Takata Air Bags Class Action – Common Questions

This judgment involves representative proceedings brought by the Plaintiffs against a number of car manufacturers, namely Mazda Australia Pty Ltd, Subaru (Australia) Pty Ltd, Honda Australia Pty Ltd, Nissan Motor Co (Australia) Pty Ltd, Toyota Motor Corporation Australia Ltd, BMW Australia Ltd and most recently Volkswagen Group Australia Pty Ltd (the Defendants).

The pleadings have gone through several iterations since approximately November 2017 and now broadly are at the stage of Further Amended Statements of Claim filed by the parties in September 2018 followed by Amended Defences also filed in September 2018.

The exception is the Volkswagen Group Australia Pty Ltd (Volkswagen) matter, in which Philip Dwyer filed a Statement of Claim on 22 October 2018 seeking in effect the same relief as the other matters, making it a relatively new addition to these proceedings. By reason of this new addition to the proceedings Volkswagen has not provided submissions on the issue of common questions.

These matters are a series of representative proceedings which all involve, broadly, claims relating to the installation and removal of Takata airbags from the various car manufacturers listed above.

During the course of case management of this representative proceedings, there has been preliminary issues raised concerning applications for the making of a common fund order pursuant to s 183 of the Civil Procedure Act 2005 (NSW), the issuing of opt out notices and the issuing of notices to all group members.

All of these issues above have presently been deferred. That is, save for on 22 October 2018 when I ordered that there be a separate question determined by the Court of Appeal in the Owen Brewster v BMW Australia Ltd matter, to the effect of whether the Court has power to make common fund orders pursuant to s 183 of the Civil Procedure Act 2005 (NSW): Owen Brewster v BMW Australia Ltd [2018] NSWSC 1602.

That separate question is still outstanding and does not impact on this present judgment.

The representative proceedings have now reached the stage where it is necessary and desirable to determine common questions. The causes of action in the pleadings broadly make claims for (1) lack of merchantable quality, (2) lack of acceptable quality, (3) misleading and deceptive conduct, and (4) unconscionability.

The parties have managed to reach some level of consensus as to the common questions to be posed. However there are remaining areas of dispute between the Plaintiffs and the Defendants, which I will address sequentially.

Sections 157, 161, 168 and 169 of the Civil Procedure Act 2005 (NSW) relevantly provide:

In Wong v Silkfield Pty Ltd (1999) 199 CLR 255; [1999] HCA 48 at [27]-[30], Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ provided an analysis of the extent to which common questions need to be “common”. Their Honours held that common questions address “substantial” common issues, stating “‘substantial’ does not indicate that which is ‘large’ or ‘of special significance’ or would ‘have a major impact on the ... litigation’ but, rather, is directed to issues which are ‘real or of substance’”.

In Scenic Tours Pty Ltd v Moore [2018] NSWCA 238 Sackville AJA (with Payne JA and Barrett AJA agreeing) emphasised (at [69]-[77] and again at [407]-[409]) the importance of the early determination of common questions in representative proceedings in order to facilitate the prompt and efficient resolution of such proceedings. His Honour also noted how common questions should not be contrived to be only relevant to particular group members, stating (at [72]) “[t]he trial itself was conducted without a clear differentiation between questions common to all Group Members and those common only to particular sub-categories”.

As helpfully provided by the Plaintiffs, the common questions are as follows with notations indicating areas of dispute (as perceived by the Plaintiffs) between the parties:

For the sake of clarity I have referenced the parties’ submissions not as a standalone section but alongside each discrete area of dispute concerning the proposed common questions below.

It is important to bear in mind that common questions should be just that, and they should not pick up or pose questions more appropriately to be determined on an individual basis or idiosyncratic analysis of a particular group member. Common questions, however, need not be entirely uniform across all group members.

Common questions 1, 2, 3, 4 and 5 are uncontroversial between the parties and in my view they are appropriately posed as common questions.

There has been some suggestion that common question 6 was not agreed, with BMW and Subaru suggesting this question does not arise in their proceedings. However, this question was not the subject of substantive oral submissions or submissions in writing and in my view it is appropriate as a common question.

Question 7 is agreed between the Plaintiff and all the Defendants save for Toyota, which objects to this question. Its objection was not raised in Toyota’s written submissions however was raised by Senior Counsel for Toyota on 16 November 2018 in oral argument. That is, Mr Rich of Senior Counsel for Toyota submitted question 7 poses a legally meaningless analysis of whether the Defendants took “adequate” steps, and in any event, is already covered by questions 14 and 16 (T21/1-15). As question 16 is no longer pressed by the Plaintiffs, the question is whether questions 7 and 14 substantially overlap, to the extent that question 7 should not be posed.

