Capic v Ford Motor Company of Australia Pty Ltd ACN 004 116 223 [2024] HCATrans 23 (11 April 2024)

Last Updated: 11 April 2024

[2024] HCATrans 023

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S25 of 2024

B e t w e e n -

BILJANA CAPIC

Appellant

and

FORD MOTOR COMPANY OF AUSTRALIA PTY LTD ACN 004 116 223

Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 APRIL 2024, AT 11.39 AM

Copyright in the High Court of Australia
MS F.T. ROUGHLEY, SC: May it please the Court, I appear with MR S.L. GERBER for the appellant. (instructed by Corrs Chambers Westgarth)

MR S.G. FINCH, SC: If it please the Court, I appear for the respondent Ford Motor Company with my learned friends, MR M.P. COSTELLO, KC, MR T.F.B. FARHALL and MR M.C. ROBERTS. (instructed by Allens)

GAGELER CJ: Thank you, Mr Finch. Ms Roughley.

MS ROUGHLEY: Your Honours will have understood from the oral outline that Ms Capic’s position is a primary position that is perhaps stronger than what was agitated for the Williams appellants in the earlier proceedings, and that is a more limited use of post‑supply information.

In the oral outline what I have sought to do is, from paragraphs 2 to 5, state as clearly as I can what is the precise construction of section 272(1)(a) for which Ms Capic contends, and how that flows through to the use of after‑acquired information. From paragraphs 6 and 7, I then propose to come to the questions of mischief and purpose, and textual and contextual considerations. Appreciating that one normally starts with the text, given how much the Court has already heard about the text, going back to the reasons for why the text took that form, in our submission, is powerful material as to why Ms Capic’s primary position on the construction of section 272(1)(a) should be accepted.

From paragraph 8 I will come to the facts of Ms Capic’s case, which are fairly extreme facts, and they reveal two types of considerations to be borne in mind in the construction of section 272(1)(a), and that is this being consumer legislation, remedial legislation. How does it practically work when facts can be as difficult and complicated as they are for Ms Capic and for group members? Paragraphs 9 to 12, I will then deal with the decisions below and the way in which Ms Capic’s construction is effectively seeking the reinstatement of the primary judge’s approach, and then the errors in the Full Court that we submit were made here.

So, to start with the proper construction of section 272(1)(a), the position that we advance is this. It requires identification at the time of supply of any reduction in the value of a good below the statutory reference price resulting from the failure to comply with the relevant guarantee. In that process, regard may be had to relevant subsequent events if they show what the text of section 272(1)(a) identifies as a relevant consideration for the valuation inquiry, and that is the failure to comply with the guarantee.

To the extent that, at the section 54 stage, the statute – and I will come to it in detail a little later when I get to the terms of the statute – is directing a court considering an allegation of failure to comply with the guarantee to take into account information about the defect, including latent defects, or hidden defects, is the language. All of that information has already fed into the failure to comply, and on the text of 272(1)(a) it is then available to be considered for the purposes only of identifying a failure to comply at the valuation stage. We say that that is, in essence, the approach the plurality referred to in Marks v GIO as:

what price freely contracting, fully informed parties would have offered and accepted for –

the good. The quotation your Honours see in paragraph 3 of the outline is from Marks v GIO, and I will come to that case in detail in due course. That is what their Honours were looking for in the context of that case, but we submit that inquiry is driven by the purpose of the particular statute in which the inquiry is asked. The purpose of this particular statute is that it is a consumer who, by definition, has gone in and wanted acceptable quality and has not got it.

So, it is not looking at a person who is hypothetically, other than that consumer, someone who has walked in and intended to buy a car or any other consumer good that has a level of defect, failure to comply, safety – whichever one of the section 54 criteria is not met; it is not that person. The hypothetical consumer is still someone wanted quality and wanted to bargain for quality.

What that means is that the hypothetical construct that is being constructed is it is the hypothetical person who is wanting acceptability – that is fundamental – and they are making informed judgments that the good that they are getting is not acceptable for all the reasons that the section 54 inquiry, in due course, has revealed give rise to the failure to comply in the particular case. In that context, they are then also making a contractual bargain not only to miss out on the benefit that they want but for the allocation of contractual risk that will flow.

What that means, if I can step back and put it more in a conceptual sense, is the hypothetical consumer has X‑ray vision about the good. It is like you can take an X‑ray of everything that is wrong with this good. To take our friends’ example in their written submissions, if there is a horse with a cancer in there, you have the X‑ray that shows you the cancer is there. They take that fully into account. What they do not have is a crystal ball as to how that cancer will play out, how the defect will play out, in due course.

What that way of constructing the hypothetical allows to happen is it is, in simple terms, saying that the consumer who is now making a claim under section 272(1)(a) did not know that the good was troubled when she walked into the dealership. She did not know that, but that is what she bought. So, what is now being compensated for is that she wanted quality, but what price would she have paid if afterwards she had said, well, I knew this was trouble when I walked in so I no longer get the benefit of the statutory guarantees and I have all of the risk that is associated with what may come to pass, both in the case of a propensity risk as well as in the case of – various words have been used: misery, anxiety, absence of peace of mind, run‑around – the potential to have to only rely on a warranty from the manufacturer, if that has been provided.

GAGELER CJ: So, the only hindsight that is brought to bear on your analysis is the hindsight that gives you the details of the noncompliance. Is that right?

MS ROUGHLEY: Correct, save for one exception, your Honour, and that is the exception in paragraph 5 of the outline.

GAGELER CJ: All right.

BEECH‑JONES J: Ms Roughley, is that treating the word “value” as meaning market value, as opposed to intrinsic or real value? Take that on board, if you need to.

MS ROUGHLEY: Yes. The hesitation I have is: what does “real value” mean in a particular context? It may be different things depending on the injury being compensated for. So, what you are looking for is the real value of the thing that is being acquired. When I come to HTW Valuers, I can address that in more detail, looking at that case. I think the answer to your Honour’s question is mostly yes, so long as market value is taking the hypothetical consumer in the way that I posited, but the real value is not being informed by everything that follows. It is what can be informed. It is real value for the purposes of the statute on the basis of what the statute tells you to take into account; the real value in that situation.

At paragraph 4, that is then the more complete answer to your Honour the Chief Justice’s question as to what else can be taken into account. Because of the way in which the Full Court dealt with things, Ms Capic’s appeal only concerns those particular categories of information. What I have sought to indicate in paragraph 4 is what are the particular categories of information, and which ones arise on which grounds of the appeal.

To indicate the difference in territory between what this appeal is covering versus what your Honours have been hearing for the last day and a bit is 4(i), the subjective or objective experience of the failure to comply. That is something that on – if I can call it the Capic Full Court – the Capic Full Court’s extension of what the Toyota Full Court indicated was the approach. The Capic Full Court has indicated that this is a category of information that is to be brought to bear in the valuation exercise.

Secondly, (ii), they have indicated that the claimant’s use of the good post‑supply should be brought to account. We say that it is inconsistent with what the Toyota Full Court said, in particular paragraph 165 of the Toyota Full Court that I will come to. But those are two categories of information that just do not arise on the Toyota appeals in the way that they have been formulated.

EDELMAN J: But you are also saying that not merely just the actual subjective or objective experience of the particular purchaser cannot be taken into account, but also the likely or expected experience of a consumer in their position cannot be taken into account.

MS ROUGHLEY: It is right for the first part, your Honour. The second part is qualified in this way. When one takes into account full knowledge of the failure to comply – as in this case, you have full knowledge that the car has all sorts of mechanical and architectural reasons for why it may manifest in troubling behaviours thereafter – and you have full knowledge of what the cause of it is, you have full knowledge of the risk associated with that, what you do not know is, am I going to experience it on the highway on that date, or is this person going to have a worse problem or a better problem because they do city driving versus country driving. So, in that sense, you do have a sense of what is the risk associated with it but, in a very objective sense, anchored to the failure to comply.

Paragraph 4(iii), the post‑supply application of repairs, has a degree of commonality with the Toyota appeals, of course, but here we are dealing with a failure to comply. On the basis of the Full Court’s reasoning, it is a single failure to comply that has never had a complete remedy made available for it. Paragraph 4(iv), the “performance of the good after supply” – the quotations reflect that this is the language in Ford’s notice of contention ground 1. We have indicated in writing we are not quite sure the extent to which that is different from what is in categories one to three, but that is the fourth category of information arising on this appeal for your Honours to determine whether and to what extent it is taken into account in the valuation exercise.

At paragraph 5 of the oral outline – this is that qualification to the Chief Justice’s question I indicated – that is not to say that the valuation exercise cannot have regard to other relevant information that is available at trial that might, as in the ordinary way, be some type of proxy for working out a value. For example – this is not our case, but there is a comparable sale three days later, and that provides some market information. In a very simple case – we do not have that, but in a very simple case, that is the type of thing that courts are always doing. They are just looking for data points for estimating the value at supply.

Our qualification is this: you could only be taking into account post‑supply information as a proxy or useful data point if it can be probative of the inquiry in the way that we have constructed it. What ground 2c raises is that the evidence that the primary judge said is just not relevant to me and the Full Court has now directed the primary judge to take into account his evidence that, we say, is not probative in the inquiry stated, largely for the reasons that the primary judge gave.

GORDON J: When you are talking about the inquiry, that is what you have posited in the last four lines of your outline in paragraph 3?

MS ROUGHLEY: Yes. So, can I come, then, to considerations of mischief and purpose. Your Honours are aware that the immediate predecessor of section 272, section 74D of the Trade Practices Act – I was not going to go to it, but it is in volume 2 of the joint bundle of authorities at tab 6, page 179. That formulation left much unstated. It provided that where there was a noncompliance with the implied obligation to supply merchantable quality, then:

the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not –

of a merchantable quality. In that situation:

the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation –

et cetera. That statutory language of “suffers loss or damage”, “liable to compensate” for the loss or damage, as I say, did not specify what was the measure of compensation. The way that this was approached, however, was that it was the contractual measure that applied:

namely, the estimated loss directly and naturally resulting in the ordinary course of events from the breach. The prima facie measure of that loss is “the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty” –

This is all matters of history, but just to give your Honours the reference, what I was just quoting from was Justice Kenny’s decision in Lowe v Mack Trucks Australia Pty Ltd [2008] FCA 439, at paragraph 268. So, it is in that context that there is an overhaul of the entire implied warranties arrangement, and we get the statutory guarantee arrangement with all of its remedies in the ACL.

The explanatory memorandum to the Act by which this occurred – namely, the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) (Cth) 2010, is in volume 7 of the joint bundle of authorities, at page 1443.

JAGOT J: Do you have the tab number of that?

GORDON J: Tab 45, possibly.

JAGOT J: Yes, 45. Thank you.

MS ROUGHLEY: Starting at page 1444, it sets out there the immediate context for this. What your Honours will see is that it reflects the agreements of COAG:

to create a single national consumer law –

the intention being that it will replace the State and Territory legislation that was preceded and gave effect to the requirements of the intergovernmental agreement. Your Honours have dealt with these matters before. As to consumer guarantees specifically, at page 1449, there set out was the broad intention that the consumer guarantees would:

replace conditions and warranties that were implied into contracts by the TP Act –

Over the page on 1450, just before the heading “Offences”, your Honours will see a passage indicating that the intention is to set up:

the remedies that are available to consumers when goods or services fail to meet consumer guarantees. The appropriate remedy varies depending on whether –

it is a major or not major failure, but generally includes a set of remedies that will be available as statutory rights.

Ms Capic’s contention is that once one looks at not just the explanatory memorandum but the regime as it was enacted, it is not just a rewriting to make the language more modern – certainly, the language of “merchantable quality” moved to “acceptable quality” – but in the remedial regime there is quite a fundamental overhauling of the remedial consequences of failure when there is a failure of goods to be of acceptable quality. On page 1454, in the last main paragraph, your Honours will see that it refers to:

Four Regulation Impact Statements (RIS) have been prepared in respect of measures included in the ACL. All four . . . were considered by MCCA –

being the Ministerial Council on Consumer Affairs:

in the context of developing the ACL.

Over on page 1459, the last bullet point indicates that:

Remedies applicable to consumer guarantees are set out –

as your Honours have seen, but:

Previously, businesses and consumers required an understanding of remedies under the law of contract to effectively apply implied conditions and warranties to their particular situation. By setting out the applicable remedies, the ACL will reduce cost for businesses and consumers when they seek to assert, or defend, their rights.

Page 1460, from paragraph 7.120, looks at the concept of “Actions for damages against manufacturers of goods”, and, noting that, in the ordinary course:

the primary source of remedies for consumers when goods to fail to meet the standard required by guarantees –

is to go to the supplier. That makes sense, that is where the relationship sits, but the Act entitles the consumer to go to the manufacturer. That, in itself, was not new, but the specification of which injuries were being protected and the measure of compensation was new. In 7.122, your Honours will see that there is a reference to changing it so that it is:

the lower of the price paid or the average retail prices of goods at the time of the supply. This approach ensures that manufacturers are not required to provide excessive compensation to consumers if suppliers charge high prices for goods.

We submit that this is an example – and there are more – that in the drafting of this statute, careful consideration has been given to what would be excessive compensation, what would be appropriate compensation, what would be under‑compensation. It is notable, in that context, that there is no suggestion made that it would be excessive compensation if a supplier had provided a repair post‑supply for the consumer to still have a statutory remedy against the manufacturer for reduction in value damages.

Over the page, there is an example of how it would work to protect manufacturers from having to pay too much reduction in value damages, even where they are the source of the original failure to comply. The only explanation for section 272(3) is what your Honours can see in 7.124; it is the last sentence there. We would say the paradigm example of that is where a car with a latent problem giving rise to a reduction in value on supply is recoverable under (a), and that person then sells the car at an undervalue to a private party. That would be a loss on resale suffered through a reduction in value that would not be compensable.

Again, another indication of the statute and the drafting carefully working through how different interests of different persons – consumer, manufacturer, supplier – should feed into the assessment of what is appropriate compensation in the circumstances.

BEECH-JONES J: Sorry, Ms Roughley, could you just repeat that example you just gave about a resale? What did you say again, sorry?

MS ROUGHLEY: I just said this is another example – and I will keep building through them – of how this statute has carefully thought about the appropriate way to protect the different interests of a manufacturer, a supplier, or a consumer – interests where there has been a failure to comply with the guarantee. And it is carefully working out the circumstances in which a manufacturer should be liable and it is specifying them, and it is not leaving things to be worked out in accordance with the former common law position on the Sale of Goods Act. And it is also working out, as between supplier and manufacturer if a supplier has provided certain things, what can then happen, et cetera.

BEECH-JONES J: I see. Thank you.

GAGELER CJ: Ms Roughley, am I right that paragraph 7.122 is the only paragraph you will be taking us to that actually directly addresses section 272(1)(a)?

MS ROUGHLEY: Yes. There are many others that provide context of what they were trying to do, though.

GAGELER CJ: All right. What is the big picture that you were trying to build up?

MS ROUGHLEY: The big picture is this. In the regulation impact statements that are in, particularly, chapter 25 at the end of this long explanatory memorandum, there is a recognition that a number of inquiries have been taken, looking at when goods are not of merchantable quality – that being the standard at the time – how effective was that statutory protection of consumers? Answer: not very effective in protecting them to get merchantable quality goods in the first place – because the remedial regime was not well understood, easy to enforce, its incentives enabled systematic breach of the requirements, and it was so costly and difficult for consumers to understand that it was at odds with the fundamental purpose of such remedial legislation – and that one of the things that they sought to do was to make this so clear and straightforward that consumers could insist upon their rights without having to do anything like this exercise.

