International litigation funder Vannin Capital (Vannin) and leading global law firm Quinn Emanuel Urquhart & Sullivan (Quinn Emanuel) are investigating a potential class action against various entities including Davantage Group Pty Ltd (trading as National Warranty Company) on behalf of persons or entities who acquired extended warranty products from National Warranty Company (NWC) from 2011 to 2015. Davantage Group (trading as NWC) is a wholly owned subsidiary of ASX listed McMillan Shakespeare Limited (ASX:MMS).
Vannin Capital is one of the world´s largest and pre-eminent litigation funders. It has staff in London, Paris, Washington DC, Sydney and Melbourne. Vannin is presently funding legal claims for total amounts of billions of dollars.
Quinn Emanuel is one of the world´s most respected law firms and specializes in litigation. Quinn Emanuel is the largest law firm in the world devoted solely to litigation. Quinn Emanuel has more than 700 lawyers in 20 offices all over the world. When representing plaintiffs, Quinn Emanuel has globally won over $50 billion in judgements and settlements. The team from Quinn Emanuel´s Sydney office that will conduct the National Warranty Company claim is highly experienced with a long track record of success in class action litigation.
From about 2011 to 2015, NWC has provided extended warranty products for second hand passenger vehicles and for commercial equipment (eg, trucks, forklifts and buses). Most warranties were sold to the customer by the dealer at the time they bought the vehicle or equipment.
The warranties were often issued under the product name of “Sentinel” and purported to provide an extension of the cover under the original equipment manufacturer´s warranty for an agreed period (typically a few years).
Our investigations show that the amount of premium paid for the warranty products ranged from a few hundred dollars up to a few thousand dollars, depending on the features of the extended warranty product selected.
However, each extended warranty contained numerous wide exclusions from cover, such as in relation to wear and tear and certain of the components (eg, transmissions) only being covered up to fixed, low monetary limits.
Most significantly, even if a claim was otherwise within the terms and conditions of the warranty, NWC retained an “absolute discretion” as to whether they would pay the claim.
Unsurprisingly, our investigations have also revealed that a significant number of all claims made by warranty holders under their extended warranty contracts have been refused by NWC, usually on the basis of their “absolute discretion” to do so.
As a result, we allege that the extended warranty products are virtually worthless.
Despite the extended warranty contracts having some similarities to insurance products, the contracts we have reviewed are not contracts of insurance. Significantly, this means that the protective provisions of the Insurance Contracts Act 1973 (Cth) do not apply and NWC is not subject to the regulation that an insurer would be. Our investigations lead us to believe that many people who purchased the extended warranty products may not have properly understood this.
In the circumstances, we will contend that the extended warranty contracts can be voided, both under general law principles and in reliance on the provisions of the Australian Consumer Law relating to unconscionability and misleading or deceptive conduct.
Our investigations reveal that many people bought the extended warranty contracts at the same time they purchased a second-hand vehicle or piece of commercial equipment, often with the benefit of finance. As a result, the cost of the premium of the extended warranty product was included in the amount financed.
Should a claim proceed, we intend to seek orders from the Court to recover the amount of the premium paid to NWC (together with interest at applicable Court rates) along with the amount of interest and finance charges that were paid to a financier for any loan amount taken out to pay for the premium.
In many cases, individual losses could run into several thousands of dollars.
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