If you bought a new Toyota diesel between October 2015 and April 2020, you might be driving a vehicle that a court found was not of acceptable quality. The High Court of Australia confirmed in late 2024 that consumers can claim damages for the reduction in value of goods that fail the acceptable quality guarantee under the Australian Consumer Law. For the roughly 260,000 vehicles affected by the defective exhaust system, the practical question is what that reduction in value actually means in cash terms — and how you go about claiming it.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Those numbers matter because they set the scale of what’s at stake. A 17.5% reduction on a $50,000 vehicle is $8,750. But the Full Federal Court later limited damages to the period before Toyota offered a free fix in mid-2020, which changed the calculation significantly. The High Court’s November 2024 ruling clarified how reduction in value damages should be assessed under section 272(1)(a) of the ACL, and it has implications that go well beyond this one class action. Here’s what you actually need to know.
What the Toyota Case Means for Your Diminished Value Claim
The central concept here is reduction in value — the difference between what you paid and what the vehicle was actually worth at the time of supply, given the defect. The High Court made clear this is assessed based on everything that was known or knowable at that point, not with the benefit of hindsight.
What I tend to notice is that most people assume a diminished value claim is about resale price. In the Toyota case, the courts were clear it’s about utilisation value — what the vehicle was worth to you as a usable product. That distinction matters when you’re deciding whether to pursue a claim.
How Reduction in Value Is Calculated Under the ACL
The calculation method matters more than the headline percentage. The first-instance judge in the Toyota case awarded 17.5% of the average retail price at supply. But the Full Federal Court said that approach was wrong because it didn’t account for the free fix that became available in mid-2020. The High Court then confirmed the proper method: assess the loss of utility over the expected useful life of the vehicle, measured at the time of purchase.
The table below shows how the calculation changes depending on when the vehicle was purchased and whether a fix was available.
→ Scroll right to see all columns
| Purchase period | Fix available? | Damages likely cover | Example on $50,000 vehicle |
|---|---|---|---|
| Oct 2015 – May 2020 | No fix at purchase | Full period of defect (pre-fix) | Up to $8,750 (17.5%) |
| Oct 2015 – May 2020 | Fix offered mid-2020 | Only period before fix available | Reduced amount, varies by purchase date |
| After May 2020 | Free fix available | Minimal or nil (defect remedied) | Likely $0 |
The practical takeaway is that timing is everything. If you bought a vehicle after the fix was available, your claim is essentially dead. If you bought before, the amount you can claim depends on how long you had to live with the defect before Toyota offered to fix it for free. The courts also considered that owners continued using their vehicles despite the defect, which reduced the loss of utility further.
For anyone dealing with a similar situation — whether it’s a car, an appliance, or any other consumer good — the principle is the same. The reduction in value is calculated at the time of supply, based on what a reasonable consumer would expect, and a prompt remediation program can significantly limit what you can recover.
Common Mistakes People Make With Diminished Value Claims
Waiting for the defect to cause a failure
The High Court confirmed that damages are assessed at the time of supply, not when the defect actually manifests. In the Toyota case, the trial judge held each vehicle failed the acceptable quality guarantee at supply, regardless of whether adverse consequences later appeared. Toyota projected 50% of vehicles would fail within five years and 94% within ten years — but the claim wasn’t about waiting for those failures. If you’re sitting on a defective product waiting for something to break, you’re probably leaving money on the table.
Assuming diminished value means resale value
The ACL focuses on utilisation value — what the product is worth to you as something you use. The Full Federal Court was explicit about this: the focus is on utilisation value, not resale value, because the ACL applies to goods ordinarily acquired for use rather than resale. A car that smokes and smells but still gets you from A to B has lost some utility, but not all of it. That’s a different calculation than what a dealer would offer you on trade-in.
Ignoring the impact of a free fix
If the manufacturer offers a free repair that restores the product to acceptable quality, that will reduce your damages. The Full Federal Court limited Toyota’s exposure to the period between purchase and when the fix became practically available. If you accepted the fix, your claim is essentially for the time you spent driving a defective vehicle, not for the defect itself. If you didn’t accept the fix, the court will still factor its availability into the calculation.