GORDON J: What do you mean by “this exercise”?

MS ROUGHLEY: An exercise of the kind that the Full Court below has indicated should be done. So, in working out what the consumer’s rights are to recover reduction in value damages, the consumer does not just need to say, there is a failure to comply with my good, here is the detail of my purchasing situation, maybe have regard to what the average retail price was at the time, and deal with the question of, hypothetically, what would a reasonable consumer have paid in the construct at paragraph 2 of the outline. In addition to that, the effect of the Full Court below’s conclusion is that that consumer also has to deal with questions of remedy – even partial remedy – that may have become available, as in this case, only after the proceedings were commenced and which may have an effect on how much the consumer’s right is worth.

To pick up a comment your Honour Justice Gleeson made yesterday, it incentivises manufacturers to wait a very long time before they pay any reduction in value damages because the longer they take, the more prospect they have to reduce the reduction in value damages that they will ultimately have to pay to these consumers. So, in a context where the concern was consumers need to be informed there is an asymmetry of information, and that is to the detriment of consumers, and if they get the wrong thing knowingly on the supplier’s account or otherwise, consumers should be able to effectively enforce a statutory remedy and it should be so easy for them that they can understand it.

GLEESON J: Cars are probably the most or one of the most expensive examples of the type of purchase that would give rise to these kinds of remedies.

MS ROUGHLEY: Yes. Another case that has been – at least at first instance – before Justice Derrington is a very expensive yacht. So, you can get something in the millions, but most things – we embrace what your Honour has said. It is lower‑end purchases. It is nothing to do with the complicated exercise that happens when buying a business on a misrepresentation.

GLEESON J: So, your theme would be let us not overthink this?

MS ROUGHLEY: Correct.

GAGELER CJ: Is it just coincidence that the statutory measure matches Marks v GIO, or is there some linkage that we can see in this material to the proposition in your paragraph 3?

MS ROUGHLEY: When your Honour says Marks v GIO, that was not done referrable to the expectation interest, that was done referrable to consequential loss. Actually, 272(1)(a) is what, funnily enough, the borrowers in Marks v GIO wanted to get. That is what they were trying to get, and the Court said, no, you do not have a contract. That misrepresentation as to what your interest rate will be did not find itself into a contractual promise that the interest rate in the financing arrangements will be fixed.

So, we would say it is not a coincidence that what it really reflects is something quite similar to the Sale of Goods legislation that preceded it. That is because that is something that started with contract and developed over time to protect merchants, but it has been modified and adapted to better reflect the consumer context and the protection of consumers.

EDELMAN J: Your ultimate point, as I understand, on this aspect of your submissions, is just that we do not throw the common law out the window, but we start with that and we view this scheme as a scheme which was intended to provide an additional layer of certainty.

MS ROUGHLEY: Yes, your Honour.

GORDON J: I think you may have misunderstood the Chief Justice’s question. Your reference in paragraph 3 to Marks was just to pick up language – you do not seem to pick up the reasoning there, do you?

MS ROUGHLEY: No. So, Marks v GIO is about the consequential loss stage of the inquiry.

GORDON J: We know that, but the question is: is your reference to Marks v GIO in paragraph 3 there because you are picking up the idea about:

what price freely contracting, fully informed parties would have offered and accepted –

That is extent of the reliance?

MS ROUGHLEY: Yes, your Honour. I am grateful, your Honour, and apologise for the confusion. It is that. It was just there have been various questions asked over the last day as to what do you say is the construct being constructed. So, that is to indicate this is the language but adapted to the consumer context.

Chapter 25 I will not go through in any detail, but it is a lengthy excursus on the problems that are experienced by consumers that this regime is seeking to deal with, and what has been extracted in paragraph 6 of the outline of the three problems, your Honours will find at page 1470 of the joint bundle. They are then dealt with seriatim within this RIS in considerable detail, indicating what is contributing to the law of empowerment of consumers and the uncertainty.

It is put in various ways. It is about the complexity of not understanding contract law; it is about the co‑extensiveness of private contractual remedies or manufacturers’ express warranties with statutory rights. One of the things they were concerned about is consumers seem to think that the manufacturer’s remedy was the only thing they had available to them when something went wrong. They did not realise how much protection they could have under statute and, to the extent they did, there were difficulties in enforcement.

From page 1478, your Honours will find the reform proposals that were set out. Again, I will not go through these in detail, but what is clear is that in the drafting of this, they specifically considered do we leave it alone, do we make some minor adjustments, or do we go the full hog? What they suggest is, this needs a complete overhaul on the remedial side of things, because that is the only way to address the consumer‑related harm that the evidence – which they had from various inquiries and reports that had been done – was revealing that consumers were having. The analysis of the particular option they went forward with is from page 1483 of the bundle.

GAGELER CJ: Was there any analysis of the impact of funded class actions?

MS ROUGHLEY: There is reference to representative proceedings being one of the few ways available under the antecedent regime for consumers to attempt to effectively enforce the statutory rights that they had, such as they were, because of the cost involved in litigation and the need to have expert assistance – if I can take that one on notice, your Honour, because I do not know that I will be able to isolate immediately.

GAGELER CJ: That is fine.

MS ROUGHLEY: Can I just emphasise from here, page 1480 of this document, beginning with 25.56. That has something to do with the legal representation, but there is a more specific one I will track down for your Honour. The reference in 25.57, at the end of that paragraph:

If consumers have no means of securing timely and cost‑effective remedies, their rights are, ultimately, of little value.

And 25.58 is where I have sourced much of the objective that your Honours see reflected in summary in paragraph 6 of the outline. It is the last sentence:

The policy of consumer protection not only encompasses protecting consumers from unfair business practices –

Number one:

but also ensuring that consumers are getting what they are paying for and are able to seek redress when they encounter problems.

It goes on with the benefits of that, which I will skip over. The second reading speech your Honours will find in the same bundle. I do not know that I have the tab number ‑ ‑ ‑

GORDON J: Tab 46.

MS ROUGHLEY: Thank you, your Honour. It is much to the same effect. The main part of this is on page 1510, where it is indicated on the right‑hand side, the second paragraph:

These reforms are to be supported by administrative changes and changes to enforcement regimes to make the law more effective, through greater coordination of enforcement and better provision of information to consumers and businesses.

There is reference there to how these:

well‑considered recommendations were adopted by the Ministerial Council on Consumer Affairs –

et cetera. Over on page 1513, under the heading “Conclusion” on the left column, that first paragraph, three‑quarters of the way through:

It will empower Australian consumers and free Australian businesses to make our markets work better – delivering tangible benefits for all.

If your Honours wish to see the Commonwealth Consumer Affairs Advisory Council final report that were so fundamental for the EIS I have just taken your Honours to, you will find it in the same volume, volume 7, tab 52 – but I do not propose to go to it, it is more of the same thing. Sorry, I said I will not go to it, but it is relevant to the question your Honour the Chief Justice asked. At page 1665 there is a section there on incentives, and the conclusion to that section, which is over the page, is that it is believed:

Wherever possible, there is a need to make the law self-executing and eliminate recourse to expensive litigation.

Can I come, then, to the textual analysis.

GAGELER CJ: In a sentence, what do we draw from all of that?

MS ROUGHLEY: What we draw from it is that the main objectives were the three that were set out. In short, they wanted to ensure that consumers are getting what they are paying for, that is the first bit. They want them to get acceptable quality, they would like to disincentivise goods of unacceptable quality coming into the hands of Australian consumers. And secondly that, when that unhappy event happens, they want consumers to be able to seek redress when they encounter problems in a way that is straightforward, efficient and does not incentivise the absence of a remedy being provided in a timely way by a manufacturer or a supplier.

STEWARD J: Can I ask you, if Ford were able to fix all of the problems in your client’s car, would that be the simplest and easiest remedy for a consumer?

MS ROUGHLEY: No. One, because this is a situation where a consumer walked into the dealership and wanted acceptable quality and was promised acceptable quality. That promise had value. That was beyond the consumer’s interest in not also having to pay for a repair in order to ‑ ‑ ‑

STEWARD J: What if the repair was free?

MS ROUGHLEY: That is what – I think we are at cross‑purposes. Had the repair not been free, there would have been a consequential loss point.

STEWARD J: Absolutely.

MS ROUGHLEY: And so, the manufacturer, defraying their responsibilities under either their express warranty, which is picked up by a different guarantee, section 56 of this Act, and then has similar enforcement possibilities – the fact that the manufacturer has to comply with a promise it voluntarily made to give a remedy, or that the manufacturer thinks it is in its interests to itself provide the repair so that two things do not happen, one, it is not exposed to additional damages for consequential loss for this consumer, or, two, under the indemnification of suppliers arrangements, it does not have to indemnify the supplier for providing a repair either. That is all serving the manufacturer’s interests.

It is good for the consumer to avoid consequential loss, too, but it fundamentally does not deal with the other right and interest that the consumer has with a contract different from the cases that are principally relied on by the respondent, which is, I had a promise and it had a value.

STEWARD J: What if it was fixable a week after purchase?

MS ROUGHLEY: It does not change things, though it might have an impact on the value, depending on what information could be fed into the construct. So, if at the time it was being supplied – I do not wish to get into the question of what “availability” means – but if what it is, is, look, this thing is a broken windscreen wiper – that may not even be a failure to comply with the guarantee – but if there is a broken windscreen wiper, I know you want to drive your car out of here today because you have a family celebration and you want to show everybody, but if you come in next week, we will replace it at no cost, obviously it is under your warranty.

The impact that that would have on valuation in that circumstance is likely to be de minimis. As I said, it may not even be a failure to comply. But if it is a revolutionary event – a true leap in scientific knowledge – that happens a week later – and that is the hardest case for us, our submission is the statute has made clear it is valuation at the time of supply, and that is just not brought to account. That is not an unfair result in circumstances where the primary obligation the statute is imposing this, do not give the consumer the dud car in the first place.

So, the likelihood that you have a situation where a dud car has been given to the consumer and an enormous leap of scientific advance happens a week later – as if they did not know about the problem – it is pretty unlikely to occur.

BEECH‑JONES J: Ms Roughley, we will come to this, but do you take issue with Dwyer?

MS ROUGHLEY: Yes.

BEECH‑JONES J: I see. Thank you.

MS ROUGHLEY: Yes. And we have in writing, and I will come to it.

BEECH‑JONES J: Yes.

MS ROUGHLEY: On the Act, paragraph 7, I have sought to encapsulate in summary terms what we said this Act did – it is modelled on the common law of contract and antecedent legislation applicable to sales of goods, but it was modified and adapted having regard to the consumer context, and the remedial purpose of this regime, and the particular mischiefs that had been identified.

Starting with section 3 – this is, I think, just picking up the point that your Honour Justice Gleeson made to me, that the only context in which this is applying is consumer transactions. They are, in 3(1)(a):

the amount paid or payable –

cannot exceed $40,000. Ms Capic’s car, which is about $22,000, is sitting right in the middle of what this looked like at the time it was enacted. Recently, in about 2021, the amount is now greater under (ii) – it is now $100,000.

But we are still at the low end where, in a different context from merchants buying supplies of goods or large‑scale business transactions, transfers for buying into shopping centres and the like. In 3(1)(b) and (c) are the ways in which it may be a consumer transaction, and, again, concerned with the ordinary private lives of consumers. By (c), that is how we get a vehicle – (b) is how we get a yacht. In 3(2) is the carve‑out that what this does not include is, (2)(a), any acquisition that was:

for the purpose of re‑supply –

That narrow context can then explain why Parliament has seen fit to really constrain the considerations which are brought to account in the reduction in value damages for this particular type, particular set of transactions as being something that, in the circumstances, is making the policy choices for everyone rather than, as the common law provided, a prima facie position subject to common law rules of various limitations.

GAGELER CJ: Where did the yacht come in?

MS ROUGHLEY: Sorry?

GAGELER CJ: How did we get a yacht into the consumer transactions?

MS ROUGHLEY: I said it very confidently; I think it was in (1)(b), but the case is Vautin, Justice Derrington’s decision. I assume it came in through personal use or consumption, but I did not actually ‑ ‑ ‑

GAGELER CJ: I am not sure it is a point that helps you.

MS ROUGHLEY: It was a very bad yacht. Section 271, the rights against manufacturer, as your Honours have seen, but that is, of course, predicated on an extended definition of “manufacturers” that is found in section 7 of the Act, reflecting again, by section 7(e), the policy underlying this regime that if the manufacturer who is actually responsible for the good being of unacceptable quality does not at the time of importation have a place of business in Australia, then it is the next best thing, it is the person who does have a place of business in Australia but is the importer. It does not allow the first manufacturer to get off the hook, but it does increase the remedial opportunities for Australian consumers.

By 272(1) to (3), our submission is that this identifies the interests that are protected and injuries that are compensable under this regime. And 272(1)(a) is directed to the consumer’s interest in performance of the bargain, namely, the receipt of a good of acceptable quality. It is also the consumer’s interests in not taking on the risks, as they were at that time, of an acceptable good that they did not bargain to get. And it is (1)(b) where the consequential loss, the reliance loss, is reflected. As I will come to when I come to the cases that are in 7(g) of this outline, that is a very familiar regime.

There has been some modification, though, of that regime, some of which is in favour of the manufacturer. In 272(1)(a), it is now specified that the price is not just – the price is below the average retail price or the price paid, which is, in fact, capping the exposure of the manufacturer not just to what may be the overcharging suppliers, that reference in the explanatory memorandum that I took your Honours to, it also means that a situation like what happened in Clark v Macourt cannot happen here.

So, in Clark v Macourt, where you have the facts of Dr Clark promised usable sperm straws, and that was not delivered to her. On the majority’s view, in separate reasons, that meant that she was entitled to receive the value of the bargain – usable sperm straws – that was assessed to be the measure of replacement straws. And that entitled her to a very large amount of, effectively, reduction in value damages for not getting the benefit of the bargain – the usable straws – even though the value of business that these assets formed part was less than half a million dollars. That cannot happen on this statute, because of this limitation in favour of manufacturers. So that, we say, is showing how there has been a modification of the common law.

Also, there is no reference to prima facie here for the measure being – that is the measure that is used. There is no ability to use some substitute measure if the justice of the case seems to reveal it. Your Honours have already heard about 272(3). Again, the extent to which different kinds of loss or damage are protected and under which heads is being identified.

The point that is made at 7(e) of the outline is that, of course, section 272 is sitting within a context of a much broader remedial regime – section 259 providing for what are the remedies against a supplier, and again, here, quite significant modification of what the common law position would have been or the position under Sale of Goods legislation. In section 259(2), if it:

can be remedied and is not a major failure –

as defined in section 260, then (a) is where:

the consumer may require the supplier to remedy the failure –

and it is only then if a repair is not made “within a reasonable time” that the consumer may go and do the additional things in (b). Section 259(2) is a powerful indication that when the drafters of this legislation, and when the Parliament as enacting it, considered it appropriate to think the provision of a repair was enough to avoid statutory liability, they set out the circumstances in which that would happen.

Section 259(3), then deal with what happens if it cannot be remedied or is a major failure, and the rights given there are in the alternate, the consumer in (a) may reject the goods, or (b), do the equivalent against a manufacturer:

recover compensation for any reduction in the value of the goods –

BEECH-JONES J: Is there any difference between compensation for reduction and damages for reduction?

MS ROUGHLEY: No, but both of them are looking after your performance interest, we would say.

BEECH-JONES J: And not as a prima facie measure – just a measure in their own right.

