuation is based on the correct legal principles, any appellate urge to quibble, cavil, or nitpick with the value determined must be resisted. The observation of Mason J in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd applies:[262]

     "[O]n a question of valuation an appellate tribunal is not justified in substituting its own opinion for that of the court below unless it is satisfied that the court below acted on a wrong principle of law or that its valuation was entirely erroneous."

     [262](1981) 146 CLR 336 at 381 (citations omitted).

214. An "entirely erroneous" valuation should be understood as one where the value determined is outside all bounds of reasonable tolerance. In such a case, the value determined is necessarily wrong.

215. Finally, and as noted in Capic vFord Motor Company of Australia Pty Ltd, a judicial valuer is not bound merely to choose between competing expert valuations or to accept valuation evidence, even if that evidence is based on correct assumptions as to facts and law, but is entitled to their own view of the evidence.[263]

     [263][2024] HCA 39 at [51].

     Other matters arising on the reasoning of the Full Court

216. Under s 272(1)(a), there is no separate concept of "utility value" (meaning the value from the use of the goods).[264] There is only the price paid or payable for the goods (or the average retail price of the goods at the time of supply) compared to the true value of those goods resulting from the failure to comply with the statutory guarantee at the time of supply (a difference representing those goods' reduction in value). The entitlement to recover damages of an amount under s 272(1)(a) is not to be reduced by applying a separate concept of utility value because Relevant Vehicles could be used despite the Core Defect. To attempt to separately overlay the concept of "utility" onto the statutory provisions would involve a substantial discount of the mandated entitlement to recover damages that is not permitted by the statutory scheme. Accordingly, it is not the case that, having restored the utility of the Relevant Vehicle, the 2020 Field Fix thereby reinstated the value of the Relevant Vehicle in a manner relevant to the operation of s 272(1)(a).[265]

     [264]cf, eg, Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 542 [111], [114], 544‑545 [122]-[123].

     [265]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 544-545 [123].

217. It is also not the case that "by the time of the initial trial, it was known that the 2020 field fix was available and the experts agreed that, in consequence, there was no ongoing reduction in value".[266] Mr Cuthbert did not agree that the availability of the 2020 Field Fix meant that, at the date of supply, there was no reduction in value of a Relevant Vehicle. The cross‑examination on which Toyota relied to support the Full Court's characterisation of the expert evidence concerned a paragraph of Mr Cuthbert's first report. It should be inferred that when Mr Cuthbert referred in that paragraph to not reducing value if a repair was available at no cost, he had in mind a repair that would be (and was in fact) applied to the Relevant Vehicle promptly ("promptly" meaning a matter of days, possibly weeks, but not months). In cross‑examination, when Mr Cuthbert agreed with the proposition put to him by Toyota's senior counsel that if he were asked to calculate the reduction in value in the Relevant Vehicles referable to the defect "now" he would not reduce the value at all because of the availability of the 2020 Field Fix, Mr Cuthbert was not referring to value at the time of supply. He was referring to value "now", being the time of his cross‑examination, by which time the 2020 Field Fix not only was available but had been applied to some Relevant Vehicles. He was also not asked anything about the effect the time it might take for the 2020 Field Fix to be applied to any Relevant Vehicle would have on his answer.

     [266]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 544 [123].

218. This is exposed in Mr Cuthbert's subsequent report, answering the further questions from the primary judge. Critically, Mr Cuthbert's answer to question two (what is the reduction in value of the Relevant Vehicles attributable to the defect assessed as at the time of purchase, using the information available today?) was that, for Mr Williams' Relevant Vehicle, the reduction in value would be the same, 23.5 per cent to 27 per cent less, as his valuation for question one (what is the reduction in value of the Relevant Vehicles attributable to the defect assessed as at the time of purchase, using only information which was available at the time of purchase?). Mr Cuthbert said this was so because from the time of purchase, April 2016, to the time of the 2020 Field Fix becoming available, May 2020, was a "long period of time" and Mr Williams "was faced with the Defect Consequences for an approximate 4‑year period". Therefore, it is not the case that Mr Cuthbert "failed to grapple with the effect on an aggregate assessment of reduction in value damages of the possibility that a free fix may become available".[267] Nor can it be said that Mr Cuthbert's evidence "overstated the reduction in value" because of that alleged failure.[268]

     [267]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [207].

