Damages must be assessed based on the reduced value of defective vehicles at the time of supply
In a class action against Ford Motor Company of Australia, the High Court ruled that damages under the Australian Consumer Law (ACL) must be assessed based on the reduced value of defective vehicles at the time of supply, without considering subsequent repairs or usage.
Biljana Capic, the lead plaintiff, filed a class action over alleged defective vehicles sold between 2011 and 2018. The vehicles, which included Ford Focus, Fiesta, and EcoSport models, were equipped with the faulty DPS6 transmission.
Capic purchased a Ford Focus in 2012, and experienced persistent mechanical issues linked to defects in the DPS6 transmission. These included vibrations, gear selection problems, and loss of power. Similar defects were found in all 73,451 affected vehicles. Ford, as the importer, was deemed the manufacturer under the ACL. In 2016, Capic initiated representative proceedings on behalf of other vehicle owners, asserting that the cars did not meet the guarantee of acceptable quality under the ACL.
Latest News
The primary judge found that each vehicle suffered from at least one of five significant defects, including inadequate damping of vibrations, poor heat management, and faulty components such as input shaft seals and clutch linings. These issues rendered the vehicles prone to "troubling" behaviours, including shuddering, grinding noises, and clutch odour. The judge ruled that the vehicles breached the guarantee of acceptable quality, awarding Capic $6,820.91 in damages for the reduced value of her vehicle, alongside compensation for GST, stamp duty, and financing costs, totalling $17,248.19.
On appeal, the full Federal Court upheld the breach findings but ordered a reassessment of damages, emphasising the importance of considering post-supply events, such as repairs and use of the vehicle. The court’s approach aimed to avoid "over-compensation," leading Capic to seek High Court intervention.
The High Court overturned the full Federal Court's decision, ruling that damages under s. 272(1)(a) of the ACL must be assessed based on the value of the vehicle at the time of supply, regardless of subsequent repairs or use. The court found that the full Federal Court erred in attributing post-supply knowledge to hypothetical consumers when evaluating compliance with the ACL's guarantee of acceptable quality.
The High Court’s judgment reaffirmed the principle that damages should reflect the reduction in value of defective goods at the time of supply, ensuring consumers are compensated for inherent defects without undue adjustments. The case has been remitted to the primary judge to reassess damages based on this framework.