MS ROUGHLEY: Yes, your Honour.

BEECH-JONES J: Does that pick up what you were saying earlier, that this is an almost stand‑alone issue – you do not have to look up very learned books on damages for 1(a)?

MS ROUGHLEY: Yes, yes. One of the reasons that those very extracts from those very learned books on damages are in the joint book of authorities is to show that pages can be spent analysing the common law position and the Sale of Goods position and which limiting rules of the common law should be picked up and which measure should be used in particular things. This is just a decision being made for everyone on the face of the statute. By 271(6), there is the equivalent to, effectively, 259(2), of when a repair:

in accordance with an express warranty –

may cut down the ability to enforce the 272(1)(a) entitlement. Various constructions have been advanced by the parties on this. Ms Capic’s position is this: it is very clear from the extrinsic materials that the drafting of this was done on the basis that your statutory rights are separate from any rights you might get under a voluntary express warranty.

Those two things may have a common source in the sense of the event of supply, but one is entirely at the discretion of the manufacturer as to the terms of it and it is there – they give it to induce you to purchase it, and the definition of express warranty reflects that, it is something given to induce the purchase, but the statutory regime is Parliament’s decision as to the rights that consumers should have and the protection they should get when it is breached.

So, what 271(6) does is it strikes a balance. It does not require an affected person to go down the warranty route if they want to go down the statutory entitlement route, but if they do, if they make the decision that, actually, it is more in their interests to just go and get a repair from the manufacturer, if they can get it quickly, or the manufacturer’s representatives, if they can get it quickly. If that is the choice that they make, well, that is showing that they think it is in their interest to do it and that is what they have done.

Section 271(6) is incentivising manufacturers to comply with their obligations, do it quickly – the reasonable time, that may not be a requirement of the manufacturer’s warranty, but the statute makes it a requirement of the benefit – and the benefit the manufacturer gets is that it precludes the consumer enforcing the 272(1)(a) right.

It is not that the consumer does not have the 272(1)(a) entitlement before then, it just precludes them from exercising it. On that construction, we say that properly reflects the interests and the allocation or the incentives that Parliament has struck.

STEWARD J: Can I ask you the question I asked Mr Gleeson? What if you pursue your statutory rights and are successful, and then get your car repaired for free?

MS ROUGHLEY: This comes back to that distinction between, you have got two different interests and you are entitled to compensation for both.

STEWARD J: Well, not if you get your repair first and you satisfy (6).

MS ROUGHLEY: Sorry, your Honour, I might have misunderstood. If you have got your repair first, you are precluded from exercising your 272(1)(a) right, but you are not precluded from exercising your (b) right for any other loss.

STEWARD J: I think that is clear from both sides of the Bar table. But what if you get your statutory right first? That is, damages, and then you get your repair for free?

MS ROUGHLEY: We would say, that is how the legislation would work and it is because they are different interests. It goes back to the answer I may have unsuccessfully given your Honour before about defraying other damages to which the manufacturer is entitled but is liable for, which would be the repair costs under 272(1)(b).

STEWARD J: Okay.

MS ROUGHLEY: At 274(2) is the supplier’s right to be indemnified by the manufacturer that I was referring to also. I have said at various points that this (1)(a), (1)(b) arrangement is reflecting the common law position.

GAGELER CJ: Well, I mean, at common law, a consumer does not have a contractual action against a manufacturer, normally. So, I mean, it is ‑ ‑ ‑

MS ROUGHLEY: Yes, I am being a bit loose in my language. It reflects the common law development of an implied warranty into contract in merchantable transactions taken up by the Sale of Goods and then given some level of statutory further extension under the Trade Practices Act to give you the manufacturer’s part of it. What I was intending to pick up, really, is what are the interests protected and the measure of damages under that arrangement as it has had its evolution.

The common law position we have relied on in our authorities as the decision that is in the joint bundle of authorities volume 5 tab 32, Jones v Just. I was not going to go to it other than to say it shows that, as that common law position first developed to favour merchants was, if you had contracted to receive hemp and what arrived was hemp that was not of merchantable quality, what the purchaser was entitled to was the performance interest and that did not have regard to the fact that there was a consequential transaction by which the purchaser managed, in a sale, to considerably offset their loss.

And that is showing this protection of the performance interests from a very early point. Then, reflected in the Sale of Goods Act, your Honours will find that in the joint bundle of authorities volume 2, tab 8.

EDELMAN J: Well, there is a lot of debate about these type of issues at common law, but your basic point is that this was resolved in favour of simplicity and for the purposes of providing what you call a performance interest remedy.

MS ROUGHLEY: Yes. And in Moore v Scenic Tours your Honour made the point that it did not need to be assumed there, but it was, that the statutory measure was the same as the contractual measure. And this case is one where it is squarely before the Court: is it and, if different, how different?

Can I come to the decision, then, of Marks v GIO Australia [1998] HCA 69; (1998) 196 CLR 494. In our respectful submission, the decision of Justice Gaudron usefully identifies what was happening there, which is, in a different context, sought to be done here. There, as I was explaining earlier, and your Honours are familiar with the facts, there was not a contractual promise, but the borrowers sought to obtain the benefit of it. And that was clear from paragraphs 2 to 5 of her Honour’s judgment. Paragraph 7 is the reference to the Full Court below, and held that in section 82 of the TPA, the damages were:

only for “consequential” loss, not “expectation” loss.

And in paragraph 9 then, the requirement that section 82 requires the person to:

have suffered loss or damage –

Paragraphs 10 through to 12 pick up, by reference to the earlier decision in Gates v City Mutual Life Assurance Society, this:

distinction between “expectation” loss and “consequential” loss –

as it had developed in different fields of the law and the resolution of it in respect of what then happens at section 82.

GAGELER CJ: You have used the word “performance interest”. Does that equate with expectation loss, or are we talking about something different? Do we even need the labels?

MS ROUGHLEY: There might be better ones, but what we are attempting to encapsulate is, one gets expectation losses, and they are both the protection of the bargain as well as the reliance losses. Ms Capic does not really have a bone in the fight as to what label is given to the protection of the bargain.

GAGELER CJ: But so much lies behind labels.

MS ROUGHLEY: Yes, but at paragraph 13 of Justice Gaudron’s decision ‑ ‑ ‑

GORDON J: Is that not the answer? Her Honour says, I do not care what you call it, but you have non‑conformance and you are entitled to something for it.

MS ROUGHLEY: That is it. And so, by saying entitled to the performance, that is her interest – there has been an injury to her entitlement to the performance. We are using a word that seems to work, but not intended to capture baggage associated with it beyond that. It is what is recorded at paragraph 13 of Justice Gaudron’s decision that:

Non‑performance is, in effect, the loss of a contractual promise which, itself, is a valuable right.

That is, really, my answer to Justice Steward’s question as to why is just getting a repair not sufficient. There is a valuable promise here that you would get a good of acceptable quality, and that was not received. The next couple of paragraphs of her Honour’s judgment are in a similar theme, and we rely on them, too.

In the judgment of Justices McHugh, Hayne and Callinan, from paragraph 27, there is a similar analysis of difference between contractual expectation losses and what may be the position in tort and for a section 82 claim which, like the borrowers in Gates, just did not have the benefit of a bargain standing behind it. At paragraph 38, their Honours there make the comment that section 82 requires:

examination of whether a person has suffered . . . loss or damage “by conduct of another person” –

and the inquiry on that statutory language, different from 272(1)(a), is:

to identify a causal connection between the loss or damage that it is alleged has been or is likely to be suffered and the contravening conduct.

Our position has been that the wrong for failure of unacceptable quality is the loss of something that was promised, not just what then follows in an ordinary 82 analysis for this type of conduct.

At paragraph 39, their Honours then deal with the facts that it would have been different if there had been the benefit of a contractual promise as well as just the misleading statements. That is what leads their Honours at 41 to say, having made the distinctions between different areas of law and what one is trying to do, does not mean that one cannot get help from it, but you have to be careful as to what was the inquiry for loss directed to. That is, I will come to after lunch, what we say is the difference between what was being done in HTW Valuers and the passages that our friends have principally relied upon.

The difference between what was done there in the way that – to pick up your Honour Justice Beech‑Jones’ words – real value was being constructed. It was being constructed in that way because of the injury sought to be protected there. It was fought on the basis of the misleading and deceptive conduct case and the Court expressly said, although there is a contract here, no one gave attention to whether that would make any difference, and so we do not have to deal with that issue in this position. Your Honour, I note the time. I am about to move on to quite a lengthy topic.

GAGELER CJ: Are you finished with Marks?

MS ROUGHLEY: I am.

GAGELER CJ: All right, thank you. We will take the luncheon adjournment.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

MS ROUGHLEY: Your Honour the Chief Justice asked me about representative proceedings in the explanatory materials. The reference that I was looking for in volume 7 is on page 1476; it is paragraphs 25.40 to 25.41, where they talk about the potential for systematic breaches of consumer rights and coordination problems.

The next case I proposed to come to is HTW Valuers. Very briefly, three distinguishing features of this case. In paragraph 4 of page 645 of the report, it is recorded the promise that was actually made in that case to do a valuation, quite different from the value of the promise in issue here. Paragraph 7, it is recorded that:

The trial judge found that –

absent that negligent or misleading advice, the Fosters:

would not have caused the plaintiff to enter into that contract.

So, a no-transaction case. At paragraph 11, it is recorded, the defendant’s position, that using the price that the market at the time would have valued in the risk was $85,000, and that then comes back up in some paragraphs we do draw quite a bit from.

Paragraphs 12 and 14 are the paragraphs I was referring to earlier, that the parties in that case “gave no attention” to the fact it was also a contract case and whether that made a difference to loss. Paragraph 14 indicates that:

In this Court, the plaintiff contended that if there were a difference in the measure –

it could do no better than section 82, so the issue is joined on that basis. At paragraph 25, in criticising the way that the appeal court had approached the matter, the first criticism that the defendant made, which was accepted at 28, was:

that it was erroneous to say that the plaintiff had suffered no loss at the outset, and erroneous to say that it only suffered a loss when it was reasonably ascertainable what effect the Beach Road Shopping Centre would have.

We rely on that to – there is at least the $85,000 of loss. The question in HTW Valuers was, as stated at 33, is that “the only loss” – that is the words in the fourth line – or should there be more. With the discussion that happens from paragraphs 35 to 38 as to real value, the use of the hypothetical construct and that being a rule of practice, et cetera, but what we draw from that is that the hypothetical construct is just a tool that is used for a particular purpose that is not driven by the construct, it is driven the purpose of the inquiry.

In our case, section 272(1)(a), in this case, trying to work out – because this was a consequential loss case – if there had been no transaction, what is actually the position that the Fosters, or their company, would have been in at the end of the day. They were trying to offset any disadvantage with compensating advantage, and that is why at the end of this decision at paragraph 63 the Court refers to an “alternative approach” that the plaintiff urged in this Court, which was to say, well, let us look at what is left in my hands at the end.

Now, that was possible because there were some unusual findings of fact in this case – they are recorded at paragraph 8 – that it was only the issue of the opening of the shopping centre down the road that had caused all of the diminution in the business in the intervening period. But the Court there is saying that at 65:

There is certainly no reason why –

that approach could not be done under section 82, and it may in fact – paragraph 67 – lead to “a fairer result”. Our construction of that is that is because of the purpose of the inquiry at a consequential loss stage rather than compensating for the loss of the bargain, or the promise, that was provided when contracting. In the course of their Honours’ reasons as to real value, as your Honours have seen, there is the discussion of Kizbeau. We have addressed both HTW and Kizbeau in quite some detail in our submissions, that is in our submissions in‑chief, paragraphs 45 to 47, and then also in reply, 4 to 9.

One of the things that we have pointed out is that in the reference to many areas of law using the construct there is no references to Sale of Goods cases in HTW Valuers, and in Kizbeau there is only one, and that is not one that dealt with – this is in our reply paragraph 9, footnote 10 – that is not one that dealt with the issue that is confronting this Court in this case, which is, at the time that the valuation has to happen, what do I do about a bunch of hypothetical facts that could not be known at that time, and there is no direction in a statute to bring them into account?

Our analysis is to say those are the matters to do with partial repairs and the additional extended matters that the Capic Full Court has said should be brought into account, like Ms Capic’s use of the vehicle, the actual manifestation of the defect for her. They are all things that do not need to be characterised as extrinsic or independent supervening. The primary is they are just excluded by the statute. The fallback is that if one does need to get into that kind of taxonomy, then, as we have said in writing, a repair is an alteration of the good. It is doing the opposite of valuing what was delivered at supply. That then brings me to the decision of Dwyer, and your Honour Justice Beech‑Jones’ question.

BEECH-JONES J: Could I just start you with HTW Valuers. As I understand it – Mr Finch will correct me, but they fix on the first sentence of 39 as reflecting the interpretation of “value” in 272(1)(a), and you say that that method, is that right, is simply not applicable because the interest being protected is different. Is that where we get to?

MS ROUGHLEY: Yes, and that drives the purpose of the inquiry and hence what goes into the hypothetical construct.

BEECH-JONES J: Right. So, I think we were later told that the form of assessment of value is that set out at the end of 44. We were told that in the earlier appeal:

without knowledge of events which have not happened –

MS ROUGHLEY: Yes.

BEECH-JONES J: That is the area we are fighting over, is that right?

MS ROUGHLEY: Yes.

BEECH-JONES J: I am sorry, you were going to Dwyer.

MS ROUGHLEY: Dwyer. I see your Honours are using a different version than our bundle of authorities because your Honours already had it, but if you are using this version, it is volume 5, tab 28. Relevantly from paragraph 231, where the Court of Appeal picked – this point refers to HTW Valuers and Kizbeau, and material I have gone to, and it is the first sentence at 232 that we take issue with:

There is no reason why the same approach should not be taken in relation to ACL, s 272(1).

We take issue with it, at least to the extent that that is about (1)(a). The next paragraph, the subsequent events that might illuminate value as at the acquisition date, we give the same answer to, and the fallback being a repair is not an inherent feature of the good as supplied.

Then, at paragraph 234, their Honours referred to the word “damages”, which has been central to this conclusion, as it is for the Toyota Full Court and there is a reference there to Capic, at 714, which is to Justice Perram’s judgment at 714. At this point, the Capic Full Court had not delivered a decision. We would suggest that the better parts of the primary judge’s reasoning to have picked up, and which are inconsistent with what the Court of Appeal has done at paragraphs 884, 890 and 891 ‑ ‑ ‑

STEWARD J: Sorry, what was the second paragraph reference please?

MS ROUGHLEY: Paragraph 890.

STEWARD J: Thank you.

GORDON J: Is that nothing more than it is dealing with compensation, is that the point? Sorry, the first line of 234:

“damages” in s 272(1) makes clear that the provision is concerned with compensation –

Is that the proposition we are concerned with?

MS ROUGHLEY: Yes, we do not challenge paragraph 714 of the primary judge’s analysis, it is just that that is not dealing with the central issue that is on the appeal. What is the central issue that is on the appeal is the paragraphs I referred to, which are the ones that are inconsistent with what the Court of Appeal in Dwyer has done.

GORDON J: I see, thank you. But you challenged the second sentence of 234 on two bases, as I understand it. The first is that at least some of those events that were identified, which is set out in your subparagraphs 1 to 5, should not be taken into account, which is what you identified at paragraph 4 of your outline?

MS ROUGHLEY: Yes.

GORDON J: Is that the only difference? It is a big difference, but is that the basis on which you challenge 234?