     [268]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [205].

219. Further, the Full Court's (otherwise correct) proposition that "assessment of the reduction in value resulting from a failure to comply with the consumer guarantee should not be made on the basis of an unadjusted resale value"[269] implies that this is what Mr Cuthbert did. Mr Cuthbert's reduction in value of 23.5 per cent to 27 per cent was not based on re‑sale value. It was based on the value that the hypothetical reasonable consumer would have been willing to pay at the time of supply to Mr Williams (that being the representative purchase). Re‑sale value was merely one of a multiplicity of factors that Mr Cuthbert considered in assessing the true value of the Relevant Vehicle at the time of supply to Mr Williams.

     [269]Toyota Motor Corporation Australia Ltd v Williams (2023) 296 FCR 514 at 560 [206].

220. Finally, while the Full Court was also correct to observe that Mr Cuthbert's evidence was based on the circumstances of Mr Williams and other Relevant Vehicles were purchased later in the Relevant Period, the primary judge's findings supported his conclusion that a uniform percentage reduction of value applies to all Relevant Vehicles. The primary judge found that the likelihood or probability of every Relevant Vehicle manifesting one or more of the Defect Consequences was "relatively high"[270] and that the Defect Consequences, if they occurred, were significant.[271] In these circumstances, if an affected person acquired the Relevant Vehicle days or weeks before the 2020 Field Fix became available and the 2020 Field Fix was applied to the vehicle effectively and promptly (within days, possibly weeks, but not months) and with little inconvenience to the affected person, then the entitlement to recover the amount assessed in accordance with para (a) of s 272(1) may be displaced. Mr Williams is not within that category of affected persons. It is not clear if any other group member is within that category. If, however, there are group members within that category, the potential consequences of such a finding are that: (a) there has been no failure to comply with the guarantee in s 54(1) of the ACL, having regard to the matters in s 54(3); (b) s 271(6) applies so that there is no entitlement to bring an action under s 272(1)(a); (c) the affected person has no damages to "recover" within the meaning of s 272(1)(a); or (d) there has been no reduction in value within the scope of s 272(1)(a).

     [270]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [64].

     [271]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [85].

     Applying s 272(1)(a) in the present case

221. The relevant failure to comply with the statutory guarantee of acceptable quality under s 54(1) of the ACL in this case, being the "Core Defect",[272] is best characterised as a design defect creating a relatively high propensity or risk for the "Defect Consequences"[273] to manifest in every "Relevant Vehicle".[274]

     [272]As defined in Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [15].

     [273]As defined in Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [59].

     [274]As defined in Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [6].

222. Section 272(1)(a) requires attribution to the hypothetical reasonable consumer at the time of supply of the Relevant Vehicle knowledge not only of the Core Defect (being the failure to comply with the guarantee of acceptable quality under s 54(1)), but also of every fact, matter, and circumstance resulting from the Core Defect. Those facts, matters, and circumstances include: (a) the "relatively high" propensity or risk of the Defect Consequences manifesting as a result of the Core Defect;[275] (b) that each Relevant Vehicle was not "suitable for use in all driving conditions";[276] (c) that the Defect Consequences, if they manifested, were of a kind that had "a significant impact upon consumers' use and enjoyment of the Relevant Vehicles";[277] (d) that the 2020 Field Fix only became available in May 2020; and (e) that the 2020 Field Fix had not yet been applied to Mr Williams' Relevant Vehicle (and presumably others), despite Mr Williams (and presumably others) seeking that to occur.

     [275]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [64].

     [276]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [83].

     [277]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [85].

