Australia is suing the local arm of Volkswagen, accusing it of misleading customers by selling modified vehicles that covered up emissions fraud.
Its consumer watchdog claims Volkswagen intentionally sold more than 57,000 such vehicles over a five-year period.
The Australian Competition and Consumer Commission (ACCC) lawsuit covers 10 Volkwagen car models including the top-selling Golf, Passat and Polo.
The ACCC is seeking a public declaration of misconduct, financial penalties and corrective advertising.
Volkswagen Australia said it was reviewing the ACCC claims.
In a statement, the company said it did not think the court action "provides any practical benefit to consumers because software solutions for cars affected by the voluntary recall are expected soon".
"The best outcome for customers whose vehicle is affected is to have the voluntary recall service updates installed," Volkswagen Group Australia managing director Michael Bartsch said.
"These allegations involve extraordinary conduct of a serious and deliberate nature by a global corporation," ACCC chairman Rod Sims said in a statement.
"We expect higher standards of behaviour from all companies that supply to Australian consumers."
Volkswagen, the world's second-biggest car maker, is also facing several private class action lawsuits in Australia.
The carmaker has suffered a global backlash since revealing last year that about 11 million of its vehicles had software or so-called "defeat devices" designed to bypass official emissions tests.
It has since had to pay billions of dollars in fines and settlements with both regulators and customers around the world.
Last month Volkswagen told a court it planned to compensate American car dealers affected by the scandal.