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Federal Court of Australia makes first aggregate damages award in a funded representative proceeding in Toyota Class Action

The following piece was contributed by Martin del Gallego and Matthew Harris of Australian law firm, Piper Alderman.

This article considers a recent decision of the Federal Court of Australia, awarding damages to class action claimants on an aggregate basis.  Aggregate damages is a rare global award which covers all group members described or identified in the award.  This was the first instance of aggregate damages being awarded to a funded litigant in Australia, and may spur a trend in representative claims brought on this basis.

In Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344, Justice Michael Lee relied on s 33Z(1)(e) of the Federal Court of Australia Act 1976 (Cth) (the Act) to award damages to group members in possession of certain Toyota vehicles throughout the entirety of the claim period, calculated as the percentage reduction in value of their vehicle or vehicles.  It has been estimated that Toyota’s total aggregate damages bill may exceed AU$2 billion.

Key Takeaways

  • For an order of aggregate damages to be made in a representative proceeding, the Court needs to be satisfied on a principled basis with which to assess and distribute the relief;
  • The analysis must be informed by general principles governing the assessment of damages, and can result in an award of aggregated damages applying to a specific class of group members within a representative proceeding;
  • While the judgment is liable to spur a trend in claims for aggregate damages, precisely how such an award will impact the approval of legal costs and a funder’s commission remains to be seen.

Background to the proceedings

The case before the Court concerned claims relating to Toyota’s supply of 264,170 defective diesel vehicles to Australian consumers between 1 October 2015 and 23 April 2020 (Relevant Period).  These vehicles were fitted with diesel combustion engines and a ‘diesel exhaust after treatment system’, or ‘DPF’, aimed at reducing harmful pollutants and other emissions from the engine.  The case alleged that the vehicles were defective because the DPF was not designed to function during all reasonable driving conditions, and even if driven normally, there was a propensity for the car’s exhaust to emit excessive white smoke and malodour, and cause reduced fuel efficiency and trigger ‘excessive’ notifications prompting the need for service or repair.

In alleging that the vehicles were not of ‘acceptable quality’ in breach of the statutory guarantee under s 54 of the Australian Consumer Law (ACL), and that Toyota’s conduct had been misleading and deceptive in contravention of ss 18, 29(1)(a) and (g), and 33 of the ACL, the lead applicant sought two types of damages under s 272 of the ACL:

  • Under s 272(1)(a), damages for the reduction in value of each relevant vehicle resulting from the failure to comply with s 54 of the ACL; and
  • Under 272(1)(b), other reasonably foreseeable loss or damage incurred as a result of the defect and failure to comply with s 54 of the ACL, including excess taxes, fuel consumption, financing costs, servicing costs and lost income.

Of these heads of damage, only two were suitable for determination at the initial trial of the lead applicant’s claim:  the ‘reduction in value’ damages under s 272(1)(a) and damages for excess GST paid by group members in connection with acquiring the relevant vehicles under s 272(1)(b).  (A separate question had been asked and answered in an earlier interlocutory application in the case, clearing the way for a potential aggregate damages award, in respect of only part of the lead applicant and group members’ claims.[1])

Aggregate Damages

Having found in favour of the lead applicant, on among other things, their ‘acceptable quality’ cases, Justice Lee also found that the same determinations could be made on a common basis for the remainder of group members.  His Honour found that the lead applicant and group members were entitled to damages for the reduction in value of their vehicles, and for excess GST paid in connection with that reduction.  Accordingly, it was necessary for his Honour to determine a principled basis for arriving at a quantum of the reduced value which could be applied on an aggregate basis to all relevant group members.

The Federal Court’s power to award damages on an aggregate basis is found in s 33Z of the Act. This section provides, among other things, that the Court may, in determining a matter in a representative proceeding, make an award of damages for group members, sub‑group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies,[2] or award damages in an aggregate amount without specifying amounts awarded in respect of individual group members.[3]  Further, subject to section 33V of the Act, the Court is not to make an award of damages under s 33Z(1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment.[4]

Noting that class actions were not the ‘Galapagos islands’ of litigation, Justice Lee observed that an award of damages, even on an aggregate basis, was subject to two overarching principles as to the award of compensatory damages.[5]  His Honour observed that an award of compensatory damages must be considered in the light of the overriding compensatory principle, and that even where the process of estimating damages is difficult, the Court ‘must do what it can’, this principle equally applying to an assessment of ‘reduction in value’ damages.