MS ROUGHLEY: There are more, but it may be I am at cross‑purposes. So, the reason we challenge 234 is on the basis that damages for loss of the bargain, or not receiving the value of the promise, is a particular inquiry that is not the same as a consequential loss. I think the reason I say that we might be at cross‑purposes is, it is the same basis that underlies the reasons for excluding all the other things in paragraph 4 of the outline.

EDELMAN J: Is your submission ultimately any different from what Mr Gleeson describes as his alternative case?

MS ROUGHLEY: I do not think so, as I understand it.

EDELMAN J: The alternative case excluded all of the actual misery, the actual suffering, all of those actual events that occurred, but it took into account, with knowledge of the repair, that it would take time for the repair to occur and so on; all of those events at the time of supply.

MS ROUGHLEY: Our primary position is more blunt than that, it is just you do not take into account the subsequent events at all. In the alternative, I would fall back on what your Honour has described as Mr Gleeson’s alternative.

GORDON J: It may be you are going to come to this, but it follows on from that question, because it distinguishes your primary argument from the alternative case put by Mr Gleeson over the last day and a half, and that is the way in which you deal with your (iii):

the post‑supply application of repairs –

Just so I am clear, if you make the assessment on your blunt case, or your more direct case, one says, what would have someone have paid for a car with all of these defects as at the time of supply? What do you take into account by reference to the fact that there are some probables available and around? Does one ignore them entirely or does one take them into account?

MS ROUGHLEY: One takes them into account.

GORDON J: What are they, and what do you take into account, on your blunt case?

MS ROUGHLEY: Can I do it by reference to the actual facts in this case?

GORDON J: When you get to it. Please finish your analysis of Dwyer.

MS ROUGHLEY: Well, I was moving to paragraph 8 of the outline, which is the facts of Ms Capic’s case, to provide the foundation of what is at paragraph 9 of the outline as to defending the primary judge’s approach. Given that there was substantial success at trial on liability for Ms Capic and for group members, and then an extension of that in the Full Court, and so many mechanical causes of problems, it can be a bit difficult to work out what is what. We have sought to make it easier for the Court with the chronology at tab 2 – sorry, this is my bundle – in the appellant’s chronology, item 4 refers to “Throughout the Relevant Period”:

Affected Vehicles were supplied with one or more of 5 Deficiencies.

Thereafter, they are set out over the following paragraphs, and your Honours will see from the reference column this has been adjusted to take account of the differences.

So, on page 3 of the chronology, the first architecture deficiency, my answer to your Honour Justice Gordon’s question is you would take into account everything from item 1 on page 3 up to on page 8 of this chronology – I am using the numbering at the top of the page – where there is a row, third line from the bottom, that is:

As to fixes available –

That is where one stops. To identify what that material is, for the architectural deficiency, when we do not have an aggregate damages award – and the primary judge did not make one because his Honour treated each of the mechanical or architectural causes of the problem as a separate failure to comply. In itself, that indicates the severity of each of these problems on their own, but the Full Court found that – and I will come to the finding on this – given the interrelationship of them and that they are all affecting a common component, they are better understood as a single failure to comply, hence why there has never been any full remedy for the single failure to comply with the guarantee, which is the finding on liability.

So, item 1 on page 3, 100 per cent of affected vehicles have the defect which cannot be fixed. That is in a sense – to put it in simple terms, the engine is vibrating in a way that you do not want to travel through your transmission into your gears and ultimately into the passenger experience. Damping a particular type of vibrations is a way to mean whatever is happening on your engine side, it is not experienced by your transmission, which can cause problems for their robustness, and it is not experienced by the user.

What that meant is, next paragraph – there are all of the issues that it was associated with. That is just it considered in isolation. As to the risk that is associated with it, this gets taken into account to:

the risk is “high” –

because it is:

described as a normal operating characteristic”.

of the vehicle:

As to “slight vibration or shudder –

it is also a normal operating characteristic, but it is:

an “ordinary incident of the operation of the DPS6”.

The second deficiency – heat – is one that has some difference between the primary judge and then the Full Court. This one occurs whenever you have one or more of the component deficiencies I am coming to. It is essentially part and parcel of the first one, to an extent. If you are not damping those vibrations, what you are getting is parts in the transmission moving against each other in a hot operating environment and that causes other difficulties for the components.

So, 95 per cent of affected vehicles have this problem, and what is recorded there in terms of the problems it is associated with is – it is associated with the friction material issue, in particular, but it also “exacerbates” all the other problems. So, those are the two architectural deficiencies. The risk that is associated with this heat issue will be the risk associated with each of the component deficiencies I am coming to.

So, for the component deficiencies – number 3 – 64 per cent of vehicles have this problem. It is a seal – basically, the plastic type of cap that is meant to keep this transmission system’s key operating element – it is called a “dry dual clutch transmission system” because it is meant to stay dry. It is meant to keep the oil out of what is meant to be dry. You can see that if those parts become wet, which they are not designed to be, then things start to become pretty unpredictable for the operation of the transmission. Over the page, that is where you see the problems that are associated with that particular issue. As to the risk, it is:

“well in excess of 20% over the first 5 years of a vehicle’s life”.

Then, the clutch lining, a very substantial issue: 94 per cent of vehicles have this problem. This is a high operating environment, meaning that the friction material, which has very complicated properties – it is very difficult to predict how it is going to work at any given time, but its essential job is to smooth out the vibrations coming from the engine, so, basically, it is helping you have some clutch slip.

If you cannot work out what the frictional properties of the material would be at any given time, it means that your computer cannot work out the alignment to be telling the clutch plates how much to be pushed together or not, and all sorts of very troubling behaviours happen. They are listed on page 6, middle of the way down:

CD2 is associated with –

And there set out is a long list of things experienced. As to the risk – that is the next paragraph – the primary judge’s conclusion was a real risk, and the evidence was – this was in 2013:

50% of B8080 clutches –

had experienced this issue and it:

“further deteriorated over the life –

of the vehicle.

STEWARD J: Just while we are here, what is “green shudder”?

MS ROUGHLEY: It is basically the idea of, if your clutch is not yet worn in, it might do exactly the same thing; it might just be a bit stickier.

STEWARD J: Okay. Thank you.

MS ROUGHLEY: Over the page, top of page 7, the third component deficiency. This is the deficiency associated with a safety issue. I will show you some of the facts when we come to the Full Court decision, but in broad terms, 88 per cent of vehicles have this problem. Down at the last paragraph on that page, it is associated with a long list of problems, which include:

a non‑transitory loss of power (a safety risk –

So that in an overtaking situation, if it occurred in that particular situation – it was unpredictable when it might:

“the potential for a serious accident [being] obvious”.

was the finding. As to the risk – top of page 8:

a “real risk of failure” . . . “reasonably widespread”. The problem was more likely to occur over time –

The reference at the end of that paragraph is to a:

“large number of negative customer experiences –

and the primary judge’s colourful expression of:

“a real world problem, certainly a nine digit one”.

refers to the amount of damages Ford US claimed from its supplier of this transmission system just for this issue. Then we have the interrelationship findings that these things work together, and that is where your Honours will see the summary of the result: only five per cent of vehicles have only one issue and that 95 per cent – Ms Capic is in that class – have three or more.

As to the fixes that are available, the first deficiency – “no fix” – that is (a); (b), the heat issue – basically, if you had the friction deficiency issue and you had the type of vehicle – which was many of them – that there was no remedy there that became available for it, then your heat issue was never solved either. Over the page, page 9 – also, and to the extent none of your other things got resolved – that one stayed unresolved as well. Paragraph (c) is a summary of what needed to happen to fix the seal issue – basically, a more heat‑resistant seal and more robust.

CD2, paragraph (d), is the friction material issue, which there is only a fix for this component deficiency for “some vehicles”. CD3 is the issue to do with your transmission control module not being able to give communications to the transmission, and you have a range of problems, potentially loss of power.

While on the chronology, Ms Capic’s personal experience is in the grey shaded rows of this chronology. As I said, it is only her facts that are in issue. On this appeal, though, it has substantial implications for the damages claims of group members, which are yet to be decided. On page 23 of the chronology, page 22 using the numbers at the top, third line from the bottom in blue, “May 2016” is “Commencement of proceedings”, she having bought her car back on Christmas Eve 2012. At the top of page 23:

The problems continue –

for her in what she experiences. On page 25, row 78 is when she has her clutch assembly replaced, which is the last repair that she receives that was effective to meet a component issue. After that, things are tried, but nothing else helps, so she is left with the residual problems. Then on page 27, row 89, is the trial commencement date.

BEECH‑JONES J: Ms Roughley, just to answer Justice Gordon’s question, you said everything up to the point where the fix is available, nothing else. Does that mean, not even the concept that defects might possibly be fixed?

MS ROUGHLEY: No, and I think that is a really crucial distinction. So, in having full knowledge of the defect, you are aware of its problem, you are aware of its mechanical cause, you are aware of the problems it is associated with and the risk of it happening during the lifetime of the vehicle. The construct asks, with persons having full knowledge of that in the bargaining situation, what value would they give – which necessarily would imply some consideration of, is it possible to repair this.

If there is a swap‑in, swap‑out solution, if you know about the problem and it is a swap‑in, swap‑out thing, a little like an airbag, if you know about that and you think this is the type of thing that is readily fixed, you might make some assumptions in that as to this is likely to be fixed, but you are doing what people do with contracting all the time and just valuing ‑ ‑ ‑

EDELMAN J: But if you are applying what you described as the X‑ray vision, and you are looking into it, you can see, with the perfect engineering understanding of what the problems are, why is that X‑ray vision not also telling you, well, these are going to be repairable but it is going to take a long time to develop the scientific knowledge, or it is going to take a lot of work and it is going to take potentially many years to effect this repair. It is the same type of mechanical or scientific X‑ray vision, to use your analogy, is it not?

MS ROUGHLEY: Yes and no. I do not mean to be evasive, so let me clarify. So, if you have full knowledge of the defect and it is as complicated as this one is, at the time, you have no certainty about whether it is fixable, whether Ford will invest the hundreds of millions of dollars globally to do it, whether, because this affects millions and millions of vehicles worldwide, you will even have supply chain constraints. You have none of that knowledge. What you do know is that with this amount of complexity it is possibly fixable, but whether a fix will become available is, really, quite impossible to know, and I price in the value that I will give as the hypothetical purchaser on that basis.

It is the same as what people do generally when they are willing to accept damaged goods, they make an assessment at the time, what will I price for the – for what this is, the bargain I am actually getting, and what risks are associated with it? We just say it is not more complicated than that. One of the reasons it is not more complicated than that, which I hope to make good by going through some of that has happened below, is that as soon as it gets more complicated than that, it is fairly difficult to work out – to use, I think, Justice Jagot’s word – where does the guillotine come down?

It sounds very easy to say, but you get knowledge of the fix. Just that little bit you take out of the world that then develops and bring it back. That is the Toyota Full Court approach. The Capic Full Court says it is that bit plus how bad it was for this particular good and this consumer, plus the use that was also made of the good in the meantime.

Then, in having knowledge about the fix, are you also to be fixed with the knowledge, as in this case, to go back to the chronology, of what is happening in Ford US as to what they are doing and why they are not doing it? So, before Ms Capic even bought her vehicle – this is row 7 of the chronology on page 11 – there is a special meeting with very, very senior people within Ford globally who decide that they are going to abandon the DPS6 and replace it with a different transmission – “abandon” is the word in the document.

So, the problem they had is they could not get the new transmission into cars quickly enough, because this is such a complicated piece of machinery, you have to get it right from the start. So, they had to persist, if they were going to continue to sell the cars, with this transmission, and the reason that they were abandoning it in part was quality issues, and that is not what they told the consumer.

So, as soon as you start looking at the fix, do you then – and there is a range of rows in this chronology, which is a very small subset of the terabyte of data that came from Ford US, of what was going on about their attempts to fix it, why it was hard, what choices they ultimately made about allocation of resources and the rollout of it. Even just on the fix, if that is all we are letting in before the guillotine comes down, that is very fact‑intensive to do. And to go to that concern that was in the extrinsic materials about information asymmetry, none of this information is ever going to be in the hands of the consumer.

So, unless they go to litigation and use some information production powers, including of an overseas manufacturer who is not party to the proceeding, this is material that they just cannot possibly know. Now, can I come to the primary judge’s fact findings – sorry, the primary judge’s approach to ‑ ‑ ‑

GORDON J: Can I just ask one question, just so I can clarify it in my mind. I keep going back to paragraphs 3 and 4 of your outline. I understand, now, paragraph 4, I think, in terms of what is not to be taken into account. The last line of 3 – sorry, the second:

knowing that the purchaser wanted acceptability –

I understand that:

and making informed judgment as to price for –

the failure:

of contractual benefit/risk.

Is what you just said in answer to Justice Edelman putting meat on the bones of that?

MS ROUGHLEY: Yes, and I also think my answer to Justice Beech‑Jones’ earlier, too – I think it was the question before Justice Edelman’s – that it is what consumers do all the time if they are buying damaged goods: making assumptions about what am I getting and what price am I willing to pay for it, with all the possible risks that it involves.

GORDON J: How do I do that, as an informed consumer, other than to stand there in a showroom, and say, you are offering me a defective good, it has the following five problems. Am I not going to enquire about the possibility of fixes?

MS ROUGHLEY: You may, but you can only do that within the realm of the information that is available at that time. So, take somebody who is buying a used car off the side of a street, and they can see that it has some issues with it, and the very honest seller tells them, it sometimes has a mechanical issue, the air conditioning is a bit bung, not sure, I do not think it is going to be very hard to fix, but it is not a big deal. Second-hand purchasers may say, I just want to get my mechanic to have a look at it. You can go and ask people to help you, you can go and, within the limits of the information that is actually available to the parties at that time, say this is what ‑ ‑ ‑

GORDON J: And the parties at that time is just the informed buyer?

MS ROUGHLEY: Informed of the failure?

GORDON J: This is in hypothetical.

MS ROUGHLEY: Yes. It is informed of the failure, and otherwise, the contracting circumstances as they existed.

GORDON J: Thank you.

GAGELER CJ: So, this is different from a market price or from a market value?

MS ROUGHLEY: Yes, in the sense that there is no market at the time that knew about that, and it is also not the marginal cost type of analysis. What it is, is, as we have said at (3), it is the bargain that was reached taking out the subjective characteristics of the particular consumer that has brought the claim, but keeping in the fact that it is a hypothetical consumer who wants a good of an acceptable quality – that is why they are buying it – and they get told this good is not acceptable for all of the many reasons – the pages of the chronology – and they say, I look around, they might Google, they are within the limits of knowledge at that time, and what would they pay? Because that is the value that that good had at that time.

GAGELER CJ: The wonderful thing about markets, as Hayek told us, is that they assimilate a lot of information. So, it is not up to individuals necessarily to understand the technical details that underlie a market price, but a market price can be taken to take account of a vast amount of technical and other information that might bear upon what is an appropriate value. But you seem to be talking about actual consumers on the floor of a showroom and what they can actually understand at that time. Is that what you are asking us to inquire into?

MS ROUGHLEY: They are half the bargain, it is what the hypothetical reasonable consumer would have paid for this particular good, had they been given the full information. And part of the reason why you cannot get the market price is because they were not told what the problems were, so there is – that is why you have to do this construct. And the further part of that is, then, the judge in Spencer at 440 to 441, just attaching risk to what is the known information.

GORDON J: I think my problem is the known information. I am trying to work out what that is in this case. If you are substituting, at the date of supply, the price for the good – the car – with known defects, are we limited to the information available about those known defects as at the date of supply? We cannot be, because, of course, some of those defects have not come to fruition. So, we know that temporally, we cannot cut it off at the date of supply. So, we are looking at subsequent events.

