On 6 November 2024, the High Court of Australia delivered a seminal judgment in Kenneth John Williams & Anor v Toyota Motor Corporation Australia Limited ([2024] HCA 38), whereby the Court clarified the applicability of damages pursuant to s 272(1)(a) of the Australian Consumer Law (ACL) in the event of a breach of a consumer guarantee under s 54 of the ACL.
Case Background: Kenneth John Williams and Direct Claim Services Qld Pty Ltd (the Williams parties) initiated representative proceedings against Toyota on behalf of individuals who purchased certain motor vehicles with a defective diesel exhaust after-treatment system between 1 October 2015 and 23 April 2020. The defect led to issues such as excessive white smoke, foul-smelling exhaust fumes, increased fuel consumption, and the need for frequent inspections and repairs. Although an effective repair was made available in May 2020, the trial judge in the Federal Court of Australia found that the vehicles did not meet the “acceptable quality” guarantee under section 54(1) of the ACL at the time of supply.
The relevant statutory provisions: Section 54(1) of the ACL provides that a consumer guarantee that the goods supplied are of acceptable quality. Section 272(1)(a) specifies that damages can be recovered for any reduction in the value of the goods resulting from the failure to comply with the guarantee.
History of the proceedings: The primary found that damages should be assessed based on the value of the goods at the time of supply, excluding knowledge of the repair available in 2020. On appeal, the Full Court of the Federal Court of Australia held that damages assessed under section 272(1)(a) should consider compensation for loss or damage, potentially requiring adjustments to avoid over-compensation and reflect the intrinsic or utilisation value of the goods. The Full Court included the availability and timing of the repair in its assessment.
High Court Decision: The High Court allowed the appeal from the Williams parties and dismissed Toyota’s appeal. The Court clarified that damages under section 272(1)(a) should be assessed based on the reduction in the value of the goods at the time of supply due to the failure to meet the acceptable quality guarantee. This assessment should consider the state and condition of the goods at the time of supply, including the effectiveness, cost, inconvenience, and timing of any repair known at the time of trial.
As neither the primary judge nor the Full Court assessed damages in line with this approach, the High Court remitted the proceedings to the primary judge for reassessment based on its reasoning.
Conclusion: The High Court’s decision emphasises the importance of assessing damages based on the value of goods at the time of supply while considering relevant information known at the time of trial. This approach ensures a fair and accurate determination of compensation for affected consumers.
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