223. As the primary judge evaluated the propensity or risk of every Relevant Vehicle to manifest one or more of the Defect Consequences to be "relatively high",[278] the case: (a) is not one in which the risk of manifestation of the Defect Consequences was sufficiently minor to be disregarded by a hypothetical reasonable consumer at the time of supply of a Relevant Vehicle, with the potential consequence of either there being no failure to comply with the guarantee of acceptable quality under s 54(1) at all[279] or no reduction in value within the scope of s 272(1)(a); and (b) supports the conclusion that no hypothetical reasonable consumer would have paid the same or substantially the same price for a Relevant Vehicle with the Core Defect at the time of supply as they would have paid for a Relevant Vehicle without the Core Defect at the time of supply.

     [278]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [64].

     [279]See, for example, Dwyer v Volkswagen Group Australia Pty Ltd (2023) 381 FLR 32 at 57 [100], 65 [147], 65-66 [151]‑[156].

224. Further, given the relatively high prospect of one or more of the Defect Consequences manifesting and the significance of the Defect Consequences, this is not a case in which the manifestation or non-manifestation of any one or more of the Defect Consequences in a Relevant Vehicle affects the reduction in value assessed in accordance with s 272(1)(a). That is, on the facts as found, the hypothetical reasonable consumer attributed with the relevant knowledge at the time of supply would not pay more for a Relevant Vehicle merely because a part of that attributed knowledge is that although the Relevant Vehicle suffers from the Core Defect and has a relatively high prospect of manifesting one or more of the Defect Consequences, no Defect Consequence would manifest during that person's use of the vehicle.

225. Overall, and given the knowledge of the facts, matters, and circumstances required to be attributed to the hypothetical reasonable consumer at the time of supply of each Relevant Vehicle, the primary judge was right to conclude that: (a) it could not be said that Mr Williams' Relevant Vehicle was "as ... free from defects ... as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in" s 54(3);[280] (b) as there is "no impediment to determining the issue of acceptable quality on a common basis",[281] there is also no impediment to determining the reduction in value on a common basis; and (c) "when the Defect Consequences manifested, which was a certainty occasioned by the normal use of highway driving, they were serious", so that "the reduction in value of all of the Relevant Vehicles, which each had the propensity to suffer from the Defect Consequences, was far from insignificant".[282]

     [280]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [187].

     [281]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [212].

     [282]Williams v Toyota Motor Corporation Australia Ltd (Initial Trial) [2022] FCA 344 at [391].

226. Accordingly, the primary judge: (a) applied an orthodox approach to the statutory valuation task; and (b) made factual findings (not successfully challenged) that amply supported a reduction in value of 17.5 per cent below the purchase price at the time of supply as the amount of the reduction in value yielded by application of para (a) of s 272(1). The only difference between my conclusions and those of the primary judge is that I would allow that there might be some group member who acquired the Relevant Vehicle days or weeks before the 2020 Field Fix became available and the 2020 Field Fix was applied to the vehicle effectively and promptly (within days, possibly weeks, but not months) and with little inconvenience to the affected person, in which event the entitlement to recover the amount assessed in accordance with para (a) of s 272(1) may be displaced for that person (as explained above). It is not clear whether the orders the primary judge made on 16 May 2022 allow for that possibility (although they may do so given the exclusion of "a 2020 Field Fix Relevant Vehicle" from the order for damages in order 2).

     Conclusion

227. For these reasons, grounds 1(b), 2(c) and 2(d) of Mr Williams' notice of appeal should be allowed. Toyota's appeal should be dismissed. Orders 1-3 of the orders of the Full Court of the Federal Court of Australia made on 27 March 2023 should be set aside, as should the Full Court's orders of 12 May 2023. In lieu thereof, it should be ordered that the appeal to the Full Court be dismissed, subject only to order 2 made by the primary judge on 16 May 2022 being varied to the extent necessary to exclude from order 2 any group member who acquired the Relevant Vehicle days or weeks before the 2020 Field Fix became available and the 2020 Field Fix was applied to the vehicle effectively and promptly (within days, possibly weeks, but not months) and with little inconvenience to the affected person, whose claim for compensation may require further consideration. Toyota should pay the costs of the appeal to the Full Court and of the appeals to this Court.