The question which then arises is, where do you bring down the guillotine in terms of information? I put to Mr Gleeson that if you substitute the value of the car with the known defects, and in light of the state of the remedy at the date of trial, then one has a guillotine brought about by the date of judgment. So, we know that that is the end of available information – it provides you with some certainty.

What you want us to do, as I understand it, is to not take all of that information – one can see it from your list in (4) – and the point is, at what point do you bring down the guillotine if it is not the date of supply – because it cannot be – and why do you do it earlier?

MS ROUGHLEY: Yes, and the answer is, if your Honour goes to the Full Court’s decision from paragraph ‑ ‑ ‑

GORDON J: This is in Capic?

MS ROUGHLEY: In Capic.

GORDON J: Thank you.

MS ROUGHLEY: From paragraph 56 on page 410, their Honours were dealing with exactly the type of problem that your Honour Justice Gordon is putting to me, as to, I am only taking into account some information, I am not taking into account the remedy. That is precisely what the court is required to do at the section 54 stage. This was an issue at trial. Ford challenged it on appeal. And from 56, the Full Court dealt with “Whether, and to what extent, after supply events are taken into account when assessing whether the guarantee has” in fact “been met”.

On our construction of section 272(1)(a), you take all of the findings that are made at the 54 stage. That is the construct that the statute says must be done at the 54 stage, and that is what gets valued. The judge does it – we embrace the primary judge’s suggestion – it can be done by way of judicial estimation in a broad‑brush way.

BEECH‑JONES J: But Ms Roughley, that is an assessment of the hypothetical market value, is it not? I mean, you are describing someone in the showroom, but what that is, is effectively putting together a market value based, one, on the information available in the market at the time, two, plus what you say flows from the statute, being the defect.

MS ROUGHLEY: Yes.

BEECH‑JONES J: All right. And if it is intrinsic value, it is a different process.

MS ROUGHLEY: Yes.

BEECH‑JONES J: All right.

GAGELER CJ: Ms Roughley, we have been asking you a lot of questions. According to the timetable agreed between the parties, I think we are over time already. How much longer do you expect to be?

MS ROUGHLEY: To be very candid, I think my estimate was a hour and forty‑five, which, given I started a bit late, would be 3 o’clock, but I can see the time and I am a bit pushed. If fifteen minutes is not asking for too much extra, I think that would take me to about quarter past 3. In this section of the Full Court’s judgment, 58 is the same issue as for 54:

the identification of the relevant information –

Paragraph 59 includes Ford’s submission as to what should be taken into account:

all available information –

which is, effectively, what the respondent now says should be done at section 272(1)(a), and there are a bunch of factors that they prayed in aid at the end of 59. Then the court dealt with earlier authorities, including, at 61 what the Full Court had said in Medtel, which was dealing with this idea that you are asking the court to bring down the guillotine in a way that, by the time of trial, one knows that there is some further information that might have been useful to know at valuation but, as we see it, the consumer in the construct that is required by the statute does not get to know. In 64, there is a reference that what is taken into account is:

all evidence at trial which bears on the propensity of the risk.

That was the way that the failure to comply was put in this case:

However, evidence as to the discovery, availability, and effectiveness of remedies –

et cetera, it is said:

is more relevant to the question of loss or damage –

Now, that statement is made referring to the Full Court in Medtel at paragraph 73. And that decision about yachts, Vautin at 173. There is no distinction being drawn there between the 272(1)(a) and the consequential loss bucket in (b). And Medtel, of course, just had the wrapped-up damages position.

On the Medtel approach, our submission is that nothing in Medtel is telling you that the (1)(a) equivalent takes into account all of the things that could not have been known at the time. And the reference to Vautin at 173 – there is nothing inconsistent there either. What Justice Derrington was dealing with was a defect with a yacht that no one suggested, if it had been fully revealed at the time, the repair cost, which was some million dollars, could not have been worked out at the time. That is an example of the repair information is something that would have been available in the market at the time, had the failure to comply been disclosed. Just to give your Honours the references for that, for Justice Derrington’s decision, it is 291 through to 302 and then 332 through to 336.

So then, to come to the primary judge’s approach, which is, in a sense, the purer approach that takes the same information used for 54 and then uses it for the 272(1)(a), this begins at paragraph 880. I start here because our ground 2c is about 880 through to the end of 881. Mr Cuthbert – it is the same Mr Cuthbert – he gave evidence for Ford in the trial below and this trial was concluded before Justice Perram, before he did his first affidavit in the Toyota proceedings.

The reason that Mr Cuthbert’s evidence was rejected as irrelevant by the primary judge is important. Can I just flag that the reason this matters is the Full Court has remitted it on the basis the primary judge should reassess damages having regard to evidence of valuation at the time of trial. That is what Mr Cuthbert sought to do, contrary to what he did in Toyota. As the primary judge said:

that is the wrong question. The correct question is what the value was when she purchased it.

He accepts, in the critical next sentence:

No doubt, it is true to say . . . that evidence of current market value is ‘of considerable utility. . . because any assessment of loss suffered at the date of supply must have regard to subsequent events’. But its considerable utility does not extend to overcoming a complete absence of any evidence as to what the value actually was at the date of acquisition.

At 881, fifth line from the bottom, end of the line, says:

Mr Cuthbert was not asked to assume that the vehicle suffered from any defects. Instead he was asked to value the vehicle on the basis of his own inspection, documents evidencing the vehicle’s service history –

and another expert’s report:

that the vehicle was mechanically sound and operated normally.

Wholly contrary to the facts found by the primary judge and as extended by the Full Court. So, that leads to the last sentence:

Mr Cuthbert’s evidence is irrelevant because his assumptions do not match the facts and because he was asked the wrong question.

That is why his Honour then says at 882:

there is no useful evidence about the fair market value –

At 883, he says he is “quite satisfied” that it was worth less. At 884, it is a difficult exercise:

when the defects it suffered from are risks not actualities is inherently impressionistic –

The primary judge does not say, I cannot do it, having sat through six weeks of hearing about this, I cannot put myself in a position to work out what the value was, and he says:

That the risks came to pass is . . . not to the point.

because the failure here is a propensity case, not the actual experience. Then he says, for the same reason, the fact that the respondent may have done a partial repair for one of the five issues just does not matter because it does not bear:

upon the risk of failure which existed at the date of acquisition.

He then, rather colourfully, uses the lottery example. Those risks were what was there at the time of purchase, but the risks at the time of purchase that feed into the value exercise were not changed by what then came to pass. His Honour then applies that logic to the other deficiencies. So, at 887, that is his Honour’s summary of what is in the chronology. Paragraph 888 is identifying the risk as “high” for the “normal operating characteristic” issues, but the consequence of it is not as dramatic. He disregards some other evidence of value at a different point in time. At 890, he concludes that it is:

worth 30% less than its fair market value without any defect on the day that she purchased it.

He does the statutory analysis and:

This is the amount which, if tendered to her on 24 December 2012, would have put her in the position she would have been in if the guarantee of acceptable quality had been complied with at least in a balance sheet sense (ie expectation damages).

That is the approach we support. The other paragraph I gave earlier, when referring to Dwyer, was 891, over the page, and the relevant part is just his Honour indicating his understanding of what (a) and (b) damages were doing, which is in the middle of paragraph 891. The Full Court picks this up at paragraph 298, page 464 of the core appeal book. Set out there is an extract of some of the parts I have just taken your Honours to.

What is missing is paragraphs 880 to 882, which is his analysis of Mr Cuthbert’s evidence and the conclusion that there was therefore no useful evidence. Paragraph 883, your Honours have now read. The second paragraph here, the process of assessing what the value of a chattel was nine years in the past – that is paragraph 884 from the primary judge – and because of how compressed the reasoning of the Full Court is, can I indicate to your Honour that that is what ground 5 of the appeal by Ford to the Full Court challenged. Your Honours will find that in the same volume of the core appeal book, tab 6, page 361, and their Honours upheld this ground.

The other ground that their Honours upheld was ground 8, which is the list of additional – of that event plus some other events that the respondent said the primary judge should have considered and should consider on remitter. The Full Court’s reasoning, 303, notes that the primary judges call this vehicle a “lemon” in the middle, and then 305, here is the analysis on grounds 5 and 8. What is really done – the only analysis of this provision is now between 306 through to 315. What their Honours do is say that Toyota – this is 306 – really answers the question, that is their words in the second line. Then the Court, at 307, proceeds to summarise, we think fairly, what the Toyota Full Court had said.

Where things go a little awry is at 308, where it says, as to the last point, i.e., what is 307(8), that the assessment of quantum is really driven by what the consumer would attribute to loss and utility. They say various things that could be considered, and there is a move at 308(3) summarising Toyota still. It said that – bottom line – one is looking at:

an assessment as at the time of purchase as to the period of time for which the defect was expected to affect the vehicle (before a repair could be found and carried out on the vehicle), whether the repair would be at no cost to the consumer, and any use to which the goods may be put –

That does not necessarily import a subjective analysis, or even an analysis of what the particular consumer did, but then there is a change to that in (4) in the chapeau:

In reaching a conclusion as to the reduction in value, the court should also have regard to any use to which the goods were put despite the defect.

We say that is inconsistent with what the Toyota Full Court said at paragraph 165, but rather revealing of the difficulties of putting the guillotine down on even the Toyota Full Court’s approach. In any event, they then, at 309, say the Dwyer decision, which has come down in between the Full Court hearing the appeal and delivering this judgment, that they understand the Dwyer decision to be consistent on the basis there set out, and your Honours have our submissions on that.

Then, at paragraph 315, nothing in between is further progressing this issue. Paragraph 315 is where we have the conclusion in very summary terms, applying the construction in Toyota. It follows that ground 5 should be upheld. That means that the fact that the defects came to pass them is Capic, and whether any repair was given – that is at paragraph 884 of the primary judge – that has been successful. Then at 315(2):

8(a) and 8(c) should be upheld –

This has a bit of overlap because the repairs and the use by Ms Capic of her vehicle up to the time of trial are brought in; particular circumstances of the claimant. Then (3) is the cusp at question, ground 2c. The Full Court said:

evidence as to the value of the vehicle at the time of trial was relevant information –

with no analysis of the primary judge’s reasons for saying it should be rejected. I appreciate ground 2c does not sound like the type of appeal point your Honours normally deal with, but it is the last part of a category of information that the Full Court has said, on orders, was in error by the primary judge and the reason for sending it back.

In the outline, at paragraph 10, I have sought to bring this together. There are errors operating at a few different levels here. So, the Full Court’s conclusion is parasitic on the Toyota Full Court’s conclusion that damages in section 272(1)(a) invokes general principles regarding the assessment of damages and may require:

a departure from the time of supply or an adjustment to avoid over‑compensation –

As we say, that reads too much into the word “damages” and too little into the careful prescription by Parliament as to that which constitute damages for failure to comply with section 54 and the approach required for their quantification. Itemised in subparagraphs (a) and (b) is drawing out two aspects of that compound error. One is that that identification at paragraph 307(8) of the Full Court’s decision focuses the inquiry on what has been lost in terms of utility by the consumer.

We say that has several problems. The first is that it is just not looking to the loss of the promise to get something acceptable if that is what you did not get. It is not just the avoidance of a negative consequence. That is why we say it is an incomplete understanding of consumers’ interests. Introducing this concept of utility into a consumer statute that has tried to be as straightforward as possible in identifying what are the factors in issue is on one view not helpful, or if it means something different and is constraining factor, we say there is no statutory warrant for it.

The second thing that is going on here – this is still in the lay of the outline – is it is imposing this constraint of actual loss and compensation for injury to the performance interests. I am sorry, I said that was the second thing. They are all in (a). In (b) – similarly, the issue that comes out at 309, and I have already addressed your Honours on, is that it is too narrow a focus to what is being compensated. The picking up of Dwyer, which we say has the problems we have addressed orally and in writing, is compounding the errors here.

Then at paragraph 11 we come to the question of the practicalities of this and the issue is that if one was to try and do faithfully, as a consumer or as a court – as a tribunal – or as part of some negotiation of a consumer saying to the manufacturer, things were breached, give me my damages, what the Full Court’s approach requires here is that a huge mass of information needs to be collated, carefully parsed, potentially contested. The valuation, although the Full Court says it is fixed at the date of supply generally unless there are good reasons, appropriate reasons, to the part – there is no analysis of how you can work that out as a consumer in advance, because it is dependent on everything that is known by the time of
judgment, with circumstances changing. Artificially, it sounds like the starting point is evaluation at the time of trial. Sorry, artificially it sounds like a valuation at the time of supply.

In substance, we say it is really something quite different because of all that is being brought to account which is wholly artificial from what the value at the time of supply would have been based on, and that is why we say, in paragraph 11, that you end up with this vast gulf between the consumer outcomes that, in practice, would follow from the Full Court’s methodology, all justified under the rubric of appropriate and avoiding under or over compensation, and the actual interests of the consumer that were part of the mischief, an object motivating the remedial regime that Parliament has identified. In the course of going through the Full Court’s reasoning and the primary judge’s reasoning, I have identified what is at paragraph 11 of the outline.

Unless there are any further questions, those are our submissions.

GAGELER CJ: Thank you, Ms Roughley. Mr Finch.

MR FINCH: Thank you, your Honours. Your Honours, I will start with a brief review of the highlights of the facts. I will not drag you through all of them. My learned friend, and I am grateful for it, has taken you through some of that. I do that for the purposes of giving some substance to the debate that is going to happen concerning the importance of repairs and the role of affected persons in the debate.

The second thing I will do is a review of the statute, and the third thing I will do is a short excursus on the role of repairs. I do not intend to do an extensive analysis of the authorities, they have been dealt with for the most part and your Honours know what they are. I do intend to say some things about how your Honours should treat those authorities rather than dragging you through them.

Can I flag immediately that we adopt my learned friend Mr Walker’s submissions. I know he would be happy for me to restate his propositions in my own words, but I will refrain from doing that. We do, though, flag also that we diverge slightly from Toyota’s position, as your Honours might have already noticed, on the question of the effect of repairs. I will come back to it in more detail, but we do not say that the Federal Court approach – the Full Court in the Federal Court approach means that actual or available repairs have the necessary consequence of there being no reduction in value, and your Honours will see why that is in due course.

Can I pull out of the facts a couple of matters which we say highlight the way in which the debate unfolds. Ms Capic purchased a new Ford Focus on 24 December 2012. If the Court will forgive me, for brevity I will just use some shortened references. That is in the primary judge’s judgment at paragraph 2. The purchase price was $22,736.36, and that is in his Honour’s judgment at 877.

Importantly, the group members are persons who not only purchase new but also second‑hand Focus, Fiesta or Echo sport cars, and those cars were all fitted with what is called a “DPS6 transmission” during the relevant period, and that period was 1 January 2011 to 29 November 2018. There were 73,451 cars sold new to consumers. They are the people who we think the Act is referring to when it refers to “consumers” in this context, but I will come back to that.

The primary judge recorded that, at trial, Ms Capic estimated there were approximately 185,000 group members, on the basis that each car had approximately 2.5 owners. So, your Honours see immediately that there is a real cohort of affected persons. There are certainly many second‑hand – probably third‑ and fourth‑hand sales – comprehended by that figure. That is as high as the evidence about total group members goes, and your Honours really only need to know about it conceptually rather than exactly.

EDELMAN J: The third‑ and fourth‑hand sales would not be affected persons though, would they?