Not keeping records of consequential losses
Section 272(1)(b) allows you to claim additional losses caused by the defect — things like increased fuel consumption, extra servicing costs, or even lost income if the vehicle was unusable. In the Toyota case, the defective system caused higher fuel consumption and more frequent servicing needs. Those are real costs that can be claimed separately from the reduction in value. But you need records: receipts, service invoices, fuel logs. Without them, you’re guessing.
How to Pursue a Diminished Value Claim in Australia
Identify whether the product failed the acceptable quality guarantee
Under the ACL, goods must be of acceptable quality, fit for purpose, acceptable in appearance and finish, and free from defects. The standard is what a reasonable consumer would consider acceptable, taking into account the nature of the goods, the price, and any representations made. If your vehicle or product has a defect that affects its use, appearance, or durability, it likely fails this guarantee. The Toyota case established that a defect that causes excessive smoke, foul odour, increased fuel consumption, and higher servicing needs clearly breaches the guarantee.
Calculate the reduction in value at the time of supply
This is where it gets technical. The reduction in value is the difference between what you paid (or the average retail price at supply, whichever is lower) and the actual value of the goods with the defect, assessed at the time of purchase. You need to consider the seriousness of the defect, its likely consequences, and the utility of the goods despite the defect. If a fix was available or became available, that reduces the loss of utility. A good starting point is to look at what a reasonable consumer would have paid for the product knowing about the defect at the time of purchase.
Document all consequential losses
Separate from the reduction in value, you can claim any loss or damage suffered because of the defect. This includes increased running costs, additional servicing, repair costs you paid before a fix was offered, and any other expenses directly caused by the defect. Keep every receipt, every service record, and a log of any extra fuel consumption. The more detailed your records, the stronger your claim.
Consider whether a class action covers your situation
The Toyota case was a class action covering approximately 260,000 vehicles. If you’re one of those owners, you may already be covered by the proceedings. For other products, class actions are becoming more common for widespread defects. Joining a class action can reduce your individual costs and legal complexity, but it also means you’re bound by the outcome. If you’re unsure, it’s worth checking whether a class action has been filed for your specific product.
Understand the impact of a remediation program
If the manufacturer offers a free fix, your damages will be limited to the period before that fix was available. The Full Federal Court’s ‘sooner the better’ approach means manufacturers who act quickly to remediate defects can significantly reduce their exposure. From a consumer perspective, that means you need to act quickly if you want to claim for the period before the fix was offered. Waiting too long could mean the fix was available for most of the time you owned the product, leaving you with minimal damages.
Frequently Asked Questions
Can I claim diminished value if I still use the vehicle? ▾
What if I bought the vehicle second-hand? ▾
Does the 17.5% figure apply to all Toyota diesel vehicles? ▾
How long do I have to make a claim? ▾
Can I claim for a vehicle I no longer own? ▾
Do I need a lawyer to make a diminished value claim? ▾
Why the High Court’s Decision Changes the Landscape
The November 2024 High Court judgment in Williams v Toyota Motor Corporation Australia Limited entrenches section 272(1)(a) as a powerful remedy for consumers. By confirming that reduction in value is assessed at the time of supply based on all information known or knowable then, the Court made it easier for consumers to claim without waiting for the defect to cause actual harm. But the decision also confirms that manufacturers who act quickly to offer fixes can limit their exposure. The practical effect is a clearer framework: if you bought a defective product, your claim is based on what you lost in utility from day one, not what eventually went wrong.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Claim Denied? Your Rights as an Aussie Car Insurance Policyholder.
Sources and Further Reading
How Temporary Car Insurance Can Save You Money in Australia — Practical guidance on insurance options that can help you manage costs while dealing with a defective vehicle.
Tips to Lower Your Monthly Premium Car Insurance Costs — Strategies for reducing your insurance expenses, which can offset some of the financial impact of a defective vehicle.
Quinn Emanuel (2024). High Court of Australia Outlines Proper Approach to Assessing Reduction in Value Damages. 🔗
Ashurst (2024). Reduction in Value Can Be Repaired: Latest Guidance on Damages in Consumer Claims. 🔗