Justice Lee found that the Court is not permitted, by s 33Z of the Act, to take an approach of awarding aggregate damages on a per vehicle basis and determining the separate question of distribution at a later stage. Because of this, his Honour was faced with a challenge of how to distribute relief to group members who had possessed the relevant vehicles for only part of the Relevant Period.  His Honour termed these group members as ‘Partial Period Group Members’ and concluded at [432]:

The bottom line is that without knowing the price at which, or the time at which, the Partial Period Group Members bought and sold Relevant Vehicles on the secondary market, one cannot determine on a principled basis how the compensation for the owners of those Relevant Vehicles ought to be assessed or distributed. One must always bear in mind the whole object of any award of damages is to put the claimant in the position the claimant would have been in but for the contravening conduct.

Ultimately, the Partial Period Group Members will be required to undertake an individualised assessment of their loss. For the ‘Entire Period Group Members’, that is, people who possessed the relevant vehicles throughout the entirety of the Relevant Period, the Court awarded aggregate damages under s 33Z(1)(e) of the Act.  The award of aggregate damages for the Entire Period Group Members was calculated on the basis of a 17.5% reduction in value of the average retail price of the particular type of vehicle at the particular time it was purchased.  In circumstances where the group member paid a price lower than the average retail price for their vehicle, the lower of the two prices was said to be the applicable comparator from which the 17.5% reduction in value is to be calculated.[6]  In being satisfied there was a reduction in value of the relevant vehicles of 17.5% resulting from the failure to comply with s 54 of the ACL, Lee J also found that Entire Period Group Members were also entitled to recover the excess GST they paid on that reduction in value, calculated as 10% of the reduction in value.[7]

Regarding the claim for damages under s 33Z(1)(f) of the Act, the Court declined to award aggregate damages on this basis, because his Honour was not satisfied that a reasonably accurate estimate could be made of the total amount owing to group members as required by s 33Z(3).

Conclusion

Williams is the first instance of a Court awarding aggregate damages in a funded representative proceeding, and provides helpful guidance on how the Court will approach such claims, particularly where only part of the claim is suitable for determination on an aggregate basis.  That said, while Justice Lee found in favour of the class on the issue, it is plain that such an assessment will need to be carried out on a case-by-case basis.

About the Authors

Martin del Gallego, Partner

Martin is Chambers & Partners recognised commercial litigator with 15 years’ experience in high stakes, high value litigation. Martin specialises in class action and funded litigation, with expertise across a broad range of sectors including financial services, energy & resources, construction and insolvency.

Matthew Harris, Lawyer

Matthew is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Matthew is involved in a number of large, complex matters in jurisdictions across Australia.

For queries or comments in relation to this article please contact Kat Gieras, Litigation Group Project Coordinator | T: +61 7 3220 7765 | E:  kgieras@piperalderman.com.au

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

[2] Federal Court of Australia Act 1976 (Cth) s 33Z(1)(e).

[3] Ibid s 33Z(1)(f).

[4] Ibid s 33Z(3).

[5] Williams [421]-[423].

[6] Williams [446].

[7] Williams [492].

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An article in ABC News covers the approval of a $180 million settlement in the Northern Territory stolen wages class action, bringing to an end the claim brought against the Commonwealth of Australia over historic mistreatment of Aboriginal workers in the Northern Territory between 1933 and 1971. Whilst Chief Justice Debra Mortimer approved the settlement along with the related payouts to Shine Lawyers and LLS Fund Services for the claimants, her written judgment raised many questions about the costs accumulated by the legal team and the relatively low value of compensation that the workers would receive.