MR FINCH: They may be, and I will come back to an example of how that might come about. Ms Capic ran her case, as your Honours are aware of, on the propensity basis. Her car was supplied in breach, as your Honours have heard, of section 54 and the guarantee contained therein because it was manufactured with three what were called “component deficiencies” and two “architectural deficiencies”. Again, your Honours do not really need to delve down too much into the characteristics of those, except, perhaps, if one wants to enliven what I think fell from Justice Jagot earlier on about how much misery there was involved in the period after purchase and before repair, or before disposal.

GORDON J: It is relevant, to this extent, to say that there are defects which have not been repaired and for which there is no repair available.

MR FINCH: Exactly, yes, and that is why I am simply highlighting these points so your Honours can be confident of a rough measure of the size of that issue. The component deficiencies, they are related to input shaft seals, the clutch friction material and what is called the “ATIC91 chip” in the transmission control module – if your Honours see the letters “TCM”, that is what that refers to. They gave rise to a propensity for the car to display a range of undesirable behaviours. Again, I will not drag your Honours through it, but the trial judge helpfully summarised them at paragraphs 225, 251 and 344 to 347 of the judgment.

The two architecture deficiencies acted as exacerbators of the propensity. Again, I do not need to take your Honours to the particulars of that, but they exacerbated the propensity by reason of a torsional damping and heat management problem created by the component deficiencies. Your Honours can see a summary of that in the Full Court at paragraphs 222 to 223. One of those architectural deficiencies, the torsion or damping architecture, had its own propensity, which was creating an independent risk of gear‑rattling. Your Honours can see that in the primary judge’s reasons at paragraph 13.

Importantly, and perhaps further illustrating Justice Gordon’s point, not all of the cars were manufactured with all of the component deficiencies. One can see that, and I will not take you back through it, in Ms Capic’s chronology at item 4. But Ms Capic’s car was manufactured with all three component deficiencies and both of the architectural deficiencies. Your Honours can see that in the primary judge’s reasons at paragraph 4. Now, importantly, prior to the hearing, Ford provided free and effective repairs for two of the component deficiencies in Ms Capic’s vehicle. The defective input shaft seals in her vehicle were repaired on 30 May 2017. That is four years and five months after supply.

The transmission control module was repaired on 10 February 2016, three years and one and a half months after purchase, and your Honours can see that in the trial judge’s summary at paragraph 766. His Honour found that those repairs were not within a reasonable time such that 271(6) did not provide a bar, and that is at paragraph 11.

BEECH‑JONES J: Mr Finch, if you can fix the component deficiencies, do the architectural deficiencies not matter? Is that the way it works?

MR FINCH: Yes. Except to this extent – that is too glib an answer. I will come back to this in due course. Part of our divergence from Toyota is we would accept that even if – and this is an extreme example, perhaps – one proffered a complete fix to all the deficiencies, that still means that the car, when sold, had the defects, the underlying defects, which produced them. Now, that may well produce in the mind of the person who is being characterised at the time of the consumer transaction, a need to discount the transaction.

GORDON J: That is to say that the price that you would pay at the date of supply for a car with a known defect would be less than the price you would pay for a car which was section 54 compliant.

MR FINCH: Yes. So that even if one – what we postulate – the reason I expand on this a little is, as part of our divergence from Toyota, even if one postulated, at the time of supply, a knowledge of the availability of a complete repair at some time – let us leave aside whether it is reasonable or not – we would still say that a valuer could easily – it would depend on the valuer’s view – decide that there was nevertheless a reduction in value.

GORDON J: Would you go one step further to accept that there may be a difference in value between something which is four years and five months versus something I can get next week?

MR FINCH: Yes, part of ‑ ‑ ‑

GORDON J: And that would give rise to a different reduction?

MR FINCH: Precisely, yes.

GORDON J: Yes, thank you.

MR FINCH: Part of that – I am going to come back to this – is because we accept that – accepting all the intellectual labour that is involved in reconstructing this hypothetical transaction, for the purposes of creating an acceptable measure of damages which avoids over‑compensation, or, indeed, under‑compensation, the elapse of time between supply and either anticipated or real defect is something that one would expect would be taken into account. Now, as long as we open the door, as it were, to admit of that possibility, the rest is a question of fact, it is a valuation case, and ‑ ‑ ‑

GORDON J: That is not the way it was run at trial, was it? And that is not the way in which the expert evidence was led.

MR FINCH: Well, the expert evidence ‑ ‑ ‑

GORDON J: Sorry, you may be coming to this, and I have probably taken you out of order, Mr Finch, and if I have, I apologise.

MR FINCH: No, no, not at all, your Honour. The expert evidence suffered from a number of defects, including – and they are described in a lively manner, as your Honours would expect – they were all asked the wrong questions. Effectively, they were all presented with a competition between fair market values at two different times. And as your Honours might have noticed, later on, unusually enough, the trial judge, with respect, also fell into that trap, he in fact did not – and I will come back to this in a moment – deploy the three integers in 272(1).

His Honour, as it were, having criticised the experts for deploying concepts of fair market value, did the same, but in the end it did not matter, because of the conclusions his Honour reached about whether the extraneous – when I say extraneous, I mean post‑supply items – came into account. But the only importance of that is – and I will come back to this in due course – concentrating on a competition between two fair market values perhaps served to obscure for his Honour the meaning of the fact that of the three component comparators in 272, two of them are fixed in time but one is not.

That does not jump off the page from a reading of his Honour’s reasons, because his Honour does not descend to observe the two fixed comparators, whereas the Full Court did pick up that. So, that is perhaps a reason why there was a divergence on the question of time. That, as I say, it is important to recognise the fact that there were two effective repairs, but out of time. Now, of course, in summary terms, our approach would allow the Court to take into account those repairs, notwithstanding the fact that they were not sufficient to provide us, bar pursuant to section 271(6) – they would still have an effect, and I will come back to some consequences of that.

As to the third component deficiency, the friction material, the primary judge found that while Ford had proved it provided an effective repair for Fiesta vehicles, it had not proved that for the clutch lining in the Focus and Echo sport vehicles and, of course, Ms Capic had one of those. And, since she had a Focus, his Honour found that Ms Capic did not receive an effective repair for the clutch lining component deficiencies, and that is at 309 of his Honour’s judgment. There was no repair for the architectural deficiencies. The point of that though, is the same as the answer I gave to your Honour Justice Beech-Jones.

Ms Capic experienced manifestations of all of the component deficiencies. That is, in a sense, if one wants to put it as propensities, the propensities all came home to roost for her, unfortunately, so that the risk eventuated in the respect of her vehicle. But it is important to note, again, for illuminating our approach or the Full Court’s approach to this case, that by the time of trial, Ms Capic had driven her vehicle for 136,000 kilometres over a period of seven and a half years.

That is in the Capic chronology, if your Honours want to track that down, at item 90. Now, in that time, her vehicle had three unscheduled services relating to the deficiencies, and they are in that chronology that my learned friend has, and we gratefully accepted it, in items 32, 54 and 58. Again, I do not need to drill down into them for the moment. Because, of course, Ms Capic’s case was run on the basis of propensity rather than symptoms, those behaviours need not have manifested themselves in the vehicle. As it happened, they did.

Can I just pause there and note, at a higher level of generality, moving from the facts in her case to the way that we say the Court should look at it, we say these defects that I have been talking about are intrinsic qualities of the car – “qualities” might be the wrong word to use, but they are intrinsic characteristics of the car. That necessarily admits of, of course, the possibility of repair of those defects. What we say is that changes in the possibility of effective repair or, later, actual repairs, are not supervening events such that they derail any assessment of valuation. I do not need to go into the authorities, your Honours are all well aware of supervening events, but they are not such things because they are associated with an intrinsic quality or characteristic of the car.

And, as I have said, we concede immediately the intellectual strain involved in bringing to account matters which were not actually apparent at the time of the transaction, but I will come immediately – and this arises out of something Justice Gordon asked a moment ago – that right from the start of the scheme of this series of sections which start at section 54, the Act itself recognises a reach beyond the time of supply. And I will go on to expand that point.

But that intellectual strain involved in bringing to account matters which are not apparent at the time of the putative consumer, or the actual consumer, becomes less so when, of course, one realises that one is engaged in what is admittedly a hypothetical exercise, and that exercise is done for the purpose of deriving damages calculations, and if damages are properly understood as being meant to be compensatory, and if that is properly understood to involve an expectation that the compensation will not be over or under, or unjust or unfair, then the intellectual strain becomes worthwhile and more defensible. And we say that, in effect, is one of the impelling reasons why what, to most people, seems an odd exercise is in fact explained by the fact that what one is reaching for is a just compensation outcome.

I will come back to why we say that jumps off the page without me having to refer to HTW or Kizbeau, or anything else, simply from a reading of the statute. Can I come to the Act itself – I am not sure where your Honours are following it along, I am going to use mostly the versions in the Full Court, but I think in the joint bundle it is at volume 1, tab 3. But before I come to the sections, can I just give a couple of overarching remarks arising from what my learned friend has said today. Pardon me, my voice is in the process of disappearing, which is no doubt a relief to everybody, but makes it difficult.

First, with great respect, there is no great utility derived from an examination of the extrinsic material – the explanatory memorandum, or otherwise. They do not deal with valuation matters or techniques. They do not deal with affected persons and the problems we say are associated with reading the Act in a sensible way. I will say no more than that, simply, that they are not a demonstrated utility.

Secondly, we say the resort to Marks v GIO is not helpful – not only because I lost that case 26 years ago, but it is not insignificant – but that was not a valuation case. That was a misleading and deceptive conduct case where the eagle‑eyed Justice Gummow noticed in this Court that my clients had been disarmingly frank at the hearing and admitted that even if they knew everything about the proposed transactions, they still would have entered into it, because it was still the best deal on the market. This was not a terribly high point in the hearing, but that is what that case turns on. The fact that there might be some words of utility is simply coincidence, frankly. It is a case which is vastly different in terms of the reason why it arose and the sections pursuant to which it was run to this case.

Thirdly, we do not – as we have been accused in the written submissions – simply map common law statements onto this Act. We do not start with the proposition that the Act was meant to be analogous to common law concepts, although there are penetrating remarks which have been made by many, including Justice Edelman, I think, in Moore, which observed some similarities between the structure of the Act and certain common law matters.

But we start with the analysis of the statute, and the way that we deploy the authorities is not the way that has been suggested – it is this: if you analyse the Act and you reach the point where the Act poses the question, has there been a reduction in value? If the proper reading of the Act admits of the possibility of post‑supply events, you then ask the question, how does a court approach the valuation of something, assuming that the circumstances in which it does so do not preclude, because of the words of the statute, recourse to post‑supply events?

We do not get there via Kizbeau and HTW, you get there via the statute. Once you are there, those cases – even though they arise out of different circumstances – we say, have useful work to do in explaining how a court approaches that question. But I could not possibly suggest to the Court that if the Act, properly construed by this Court, says nothing after the time of supply, that Kizbeau or HTW provides me with a crowbar that I can open that door again. So, that is the way we approach the use of those authorities.

Can I turn to the Act, if your Honours would be good enough to turn up whatever copy you are using of it. Your Honours will observe – and my starting point is section 54 – a convenient place to see that, if one is using the Full Court in Capic, is in the Capic appeal book, volume 2 at page 403, starting at paragraph 30, where his Honour sets it up. Pausing there, your Honours know that there are no findings in the Full Court below about section 54, which is, of course, the source of the statutory guarantee which are the subject of live issues before this Court, in the sense that any challenge has been made.

But we say it is very obstructive to look at its features. It is immediately apparent, if your Honours would be good enough to look at subsection (2), that section 54 mandates expressly that one has to look beyond the time of supply because it says, after subparagraph (e):

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 –

So, the first thing that one knows is, by definition, those are things which are not apparent then. That is, they are not apparent until later. And there is no controversy between the parties that one can and must look beyond the time of supply to see whether or not what are the terms of the statutory guarantee; so much is uncontroversial. The Full Court then posed a relevant question over the page at page 404 of the bundle, in paragraph 31(3) of the reasons, where their Honours say:

whether, and to what extent, after supply events are taken into account when assessing whether the guarantee in s 54 has been met.

Again, we observe it seems to be common ground that one does that, and one has to do that. I will not drag your Honours through the analysis which follows; they commence a discussion at paragraph 56 in answering that question – that is at page 410 of the bundle. And again, to save time, if I can simply come to the conclusion of that discussion by their Honours at paragraph 64 – and I pause and slow down there:

As submitted by Mr Gleeson SC for the respondent, the Court can take into account all evidence at trial which bears on the propensity of the risk. However, evidence as to the discovery, availability, and effectiveness of remedies for the defects in the Affected Vehicles which are discovered after the date of supply is more relevant to the question of loss or damage than to the quality of the vehicles at the time of supply. We note that such a conclusion is aligned with Medtel (FC) at [73] and Vautin –

which I will not drag your Honours back to. Again, perhaps apart from that last bit, which our learned friends would quibble with, that much is uncontroversial. The point we seek to drag out of it, of course, is a fairly obvious one, which is that the scheme of compensation, which starts with the existence of a statutory guarantee, mandates that one must necessarily look beyond the time of supply.

BEECH-JONES J: The availability of the remedies – does that go into value or does it go to damages?

MR FINCH: It might go to both, so I will come back to the way we say that works.

BEECH‑JONES J: Yes.

MR FINCH: But picking up something that fell from Justice Edelman, I think, yesterday – and I think this was the second or third limb of a series of examples Justice Edelman was giving – and I think the last stage of that series of examples, your Honour, was somebody who had been told, or the defects had been revealed by the time of the supply – it is probably gone in the mists of time, your Honour – but the answer to that postulated course is, that truncates the section 54 guarantee. Then one does not have to worry about 272 problems, because in those circumstances, the guarantee has disappeared, because the guarantee then does not apply to somebody who has been told about it. That is not strictly relevant to the matter I am dealing with now.

The point about this is that it is therefore not jarring or inconsistent to see that in the next two or three steps which follow the identification of the statutory guarantee, there should equally be an ability to look to events after supply, because the whole regime is already doing that. It would be odd if one truncated the range of vision appropriate to the hypothetical exercise at all, except by the time of judgment. One can imagine a construct where one might say, perhaps one limits it to the time which section 54 looks forward to – that is, the last event revealing a defect. But when one thinks about it for a moment, there is no more logic to that than moving to the date of the hearing, because one is still bringing to account things which are not known at the time of the transaction.

EDELMAN J: It depends what you mean by “bringing into account”, though, because one would not, for example, even with knowledge of all of the exact problems that occurred for particular consumers, bring that into account in assessing the value. It is just used as knowledge of what might be the propensity at the time of valuation.

MR FINCH: Yes.

GORDON J: That is why artificiality comes about, because it depends upon where the guillotine is and when your trial is held.

MR FINCH: Yes.

GORDON J: Because that affects the body of available information.

MR FINCH: Yes, because there is not much one can do about that.

GORDON J: No, there is not, but that is the reality of life.

MR FINCH: The same is true, though, of a lot of judicial exercises.

GORDON J: There is. We see it in personal injuries, for example, there is a whole range of damage assessments where it just depends upon – the answer that is put against you on that is, I think this morning – probably not by Ms Roughley, at least I think by Mr Gleeson – was this, you could probably string it out and in effect make it better for manufacturers.

MR FINCH: Yes. The person doing that would have to guess how that was going to turn out.

GORDON J: So, that is the answer, possibly. But it is a fact of the litigation process.

