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Motor warranty class action settled

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A motor warranty class action launched against listed fleet leasing company McMillan Shakespeare has been settled, more than a year after the Federal Court ruled the contracts with plaintiffs had been “intended to operate to permit denial of full coverage” of repair claims.

The settlement follows a separate decision made in April by Justice Jonathan Beach to deny the plaintiffs access to all relevant insurance policies held by McMillan Shakespeare and its subsidiary Davantage, which had sold the products. The lead plaintiff had applied for access to the documents, saying it would help decide if it was commercially viable to proceed with the lawsuit.

McMillan Shakespeare says it has set aside in the last financial year a net charge of $2 million plus legal costs to settle the matter, describing the figure as “sufficient” to deal with the dispute. The 2020 annual report puts the post-tax class action provision for possible settlement at $5.1 million, including legal expenses.

A spokesman for the company declined to provide more details such as the types of warranty covers that were affected by the lawsuit, which commenced in 2018 against Davantage.

McMillan Shakespeare said yesterday “the settlement is without any admission of liability and is also subject to approval of the Federal Court of Australia”.

Baker & McKenzie, the law firm that ran the class action, also did not want to comment when contacted today by insuranceNEWS.com.au.

The legal action was against Davantage, which traded as National Warranty Company, and is a subsidiary of Presidian Holdings, a business acquired by McMillan Shakespeare in 2015.

According to the Presidian website, the business offers dealer-issued warranty products that are administered by Davantage. It also has insurer-issued warranties. 

Plaintiffs had sought orders that the warranties they bought were void, and wanted either the restitution or a refund of the premium paid and interest on that amount, regardless of whether claims were in fact met and the contracts performed.

In the court ruling last year, it was not mentioned what warranty products have been sold to the class action members. But it says the warranty agreements cover 49 distinct products with each offered pursuant to a separate product disclosure statement (PDS).

It is estimated the total amount paid by the 26,000-28,000 class action members as consideration for the warranty agreements was about $32 million, according to the court ruling.