Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia (No 2)

1. [1]

   I published my principal judgment in this matter on 18 June 2021. [1] These reasons assume familiarity with that judgment. I will use the same abbreviations.

2. [2]

   I concluded that Professor Dwyer’s claim against VW, as representative of the Group Members, failed.

3. [3]

   It is common ground that the proceedings must now be dismissed with costs.

4. [4]

   Three issues remain:

   1. (1)

      whether the funder of the proceedings, Regency Funding Pty Ltd, should be jointly and severally liable with Professor Dwyer for VW’s costs;

   2. (2)

      whether VW should have certain of its costs on an indemnity basis; and

   3. (3)

      what answers should now be given to the common questions.

Should Regency Funding be jointly and severally liable for VW’s costs?

1. [5]

   Regency Funding is on notice of VW’s application that it be liable for costs and has been given an opportunity to make submissions.

2. [6]

   On 23 August 2021, through its solicitor, Regency Funding informed VW’s solicitors that it did not seek to be heard on the application.

3. [7]

   I am satisfied that this is an appropriate case to make an order against the funder.

4. [8]

   The Court has power to order that a non-party pay costs. [2]

5. [9]

   Matters relevant in determining whether it is appropriate to make such an order include whether the non-party:

6. [10]

   Each of those factors is present in this case.

7. [11]

   Regency Funding provided the funds for this litigation, including security for costs of $2.15 million. I accept VW’s submission that Regency Funding did this purely for commercial gain, particularly having regard to the terms of the relevant litigation funding agreement which provided for a significant proportion of any “Proceeds of the Claim” to be paid to Regency Funding.

8. [12]

   As VW submitted, Regency Funding “by its involvement, may properly and fairly be described as a real party to the litigation” and “is, in effect, the opposing party”. [8]

9. [13]

   For those reasons, I propose to make the orders sought by VW against Regency Funding.

Indemnity costs

1. [14]

   VW seeks an order that Professor Dwyer and Regency Funding be jointly and severally liable for VW’s costs on an indemnity basis:

2. [15]

   It is common ground that in order to obtain an order for indemnity costs in relation to this aspect of the matter, it is necessary for VW to show that:

3. [16]

   Professor Dwyer sought to establish that he, and the Group Members, suffered damage because the “true value” of the VW vehicles he and they purchased was less than the amount paid for those vehicles.

4. [17]

   In this regard, Professor Dwyer relied upon the evidence of Professor Baddeley.

5. [18]

   I did not accept Professor Baddeley’s evidence for the reasons I gave at [J224] to [J252].

6. [19]

   Professor Baddeley relied upon two bases to identify and calculate “negative price differentials” between “defective vehicles” and “non-defective vehicles”.

7. [20]

   Those two bases were:

8. [21]

   In his report, Dr Pleatsikas identified what he called “fundamental flaws” in both the Discrete Choice Experiments and the Structural Break Analysis.

9. [22]

   Dr Pleatsikas identified all the difficulties with the Discrete Choice Experiments that led to me concluding that no weight should be given to them. [10]

10. [23]

    Those criticisms led to Professor Baddeley conducting a further, revised, Discrete Choice Experiment and to producing a further report which purported to answer some of those criticisms.

11. [24]

    In opening submissions, counsel for Professor Dwyer acknowledged that both Discrete Choice Experiments undertaken by Professor Baddeley had “weaknesses, which the Professor acknowledges”. In final submissions, and following Professor Baddeley’s evidence, counsel acknowledged the “undoubted limitations and problems” with the Discrete Choice Experiments. [11]

12. [25]

    All of these matters were clear to me following Professor Baddeley’s evidence for the reasons I set out in the principal judgment.

13. [26]

    The opinions expressed in Dr Pleatsikas’s report can thus now be seen to bespeak a “high degree of certainty concerning the deficiencies in [Professor’s Dwyer’s case]”.

14. [27]

    However, I find it less certain that those deficiencies were so “manifestly clear” that Professor Dwyer, and those advising him, would have appreciated it was, in effect, pointless continuing with the case.

15. [28]

    I see substance in the submissions made on behalf of Professor Dwyer that I should be slow to reach such a conclusion where, as here, Professor Baddeley prepared a report in reply to Dr Pleatsikas’s report, took issue with his criticisms of her reasoning, and adhered to her opinions.

16. [29]

    Despite the fact that I ultimately did not accept the validity of the opinions Professor Baddeley expressed, I am not able to conclude that this result was so obviously likely that Professor Dwyer and Regency Funding should be visited with indemnity costs in relation to this issue.

17. [30]

    The matter is clearer in relation to the Structural Break Analysis.

18. [31]

    The Structural Break Analysis was beset with the fundamental error that I described in my principal judgment as to the recall dates of sale of the vehicles analysed. [12] The Structural Break Analysis was also directed to the likely impact of the installation of allegedly defective airbags on the resale of the vehicles in question, and thus not relevant to their true value at time of purchase. Counsel for Professor Dwyer abandoned reliance on the Structural Break Analysis during the hearing and accepted that “Professor Baddeley was unable to appreciate that the exercise suffered from fundamental flaws and was and is of no utility to the Court”.

19. [32]

    The deficiencies concerning this aspect of Professor Dwyer’s case were “manifestly clear” and should have been, and ultimately were, appreciated by those advising him.

20. [33]

    For those reasons, I propose to make an order to the effect that VW have its costs attributable to the loss and damage aspect of the proceedings, so far as they concern the Structural Break Analysis, on an indemnity basis from 29 January 2021.

21. [34]

    Otherwise, I decline to make the order sought by VW.

22. [35]

    On 25 March 2021, VW’s solicitors sent Professor Dwyer’s solicitors a Calderbank letter proposing that proceedings be discontinued on the basis that:

23. [36]

    This was, in effect, a “walk-away” offer. However, in circumstances where VW had by that point incurred very substantial costs in defending the proceedings and had security for costs in the sum of $2.15 million, it can be seen as a genuine offer of compromise for the purposes of the Calderbank principles.

24. [37]

    The question, however, is whether it was unreasonable of Professor Dwyer not to accept it.

25. [38]

    I am not able to come to that conclusion.

26. [39]

    First, the release that VW proposed in par (b) of the offer was extremely broad. It extended to any future claim that Professor Dwyer might have against VW for any reason, including any claim he might have were he to purchase another Volkswagen having quite different problems from those for which he contended in these proceedings.

27. [40]

    More significantly, par (c) of the offer imposed a term that was not within Professor Dwyer’s power to accept. Professor Dwyer could not accept the offer without the cooperation of Regency Funding and his solicitors.

28. [41]

    It may be that Professor Dwyer would have needed consent and cooperation of Regency Funding in any decision to settle the proceedings, but the involvement of Professor Dwyer’s solicitors was not something over which he could control.

29. [42]

    Further, Professor Dwyer was obliged to consider the interests of Group Members. As was submitted on his behalf:

30. [43]

    In these circumstances, I am not satisfied that it was unreasonable of Professor Dwyer not to accept the Calderbank offer.

31. [44]

    Accordingly, I am not prepared to make an order for indemnity costs based on that offer.

Common questions

1. [45]

   It is now agreed that I should answer the common questions in the manner set out in the document attached to these reasons. (Answers to Common Questions)

2. [46]

   Questions 17 and 19 assume an affirmative answer to an earlier question. As an affirmative answer is not to be given to those earlier questions, it is not, strictly speaking, necessary to answer questions 17 and 19. Nonetheless, it is agreed that I should answer those questions as set out in the schedule.

Conclusion

1. [47]

   The parties should now confer and agree on the orders necessary to finalise the proceedings.