MR FINCH: Insofar as this is a criticism of what we say, I accept that, and the answer is, there is nothing one can do about it. The same, for instance, would be true no matter where you put the guillotine down – which is, I think, what your Honour was saying earlier – if it is still true at the time of hearing, if one moves the guillotine back to the “reasonable time” for section 271(6) purposes, the same would be true.

The same would be true if one moved it back to whatever time was the last time of a revelation of a defect for the purpose of section 54. It is even more true if you move it back to the date of supply, given that you already know that the scheme is looking past that time. A criticism though it may be, it is perhaps something which is simply the product of the way that we resolve disputes, which is at some point a judge says, on what I can see on the landscape that I survey, this is what I can find.

GORDON J: Another possible difficulty is where you have multiple defects like you have in here, you may end up with a different assessment point depending upon which defect it is and at which point ‑ ‑ ‑

MR FINCH: That is the advantage of our approach.

GORDON J: ‑ ‑ ‑ and the interconnectedness of defects giving rise to a composite figure, especially here where you have one breach of section 54 and not multiple breaches.

MR FINCH: Yes. What we say the advantage of the approach the Full Court adopted is, doing the best one can, one assesses the landscape, including how all the defects have turned out, whether there were fixes, whether there were not; whether they were adequate, whether they were not. One thing that I wanted to add, perhaps, when I was earlier talking about the divergence of our approach to Toyota’s approach is there might be a number of reasons where, for instance, even if one postulated a neat circumstance where, almost simultaneously with the time of supply, one is told that there is a perfect fix for all the defects, here is a list of the defects and here is a list of the fixed we have got. On our approach, one still does not say to the consumer, well, you have nothing left by way of a damages claim.

For the reasons I discussed earlier with Justice Gordon, that might simply be, well, I just do not like the idea of a car which even had that characteristic that it had defects which can be fixed. One can imagine all sorts of other circumstances that all would be questions of fact in a valuer’s mind. For instance, it is just possible that consumers might not believe the blandishments of manufacturers about the superb fix which was down the road. There are all sorts of factual speculations which one can engage in, but what they all illustrate is this: on our approach, on the Full Court’s approach, one does that on the knowledge available at the time of hearing. One acknowledges the hypothetical nature of that event, but one acknowledges that the reason one is doing it is to achieve a proper compensation. That, we say, is really the core reasoning behind the whole of the approach.

GORDON J: You keep saying “the Full Court’s approach”, but the Full Court’s approach had a bit of embroidery on it, did it not, in the sense ‑ ‑ ‑

MR FINCH: I am sorry, your Honour, I missed that.

GORDON J: You keep saying “in accordance with the Full Court’s approach”, but the Full Court’s approach had a bit of embroidery on it because of the things it took into account.

MR FINCH: Yes.

GORDON J: So, what we are talking about is not what one has to carve out of those submissions that you just made. For present purposes, the additional bits.

MR FINCH: Yes. I have moved their approach into the rarified atmosphere of this Court.

BEECH-JONES J: Back into the working class of the Full Court, the use of the vehicle by the ‑ ‑ ‑

MR FINCH: That will get back to them, you know.

BEECH-JONES J: As soon as I said that I realised that. The use of a vehicle by the purchaser is just not in this area of discourse, is it? That is at 272(1)(b), is it not?

GORDON J: Just notice the difference in approach.

MR FINCH: Yes, it is – I will come back to it, but there is a possibility of – well, one answer is it is certainly 271(1)(b). It is also possible that one might say, no, it could be an element of 271(1)(a) where as valuer says, well, I am going to value the vehicle but I am going to take into account –that is why we went to these facts earlier – that this person has driven the car, was going to be able to drive the car, for 130,000 kilometres for seven years with a couple of visits to the dealer.

GORDON J: But they are not going to know that at the time of supply.

MR FINCH: No.

GORDON J: It works against your argument.

MR FINCH: I am suggesting it is at least possible that one could construct that argument about it, but the reason I have not is because it is not a very comfortable argument, and I much prefer the argument that says there is a consequential loss provision in 271(1)(b) that it fits in without difficulty.

GORDON J: All right. If we look at paragraph 4 of Ms Roughley’s outline, she identifies four matters that were taken into account.

MR FINCH: Yes.

GORDON J: Does that answer you just gave apply to each of them other than (iii)?

MR FINCH: I am sorry, I missed your Honour’s question again. Part of lurgy I have is ears as well as throat.

GORDON J: I apologise, I did not speak clearly, Mr Finch. In paragraph 4 of Ms Roughley’s outline, she identifies four matters about which they complain which were taken into account. Justice Beech‑Jones has just taken you to one of them and you have given an answer. Is the same answer given in relation to the other matters identified in that list, other than the availability of the repair?

MR FINCH: I think the answer is as I have already given it. That is, yes.

GORDON J: Thank you.

BEECH-JONES J: Mr Finch, you started with 54 and said we learn about events after supply about the hidden defect of the goods. So, do you get to say, well, that must carry with it what we learn about the ability of when and whether we can repair the defect of the goods?

MR FINCH: How effective, for instance, yes. How long was the delay, how long was the misery period – in Justice Jagot’s language – before the repair, all of that.

GORDON J: But not the experience of the failure to comply, not the use of it and not the performance after supply, except to the extent that they might feed into (b).

MR FINCH: Yes.

GORDON J: Thank you.

MR FINCH: I will come back to that, but I am told that we do have a fabulous argument about why yes in (a), but I will come back to it when I am convinced of it, your Honour.

EDELMAN J: Would the “yes” to (a) not be the data points point? That you are not relying upon them as matters that have actually happened for an assessment of consequential loss. But you can rely upon them as facts which show what the likely consequences for a car of that nature when you are assessing value at that point in time.

MR FINCH: Yes, that is exactly right, your Honour. With respect, yes.

STEWARD J: That is what you mean when you said you would take everything into account but acknowledge the hypothetical.

MR FINCH: Yes, that is the intellectual hurdle, in a sense, that one constantly runs up against when thinking about this is: but wait a minute, nobody knew that. If one looks back to the speech of Lord Reid which had Justice Branson, I think, extracted in Medtel. It is exactly that sort of dynamic that one constantly runs up against. Surely, the unknowable cannot be part of the analysis.

GORDON J: As you earlier pointed out, that it is an exercise we do, not just in this context but in other contexts.

MR FINCH: Exactly, and that exercise is more suited to the identification of defects anyway, for 54 purposes, than it is for the identification of damages in 272, if one is going to do it at all.

JAGOT J: Your position be reinforced by the words resulting from the failure to comply, obviously.

MR FINCH: Yes.

JAGOT J: Meaning not that might result or might not result, but what actually results.

MR FINCH: But actually resulting. I think I have bled section 54 dry, but if we then turn to section 271, which appears at page 456 of the Capic appeal book, starting in paragraph 260. Your Honours have already been taken to this, this is where we see, at least in this scheme of sections the word “damages” used for the first time. As your Honours know, there are some similar series of sections used in other contexts in the Act but, for the purposes we are currently looking at, one sees it appears there in the last line.

Your Honours will observe, as used there, it is not expressly constrained by any reference to time of supply. It is necessarily a concept where, used there, which is consequential upon – I keep using the word “breach” as shorthand, but it is failure to comply with the statutory guarantee, but your Honours know what I mean. We say that there is nothing, either, implicitly there which ties it to an assessment at the time only of supply. The Full Court in Toyota started its analysis here, if one looks at the Toyota book, at page 286.

GORDON J: Did you say page 286?

MR FINCH: Yes, that is my note, your Honour, I am just going to see whether I have got it right. Yes, at page 286 of the Toyota book.

GAGELER CJ: Is this a paragraph in the Full Court’s reasons?

MR FINCH: It is paragraph 97. Your Honours see here that the Full Court had started a high‑level summary of principles concerning damages in the context of 271 and 272, and their Honours immediately introduced the concept of compensation. In the third or fourth line:

It is uncontroversial that the word “damages” in ss 271 and 272 is used in the sense of statutory compensation. It is implicit in the notion of compensation that the claimant needs to establish that they have suffered loss or damage.

Then they go on. I do not need to read it out, but your Honours can see the rest of that paragraph. It is worth noting that in this Act the word “compensation” seems to be used interchangeably with “damages”. If your Honours would be good enough to turn back in the copy that you may have with you, it is in the joint bundle of authorities, volume 1, tab 3 at page 73, and look at section 259. This is the supplier analogue of the sections we are currently looking at which are to do with manufacturers.

Your Honours will observe that it is of a slightly different structure. It incorporates a differential between minor and major failures, which I assume was put there for the benefit of lawyers, but other than that the concepts which are deployed are similar to those we see. So, if one looks at subsection (3), this is in the major category:

If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:

(a) subject to section 262 . . .

(b) by action against the supplier, recover compensation for any reduction in the value –

Now, that is sufficiently similar to 272(1)(a)(i), or even (1)(a). But in the very next part, subsection (4), which is the analogue or the consequential loss part of the two‑pronged loss structure in 272:

The consumer may, by action against the supplier, recover damages for any –

et cetera, in terms sufficiently similar to the section we are looking at.

BEECH‑JONES J: The text at (4), which is the same as (1)(b), the phrase “damages for any loss or damage”, is suggestive that the word “damages” is a reference to money sum, is it not?

MR FINCH: Well, I will come back to that, your Honour.

BEECH‑JONES J: Yes.

GORDON J: I think I put it to Mr Walker, but it is like an umbrella term.

MR FINCH: Yes, and I will come back to it.

GORDON J: In 272.

MR FINCH: Yes. I have diverted slightly there. The key element of the Full Court’s reasoning in Toyota is at paragraph 99 – again, at that page 286 of the book. Having started with, then, that equation of damages with the concern with compensation for loss or damage, they move straight from there to, in about the middle of the paragraph:

This may require, depending on the circumstances of the case, a departure from the time of supply or an adjustment to avoid over‑compensation.

We would add, also, to avoid under‑compensation, because if both outcomes are equally unjust and unfair ‑ ‑ ‑

GORDON J: Mr Finch, I do not want to go back and re‑run the other case, but Mr Gleeson identified that as one of his key areas in the judgment of the Full Court because of the sentence which reads, as you have just read to us:

a departure from the time of supply –

MR FINCH: Yes.

GORDON J: There were five areas on that page, and according to my notes of defects he saw in the judgment, and that was one of them.

MR FINCH: Yes.

GORDON J: So, you do not embrace the whole of that sentence, do you?

MR FINCH: No.

GORDON J: No.

MR FINCH: There is a peculiarity, if I may say so, with respect, in some of the expressions because there is a distinction which is sometimes adopted on the one hand – and I will come to an example of it in a moment. One fixes the date at the date of supply and brings to account information later observed. On the other hand, one says one does not fix the time of supply, one simply moves it to whatever time you are adjudicating on the matter.

GORDON J: There are two inquiries, I think. One is, you are making a judgment at the date of judgment, you are making a valuation, or an assessment of value, at the date of supply, taking into account known information, which includes – I think I have said that it is the state of the remedy, and as you, I think, have accepted, that is a hypothetical construction. There will be some information that will be in or out depending on the date of the trial and the date of the judgment.

MR FINCH: I accept that, your Honour. What is not entirely clear is the difference between describing the process as moving the time of assessment to the time of judgment or leaving the time of assessment at the time of supply but taking into account matters which are apparent at the time of judgment.

JAGOT J: The answer to that might well be, if you did not do it at the time of supply, at the time of judgment it is very difficult to get rid of all supervening events. For example, the COVID‑19 pandemic, the price of second‑hand cars has all gone up. You might say that that is somehow relevant.

MR FINCH: Perhaps it makes it easier to do the exercise to identify supervening ‑ ‑ ‑

JAGOT J: It is easier to attribute the knowledge back.

MR FINCH: Yes, but when one considers the population of events which would then properly be brought to account, one would think the population would be the same, no matter how one described it.

GORDON J: I do not know about that. One of the other ways to look at is to ask yourself – in a sense, consistent with your submission about 54 and hidden defects – what is the price a person would have paid at the date of supply with the knowledge of the defects and, to the extent relevant, the other matters that are relevant to that assessment.

MR FINCH: Yes. That would certainly seem to be an encouragement to leave the date of supply where it is because that is the element of the notional transaction. Then, one simply adds to the intellectual strain in the hypothetical exercise of bringing into account, at that time, those later matters, but at least it preserves the integrity of the transaction being examined as at the time of supply being the notional transaction rather than a time after that.

STEWARD J: Can I ask a slightly different question, Mr Finch? Why is the relevance and the utility and the use of post events not really just a matter for the valuer?

MR FINCH: My short answer is that is right.

STEWARD J: Is this a question of law or is this a question for the valuer?

MR FINCH: As long as one accepts, we utterly endorse what your Honour says, with respect. If one looks at section 272 again for the moment – I am jumping ahead a little, and I will come back to this in a moment. An easier way, perhaps, to read this in a way which makes sense of the concepts is to recognise in 272(1) there is two references to the word “damages” – and I am leaping ahead here a bit:

In an action for damages –

and I will come back to this, that is, untethered. One way of reading it, which is perfectly proper English, is to read it as if it said this:

entitled to recover damages for:

(a) any reduction –

And (b), damages, so that when read distributively – the damages – it makes it slightly clearer, it is not doing violence to a language, it is just making slightly clear that this is a distributive word:

damages for:

(a) any reduction in the value of the goods –

That bit – and this is the big point I want to make when I get there – is not fixed in time, that is just the task for the valuer to do, and the valuer has only two fixed elements in that exercise to take into account. I am jumping ahead a little bit there, but I think that is the answer I want to give to your Honour Justice Steward.

GLEESON J: Valuation always had to be grounded in a point in time, does it not?

MR FINCH: Yes, but our only question is, how much information do you import into the exercise and whether one considers oneself hamstrung by 272(2) or 271, or any part of the Act in that exercise, and what you bring to account.

GAGELER CJ: And valuers are giving expert evidence on the basis of assumptions, and it is, really: what are permissible assumptions? That is the question.

MR FINCH: Yes, and although there might be some awkwardness in it, experts – and your Honour has seen this thousands of times – are commonly given a list of assumptions on which to base their exercise, whether it be valuation or otherwise. Whether or not they are yet established, or never established, does not necessarily affect the ability that they have to complete the exercise.

BEECH-JONES J: But Mr Finch, would we not give the valuer – they would have to be given the assumption as to the value of the goods at a particular time. They would not make that up for themselves.

MR FINCH: No, but what they would do is be told, now, your task is this; and this is a question that arose from the Chief Justice before. This is not a fair market valuation, this is a slightly odd, truncated transaction. That is a putative transaction involving a consumer buying this car, not all of the cars, in circumstances affected by the following list of factors.

BEECH-JONES J: It is an extrinsic value valuation, is it not?

MR FINCH: Yes, I might have misunderstood your Honour’s question, but the answer is yes to that.

BEECH-JONES J: Paragraph 39 of HTW, as opposed to paragraph 44.

MR FINCH: Yes.

GLEESON J: But Mr Walker agreed, and I think you have adopted his submissions, that the appropriate valuation approach in this case, or an appropriate proxy, was a market valuation.

MR FINCH: That might have been shorthand, but to the extent that that is being used in its colloquial sense, we would not agree with that because this is a truncated market with particular rules of a game.

EDELMAN J: Truncated hypothetical market.

MR FINCH: Yes, exactly, it is not everybody, it is not every car, it is not all the defects. So, there are a number of boundaries to the exercise, and there are a number of inputs to the decision‑making process, which would not normally be inputs to a normal market, although a free market. The Full Court, if I could go back to what they said.