The judgment approved payments of up to $15 million to Shine Lawyers for legal costs, and a funder’s commission of up to $31.5 million to LLS Fund Services. However, Chief Justice Mortimer’s judgment also contained criticism for both these parties, stating that their “good intentions” in supporting the claimants has been somewhat overshadowed by “the pursuit of the business model”. Mortimer expressed doubt that Aboriginal and Torres Strait Islander communities would “see much social justice” in an outcome where these “city based non-indigenous participants in this proceeding come out with so much money compared to their family and friends.”

The settlement in the Northern Territory lawsuit is the latest in a series of similar class actions brought against the Australian state, with previous settlements having been reached with the Western Australia and Queensland state governments.

The full judgment from Chief Justice Mortimer in McDonald v Commonwealth of Australia can be read here.

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By Harry Moran |

As LFJ reported last week, Google is the target of a €900 million claim brought against the technology giant in the Netherlands over its alleged anti-competitive behaviour. However, that is not the only lawsuit being brought against the company over such allegations, with a new claim being filed at the Competition Appeal Tribunal (CAT) in the UK.

An announcement from Geradin Partners highlights the filing of a new claim brought against Google before the CAT over allegations that the company abused its market dominance to increase prices for Google Ads and harm competitors in the search advertising market. The claim, which has an estimated value of £5 billion, is being brought on behalf of UK-based advertisers who have allegedly suffered losses because of Google’s anti-competitive behaviour. The lawsuit is to represent UK businesses who purchased advertising space on Google search spaces since 1 January 2011.

The opt-out competition damages claim is being brought by Or Brook Class Representative Limited, with Dr Or Brook acting as the proposed class representative. Dr Brook is a competition law expert, currently holding the position of Associate Professor of Competition Law and Policy at the School of Law at the University of Leeds. She is supported by a legal team led by Geradin Partners, with funding for the proceedings being provided by Burford Capital.

Dr Or Brook, provided the following comment on the lawsuit: “Today, UK businesses and organisations, big or small, have almost no choice but to use Google ads to advertise their products and services. Regulators around the world have described Google as a monopoly and securing a spot on Google’s top pages is essential for visibility. Google has been leveraging its dominance in the general search and search advertising market to overcharge advertisers.”

Damien Geradin, founding partner of Geradin Partners, emphasised that “this is the first claim of its kind in the UK that seeks redress for the harm caused specifically to businesses who have been forced to pay inflated prices for advertising space on Google pages.”

The full announcement from Geradin Partners can be read here.

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By Harry Moran |

Ever since the Supreme Court’s ruling in PACCAR, it has become a common sight in group proceedings to see defendants bringing appeals over the funding arrangements in these cases. However, a new judgment by the Court of Appeal on one such appeal has offered a significant victory for litigation funders who wish to support these group actions.

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The Court of Appeal’s judgment related to two grounds of appeal that Apple had raised. Firstly, the CAT’s alleged lack of jurisdiction to make an order to payout a funder’s fees or returns before damages were distributed to class members, and the ability of class representatives to enter into funding agreements that contemplated such orders. Secondly, that the funding agreement in this case ‘created sufficiently perverse incentives that the CAT could not properly authorise’ Mr Gutmann to act as the class representative.

The Court of Appeal’s judgment, led by Sir Julian Flaux Chancellor of The High Court with unanimous agreement from Lord Justice Green and Lord Justice Briss, dismissed Apple’s appeal on both grounds. In the conclusion of his judgment, Flaux wrote that “the CAT does have jurisdiction to order that the funder’s fee or return can be paid out of the damages awarded to the class in priority to the class.” With that fact clearly established, he went on to say that it follows that “that there can be absolutely nothing wrong with the CR entering into a LFA which makes provision for that to happen.”

Leaving no room for any doubt, Flaux stated plainly that “once Ground 2 of the appeal fails, Ground 3 is indeed hopeless.”

Separate appeals brought by Apple over the consequences of the Supreme Court’s PACCAR’s ruling as it relates to LFAs being considered as damages-based agreements, are still yet to be heard. A hearing on this separate ground of appeal is scheduled for June following the Court of Appeal’s lifting of the stay on those appeals on 4 February 2025.

The full judgment from the Court of Appeal in Justin Gutmann v Apple Inc and others can be read here.