Deeper insights into the facts of Dwyer v Volkswagen. The Standard of Guarantee of Acceptable Quality under the Australian Consumer Law.

Key Takeaways

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• Claims against car manufacturers and suppliers for breaches of the consumer guarantee of acceptable quality under the Australian Consumer Law are on the rise.

• A mere risk or propensity for a defect to manifest may be sufficient for a court to find a breach of acceptable quality, even if the defect never actually manifests in some vehicles.

• Even where a defect has never, and may never, manifest in adverse effects in some vehicles, those vehicles may nevertheless breach the acceptable quality guarantee due to the elevated risk that they might experience problems at some point.

 

Background

 

This case arose as a result of a global recall of Takata airbags that began in 2018 and has since been completed in Australia.

 

In 2017, Phillip Dwyer commenced proceedings on behalf of 83,000 Australian consumers who alleged that Volkswagen AG (VW) had breached the consumer guarantee of acceptable quality by installing Takata airbags in their vehicles.

 

The plaintiff alleged that because the Takata airbags used a propellant known as phase-stabilised ammonium nitrate (PSAN) and because PSAN was known to have a propensity to degrade when exposed to temperature fluctuations and moisture, his car was not of acceptable quality because by reason of the use of PSAN as a propellant the Takata airbag as installed in his car had a propensity to explode or mis-deploy.

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In June 2021, the NSW Supreme Court found that the plaintiff had failed to establish that there was any 'relevant, functionally significant propensity' for the PSAN to degrade in the Takata airbags installed in VW vehicles so as to cause it to explode or mis-deploy, and on that basis there was no breach of the guarantee of acceptable quality.

 

The plaintiff attempted to prove the alleged safety risk by relying on expert evidence and empirical analysis by VW that found only one instance of airbag rupture in approximately 20,000 VW installed Takata airbags which were tested. However, it was agreed that the 1 instance was considered an outlier that likely occurred due to manufacturing issues.

 

While separate evidence did establish a general propensity of PSAN to degrade when exposed to moisture and temperature fluctuations, the plaintiff failed to prove that this propensity created a risk of malfunction in VW airbags that was more than a theoretical possibility.

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Despite this decision, the Court upheld the proposition that even where a defect has never, and may never, manifest in adverse effects in some vehicles, those vehicles may nevertheless breach the acceptable quality guarantee due to the elevated risk that they might experience problems at some point.

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Appeal to the NSW Court of Appeal

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On appeal, the plaintiff argued that the trial judge had failed to understand the true nature of the risk in VW vehicles as an unquantifiable risk of serious harm. While the plaintiff accepted that the evidence had been unable to quantify the probability of airbag rupture in VW vehicles, it was argued that the inability to exclude an unquantifiable risk of serious harm, or the possibility of airbag rupture, was a sufficiently unacceptable risk to the reasonable consumer.

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The Court of Appeal rejected this argument. It held that to demonstrate unacceptable quality on the basis of an inherent risk, without the risk having actually materialised, it is first must first be established that the type of product carries an ‘inherent risk’.

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The Court held that based on the evidence, the plaintiff had failed to prove the ‘inherent risk’ was anything more than a ‘speculative possibility’ given that the asserted risk of rupture as a result of the PSAN degradation was unlikely to eventuate within any meaningful timeframe. As such, the plaintiff failed to establish a breach of the acceptable quality of guarantee under the Australian Consumer Law.

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Appeal to the High Court

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On 8 February 2024, the High Court refused an application by Mr Dwyer for special leave to appeal the NSW Court of Appeal’s ruling.

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Section 54 – Guarantee as to acceptable quality

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The central claim by the plaintiff in Dwyer was that VW had breached the consumer guarantee of acceptable quality by installing Takata airbags in their vehicles from 2011 to 2018.

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Section 54 of the Australian Consumer Law (ACL) which provides that goods will be of acceptable quality if they are as:

• fit for purpose;

• acceptable in appearance and finish;

• free from defects;

• safe; and

• durable,

as a reasonable consumer—fully acquainted with the state and condition of the goods (including any hidden defects)—would regard as acceptable, having regard to the matters listed in s54(3). Those matters include: the nature and price of the goods; statements or representations made about the goods; and any other relevant circumstances.

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What is the standard of acceptable quality for passenger vehicles?

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The courts have acknowledged that vehicles are complex goods that consumers expect may require repair under warranty.

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In Dwyer, the court accepted that this expectation included the possibility that vehicles might develop safety problems over time.

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Under the ACL, if a reasonable consumer would not have bought the vehicle if they knew the nature and extent of a problem with the vehicle, there will be a breach of the acceptable quality standard regardless of whether it can be repaired.

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Actions you can take

 

• Raise and report all defects and potential defects in writing to the supplier regardless of whether they are safety related or only impact comfort or satisfaction;

• If the supplier or manufacturer are unwilling to assist, you can make a complaint to the office of fair trading in your relevant state or territory or the ACCC;

• If you are unsatisfied with the outcome, repair, or remedy you have been given, you should obtain independent legal advice.

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Need help with a defective motor vehicle legal issue?

 

If you’re a vehicle owner faced with the frustration of a defective car, caravan or truck, Arida Lawyers can help you understand your legal options. Arida Lawyers are best suited for disputes for defective motor vehicles including:

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• Unresolved defects in new vehicles;

• Safety concerns and recall disputes; and

• Warranty coverage conflicts.

 

BOOK A FREE CONSULTATION

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At Arida Lawyers, our commitment extends beyond mere legal counsel; we are dedicated to upholding and protecting consumer and business rights. Should you identify with the circumstances similar to the case of Dwyer v Volkswagen or find yourself in a similar situation, don't hesitate to contact us.

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This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.

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