Toyota Australia facing $2 billion in compensation payouts over diesel class action

Toyota Australia could be forced to pay up to $2 billion to Australian consumers over faulty diesel particulate filters in more than 250,000 vehicles, after a Federal Court ruled today the anti-pollution devices were defective and put thousands of vehicles off the road for time-consuming repairs.

Justice Michael Lee found a "core defect" in certain vehicles sold by Toyota Australia – certain Toyota HiLux, Toyota Prado, and Toyota Fortuner models manufactured between October 2015 and April 2020 – fell foul of Australian Consumer Law, and that customers should be compensated 17.5 per cent of the value of their vehicle's "average retail price".

The affected Toyota vehicles – a total of 264,170 – were fitted with either the 2.8-litre (1GD-FTV) and 2.4-litre (2GD-FTV) turbo diesel engine.

Before Toyota could come up with a technical solution, faulty diesel particulate filters could clog the exhaust system and produce excessive white smoke, which often led to increased fuel consumption – and complaints from other motorists to pollution authorities.

A large proportion of customers took their vehicles back to Toyota dealerships for warranty repairs multiple times, putting their work vehicles off the road on numerous occasions.

The defective device – which is part of the exhaust system – is designed to reduce emissions by trapping and burning-off highly-polluting particulate matter within the filter.

However, before Toyota could fix the problem, the filter on affected vehicles would clog, causing "excessive white smoke and (a) foul-smelling exhaust", along with increased fuel consumption and repeated visits to the dealership, the Federal Court determined.

Because of this defect, the applicants in a class action against Toyota – headed by Bannister Law – say the vehicles in question are not of "acceptable quality" under Australian Consumer Law. Applicants in the class action were seeking 25 per cent compensation on the value of the vehicle.

In Toyota's defence, legal teams argued the vehicles in question were “fit for all the purposes” as a reasonable consumer would regard as acceptable.

Toyota also argued the diesel particulate filter "is not essential for the operation of essential parts of the relevant vehicles", "the relevant vehicles were operational in any driving environment", and white smoke was a characteristic of normal operation.

Justice Lee rejected these submissions, and awarded compensation of 17.5 per cent of the average retail price of each vehicle.

However, the compensation between each case may vary, depending on additional loss of income stemming from the faults and the time off the road.

Technical upgrades introduced by Toyota Australia between 2016 and 2018 included software updates and manual switches to operate the DPF, however some customers still reported ongoing issues.

Later technical upgrades introduced by Toyota in 2020 appeared to be more effective, said court documents.

Toyota Australia and Bannister Law have been contacted by Drive for additional comment.

We will update this story when we receive their responses.