International litigation funder Vannin Capital (Vannin) has agreed to fund a class action proceeding against Davantage Group Pty Ltd (trading as National Warranty Company) (Davantage) in the Federal Court of Australia on behalf of persons or entities who acquired discretionary risk products issued by Davantage during the period July 2013 to May 2015. Davantage is a wholly owned subsidiary of Presidian Holdings Pty Ltd (Presidian) which was acquired by ASX listed McMillan Shakespeare Limited (ASX:MMS) in February 2015.
Vannin Capital is one of the world's largest and pre-eminent litigation funders. It has staff in London, Jersey, Paris, Washington, New York, Sydney, Melbourne and Bonn. Vannin is presently funding claims worth billions of dollars.
From 1 July 2013 to 28 May 2015, Davantage issued discretionary risk products for second hand vehicles including cars, caravans, motorhomes and watercraft. Most warranty products were issued to the customer by the vehicle dealer at the time they purchased the vehicle.
The warranties were often issued under the product name of “Sentinel Warranty” and purported to reduce the financial impact of unexpected mechanical or electrical failure to the vehicle by providing parts and labour cover on covered components 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 warranty product selected and the period of the warranty.
However, each warranty contained numerous exclusions from cover, such as in relation to wear and tear, and fixed monetary limits for the cover of certain components (eg, transmissions).
Most significantly, even if a claim was otherwise within the terms and conditions of the warranty product, NWC retained a discretion as to whether they would pay any claim, and if so, what amount.
As a result, the claim against Davantage is that the 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 and ASIC Act relating to unconscionability and unfair consumer contract terms.
Our investigations reveal that many people purchased the warranty products at the same time they purchased a second-hand vehicle, often with the use of finance. As a result, the cost of the premium of the warranty product is likely to have been included in the amount financed.
We intend to seek orders from the Federal Court to recover the amount of the premium paid to NWC (together with interest at applicable Court rates) along with the amount of any 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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