MR FINCH: I am back in the Toyota appeal book at page 286 where I had left off at paragraph 99. Now, the Full Court there recognises – and later during discussion it became plain that they do recognise – there is a starting point. The fact that they recognise that is not a difficulty for us, of course, nor for them.

The implications of the compensatory nature of the damages task which they are setting for themselves seem to come, at least partially, from Johnson v Perez, amongst other cases, which their Honours extract over the page starting at paragraph 103, which is at page 287 of the Toyota book. If your Honours are good enough to turn to that reference there, your Honours will see there is an extracted section. If one turns to the second and third paragraphs of the extract, the second paragraph is the one commencing:

There is a general rule that damages –

It goes on to the highlighted section:

this rule is not universal; it must give way in particular cases to solutions best adapted –

A similar point made in the third extract. Of course, over the page – before I leave that, we accept, of course, all the strictures about using cases when one is interpreting a statute – this one a negligence case, of course. But if we look at the first of those extracts, in the second and the third paragraphs, we say that the Full Court did not overstep the bounds of the appropriate use of authorities in those circumstances. That is, in a statute where there is an untrammelled use of the word “damages”, they were entitled to say, what is incorporated by that word? If it is compensatory, as it seems it is – because that word is used interchangeably in the Act with that concept – what does that import?

BEECH‑JONES J: Mr Finch, it would be a bit odd though, would it not, to say you have scope to do evaluation of the goods at the time of trial but you cannot take it below the average retail price at the time of supply?

MR FINCH: That is one of the two comparators which is used as a proxy for the value of the thing when you acquired it.

BEECH‑JONES J: The other one is the price paid at the time of supply.

MR FINCH: Yes, and I will come back to this. There is an interesting feature about those, particularly when we get to affected persons. The clear intent, one would have thought, with those – and I will come back to this – is that the price paid is the price paid, there is no argument about that, and then the second comparator, whichever is the lower – the average retail price – presumably that was drafted to avoid the unwanted effects which would lead to overcompensation of somebody buying from a dealer who was rapaciously charging a price that is too high.

So, if you bought a car that was $100,000 to you, but it should have been – according to the average retail price – $50,000, you do not get to derive your damages by being unwary, and walking into the wrong dealer. It has a different resonance, which is probably un‑looked for when I come to dealing with affected persons.

We observe that the Full Court here effectively identifies through the use of this and our authorities two ways of approaching the question, which are the ones I think I was referring to in responding to Justice Gordon’s question. If one looks at the extract at page 287 of the bundle, and those second and third paragraphs of the extract, one is here changing the date – one is looking at changing the date of assessment. If one turns through to paragraph 107, their Honours there look at it the other way:

It is also relevant to note that, as the primary judge recognised, in many fields of law, assessments of compensation made as at one date are commonly made taking into account –

That is the second way of looking at it. You do put the flag marker in, according to this version of the approach.

GORDON J: Your argument in this Court is that one adopts the second, not the first.

MR FINCH: We say that one can do both. We say that both are available, but that there are reasons – which I have briefly referred to in answer, I think, to Justice Jagot, where one might prefer to fix the date and bring into account the other information. That has a number of perhaps theoretical attractions, including the one that Justice Jagot mentioned.

What the Full Court was not doing here was, as seems to be suggested, simply mapping these common law concepts onto the Act. It was simply reaching a point at the Act which recognises that the Act was mandating an approach of saying please determine damages which are meant to be compensatory. And they simply say, well, how do you do that in circumstances where you might want to look later? Now, as I have said earlier, if the door was clearly shut in the Act to looking at circumstances later, then you would not do that. What I am endeavouring to say is that the door is not clearly shut.

The Court might have noted – I think I am up to section 271. Just finishing that off, you will note that the right of action in 271 is conferred not on the consumer but on affected persons. Before I come back to the tantalising consequences of that, can I ‑ ‑ ‑

EDELMAN J: We have all been waiting for that for about an hour. We are very excited.

MR FINCH: Your Honour is concealing it remarkably well. Can I come to section 272. I have jumped ahead a little on this, but I will deal with it as quickly as I can. Your Honours see, as I said earlier, that damages is again referred to in the chapeau. It is not expressly constrained in time. It is, I accept, constrained in content by what follows thereafter, but not all that content is constrained in time.

Then, as I have observed, it is of some utility to read the second use of damages distributively across (a) and (b), just to make it quite clear that it is damages for reduction in value of goods, and damages for loss and damage – which is a bit repetitive – but just to make it slightly clear that my argument in respect of (a) is one which is acceptable and appropriate given the language. It does say in (1)(a), “any reduction” – indicating, of course, the possibility that there may be none – that does not take me particularly far – but neither of the uses of the words “damages” in the chapeau, as I say, are constrained in time, other than it must result from something. In (1)(a), it has to result from the “failure to comply”.

Then there are the two alternative comparators. The comparator in the first, 272(1)(a)(i), “the price paid or payable”, is an integer which is inherently fixed in time – we accept, of course – and, indeed, an amount. It may be a message of, as it was in this case – if your Honours have glanced in the primary judge’s determination of this, it was not a completely straightforward exercise – but once it is completed, then it can be acknowledged that that integer is fixed in time and in amount.

The second alternative integer is the average retail price at the time of supply. Of course, as we see, that is expressly constrained in time to the time of supply and, indeed, amount because, once calculated, it can only be the average. It is a mathematical certainty what it is, so it is constrained in time and amount. As I have said, slightly oddly, his Honour the trial judge did not utilise any recourse to these two fixed items or compare them to the untethered nature of damages in what precedes them. Your Honours can see that as an example in an analysis which concludes, I think, at paragraph 890, which is in the bundle at page 279, but I will not drag your Honour back through that.

GAGELER CJ: Those two possible comparators are fixed at the same time, are they not? They are both referring to the time of supply.

MR FINCH: Yes, they are both fixed at the same time. Not, of course, the same amount, but the point I really wish to make is: fixed both in time and amount. They cannot be anything other than they are on examination. They are objectively verifiable, to put it another way.

GLEESON J: And what is reasonably foreseeable within subparagraph (b) is what is reasonably foreseeable at the date of supply?

MR FINCH: Yes. I will come back to (b), but at the moment I am engaged in demonstrating – which we say jumps off the page immediately as soon as one is thinking about this – the damages component of the three comparators is the one which is unconstrained in time, or indeed amount, of course, until it is determined by a judge. What that demonstrates is that when the Act wishes to tack a concept to a time or amount, it does so. It says so. It does it here in the two alternatives, the fixed alternatives.

But, where it does not do so, we say expressly or impliedly, why would one import that requirement and constrain the determination of damages in that way – particularly when it says, effectively, “damages as a result of”, and then one reads what is following, and one reads that in the light of what the Parliament, we assume, must have understood about the accumulation of law about how one determines damages if one is looking to compensate. So, effectively, the Full Court is underlining the concept of compensation when thinking about what it is that the Act says when it talks about damages when damages are not tied to the time of supply, but the other integers are.

BEECH-JONES J: Do you accept the reduction in value is tied to the time of supply?

MR FINCH: No, because neither is that tied in time, because it says “damages for”:

any reduction in the value of the goods, resulting from the failure to comply –

if your Honour sees that.

BEECH-JONES J: Yes.

MR FINCH: That “resulting from” is an open window going forward into the future – that may happen days, months, years later.

GLEESON J: The guarantee is given at the time of supply.

MR FINCH: Yes.

GLEESON J: It is not given on a daily basis thereafter.

MR FINCH: No, I accept that, your Honour, but we have moved on from the guarantee and we are now looking to see what happens when you seek to determine damages from a non‑compliance with that guarantee. Because of the words, “resulting from”, the one thing you know – again, similar to section 54 – the one thing you know about the exercise is it is a forward‑looking exercise – it is something which you look at to see what has resulted from something ‑ ‑ ‑

EDELMAN J: Is this is just your textual basis, to go from the point of supply, to take into account the later events?

MR FINCH: Yes.

GORDON J: You say it is driven by the reference to hidden defects in 54?

MR FINCH: Yes.

GORDON J: Or at least supported by the idea that compliance with the guarantee means that hidden defects have to be taken into account.

MR FINCH: Yes.

GORDON J: But they necessarily come to light after the date of supply.

MR FINCH: Almost certainly. If they do come to light before the time of supply, then, as I said earlier, section 54 is accordingly truncated.

GLEESON J: But the failure to comply occurs on the date of supply.

MR FINCH: The failure to comply is something which is ascertained by comparing the characteristics of the car in the terms mandated by section 54. But when one moves to section 272, it then looks at what results from the failure to comply, so the ‑ ‑ ‑

GLEESON J: Or a change in value. What is the change in value?

MR FINCH: Yes, so the whole point I am making is that there are parts of this scheme which are necessarily fixed, but they do not include the assessment of damages. That arises without recourse to any of the authorities – HTW, Kizbeau, or otherwise – it simply arises from the words used by the Act.

GAGELER CJ: Mr Finch, I must say, I am a little confused by you beginning by saying that you adopted the approach of Mr Walker. I am not seeing much of Mr Walker in the submissions at the moment.

MR FINCH: When one looks carefully along at them, I am sure there is a great deal of similarity, your Honour. To us, at least to our perception, it appeared that the only real divergence was the implications of our interpretation of the Full Court on the role of repair, because it appears that in Toyota’s approach, there was a circumstance where repair would indicate that there was no possibility of recovery of damages.

GORDON J: That comes back to this restoration or reinstatement of value.

MR FINCH: Yes.

GORDON J: The 123 kind of argument – and you say, properly understood, that means that even if you have got a repair, and the defect has therefore been met, there is still a possibility of a reduction in value under (a) because somebody – the hypothetical purchaser – would have paid less for a car in those circumstances.

MR FINCH: Yes, and that is a valuation case. We say that is what is admitted of, and indeed compelled by, these words. Now, we did not appreciate that that part of our reasoning was different from that adopted by Toyota, except to the extent that they imposed the removal of the ability to recover damages in circumstances where there had been a repair. And we do not say that the Full Court, on a proper reading of it, has that result.

GAGELER CJ: When you say that is a valuation case, of course, valuation occurs as at a particular date.

MR FINCH: Yes.

GAGELER CJ: But you seem reluctant to say that the valuation under section 272(1)(a) occurs as at the date of supply.

MR FINCH: I am not reluctant to say that, your Honour, I apologise if I have given that impression. The impression I meant to give was the Full Court seems to postulate two ways of doing it. You value it as at the date of supply but bring to account the post-supply information. And that is in paragraph 107 I think, where they say that.

EDELMAN J: And that is your preferred approach?

MR FINCH: It is, yes.

GAGELER CJ: And it is also the Dwyer approach.

MR FINCH: Yes. And so, we embrace that, but we acknowledge, as part of the argument, as the Full Court did, that another way of looking at it is you move the date of assessment. That is in that earlier paragraph that I think I read out.

BEECH-JONES J: But you do not need that, do you?

MR FINCH: I do not need it.

BEECH-JONES J: And you also do not necessarily need your reading of the word “damages” as representing loss or damage.

MR FINCH: No. The focus that we have – although the Act is a bit fast and loose with these interchangeable phrases, the principal point that we would like to make is the interchangeability of damages and compensation in the Act. We say there is an equivalence which is there. Even if there were not, their Honours’ analysis of damages being compensatory is correct.

EDELMAN J: I do not want to spoil the surprise, but is that because of this affected person argument you are about to come to? That you use compensation as an implication within the section to prevent double recovery by multiple affected persons?

MR FINCH: Not quite, your Honour, but can I put it this way. I will come back to this. If one observes, in the process of identifying damages, circumstances which give rise to an overcompensation, whether it be in the affected person regime or in the regime of the original purchaser – and I will come to give an example where it might occur in a regime with the original purchaser – but assuming there had been a second purchase, whether they are a claimant or otherwise does not matter, the Court then has to look at: how do I address this, where can I adjust to avoid overcompensation?

You cannot adjust the two fixed integers in 272 – they are fixed in time and amount. The only thing you can adjust is damages for reduction in value. We say there is no strain involved in doing that, because you say. I am giving damages for reduction in value, but those damages (a concept which is inherently compensatory) would result in an overcompensation; in the following circumstances, I reduce the award of damages accordingly.

EDELMAN J: So, where you have the secondary sale and the second purchaser brings the action first, they can recover first from the manufacturer, but the first purchaser cannot. Is that the way it works?

MR FINCH: Not quite. I will give an example which I hope clarifies what we say about it. I had not thought I had to say what would happen if a second‑hand purchaser brought the action first. I will have to think that through. The example I give is the example which demonstrates the probable necessity of the Full Court’s analysis being the only correct analysis because of the mere existence of the possibility of second‑hand sales, for instance.

For this example, it does not matter whether there has actually been a second‑hand sale, but the example demonstrates that if there is one and you do not bring the proceeds to account, then in the case of the first purchase there is a necessary overcompensation which you cannot adjust by, as it were, twiddling the dials on any of the three integers in 272 except the first, damages for a reduction in value, because the other two are the fixed comparators.

BEECH-JONES J: That is assuming a sale at a price that does not reflect the defect.

MR FINCH: I am not suggesting it must happen, but if it does happen, then you would hope that the Act allows of the possibility of adjustment to avoid over‑compensation. I am sorry, I see it is 4.15 pm.

EDELMAN J: It may also be – you can take this into account overnight –that you are now in that example confusing (a) and (b), because whether or not a loss is made on the subsequent sale is a question of consequences, and you might not even know that if, for example, there is a latent liability that the first purchaser has for the second purchaser.

MR FINCH: Yes, I will think about that, your Honour, overnight.

GORDON J: The other possibility may be that there is no need to adjust, because both are entitled to the damages for reduction in value.

MR FINCH: I will think about that as well. But my primary point that I want to make is that it does not depend on there being affected persons, but the example is more poignant when there are. But in answer, I think, to your Honour’s question, my point about the Full Court’s approach being necessary to give the Court the necessary flexibility to avoid over‑compensation is demonstrated by this, but not dependent upon there being an affected person bringing an action. Now, I know that is a limited
reply to your Honour’s question, but I will take into account what your Honour has said and think about ‑ ‑ ‑

EDELMAN J: Just to add, one more point to consider is, if you are right that there should only be one route of recovery for one defective car against a manufacturer, then if there is an initial purchaser and a subsequent purchaser, both of whom are affected persons, how would one count as between those two people for any recovery?

MR FINCH: Yes, indeed. Indeed. I note the time, your Honours, I will figure this out overnight as well, but although it is an unattractive proposition, there does not appear to be any merit in the idea that there is some sort of cap on damages whereby a manufacturer can never be held liable to pay out more than the initial sale price of the car. Although it has its attractions, it does not seem to be right, because if it is, one can immediately imagine successive purchasers may be able to demonstrate a reduction in value which does add up to more than the original sale of the car, just as if you put a dangerous product into the market.

EDELMAN J: I was not suggesting a cap at the amount of the sale price, I was suggesting a cap at the amount of the difference in value for one person.

MR FINCH: Yes, I understand. I understand, your Honour. I see the time, your Honour.

GAGELER CJ: Yes, and how long do you expect the balance of your argument to take?

MR FINCH: I intend on sticking to my limit, so whatever that was, I will stick to it.

GAGELER CJ: According to that, you would have another half an hour. Is that realistic?

MR FINCH: Yes. That should be enough.

GAGELER CJ: Very well. The Court will then adjourn until 10.00 am tomorrow.

AT 4.19 PM THE MATTER WAS ADJOURNED
UNTIL FRIDAY, 12 APRIL 2024