In my view, insofar as there are elements of inquiry and analysis which overlap in questions 7 and 14, this is not fatal to posing question 7 as a common question. Even if there is a degree of overlap, in my view it is appropriate to pose common question 7, noting that common questions need not be entirely uniform across all group members. Whether or not there is overlap between questions 7 and 14 is a matter to be determined in the answering of these common questions, not at the outset when the answers to these questions are not fully known.

Questions 8 and 16 both deal with the issue of unconscionable conduct. All parties have now agreed to the insertion of “ought to have known” into question 8, and on this basis, the Plaintiffs no longer press question 16. There was some suggestion by Mr Bannan who appeared for Mazda on 16 November 2018 that “ought to have known” is an inappropriate addition to a question on unconscionable conduct because as per Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 unconscionable conduct requires actual knowledge or a “predatory state of mind” (T25/1-11) and therefore constructive knowledge of the kind contemplated by the phrase “ought to have known” is inappropriate. I note the Plaintiffs submit their case is one of statutory unconscionable conduct as per s 51AB of the Trade Practices Act 1974 (Cth) and s 21 of the Australian Consumer Law (as set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth)). On this basis they contend there is still a question of whether constructive knowledge may ground a statutory unconscionability claim.

As all parties have now agreed to the inclusion of “ought to have known” in question 8 the statutory unconscionability and constructive knowledge point is now somewhat academic, and in my view as agreed by the parties question 8 is appropriate as a common question. Also, I am of the view question 16 now need not be asked and is superfluous given the addition to question 8 the phrase “ought to have known”.

There is the suggestion that question 9 does not arise in the BMW proceedings, however otherwise is agreed by the parties. As the common questions need only be “substantially” common and need not arise in all proceedings in my view question 9 is appropriate as a common question.

Questions 10, 11, 12 and 13 are agreed and in my view are also appropriate common questions.

The Plaintiffs and Defendants disagree over proposed common question 14. That is, they clearly disagree as to whether misleading conduct by silence in the pleadings (that is, [42C(b)] of the Plaintiffs’ pleadings) ought properly to be addressed as a common question.

In my view the Plaintiffs’ proposed common question 14 is the appropriate question to be posed, because it is open to the Plaintiffs to make a case of misleading and deceptive conduct by silence which is made on the basis of misleading conduct to the world at large, and not on factors peculiar to each group member. To be precise, relevantly [42C] of the pleadings states:

In their submissions in reply, the Plaintiffs submit that question 14 does not involve any inquiry into the idiosyncratic expectations of each group member, but asks whether there was misleading conduct by virtue of “a representation made to the world at large” and does not involve “dealings between individuals”, citing French CJ in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (at [26]) (citations omitted):

On this point French CJ cited Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 to which I have also had regard, particularly the observations of Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ (at [101]-[103]) concerning the analysis of representations to the public as assessed by reference to the “ordinary” or “reasonable” members of the class of prospective purchasers.

Having carefully considered the pleadings and the opposing versions of question 14, in my view the above authorities make it clear the misleading and deceptive conduct claims can be made on the basis of representations to the public at large, involving a level of abstraction which considers “ordinary” or “reasonable” members of the class of prospective purchasers, which is a hypothetical exercise. In my view this properly extends to misleading and deceptive conduct by silence claims. The Plaintiffs have made the deliberate forensic choice to frame their case in this manner and at this level of abstraction.

Therefore in my view question 14 as posed by the Plaintiffs is the preferable version, and it is open to the Plaintiffs to pose common questions concerning misleading and deceptive conduct by silence on the basis of the “former case” as said by French CJ and to this extent common to group members. This cause of action will stand and fall on the evidence in any event. Question 14 should be posed as per the Plaintiffs’ version:

Question 15 is agreed between the parties and in my view is an appropriate common question.

Question 16, as noted above, need not be asked.

Question 17 is agreed and in my view is an appropriate common question.

Questions 18, 20 and 21 are not agreed and are subject to more nuanced submissions by the parties. That is, the Plaintiffs have made submissions on these questions, with Subaru, Mazda, Nissan, BMW and Honda providing aligned submissions. However, Toyota has provided its own submissions on proposed questions 18, 20 and 21. These questions relate to the losses suffered by the Plaintiffs because of the diminished true value of the vehicles at the time of purchase by reason of their construction with a Takata airbag.

The dispute between the Plaintiffs and the Defendants (excepting Toyota) is largely restricted to the word “including” at the end of the chapeau to each of these three questions. The Plaintiffs assert they will seek to adduce evidence that on the balance of probabilities there was a certain proportionate reduction in the value of purchased vehicles attributable to the existence of their construction with a Takata airbag. The Plaintiffs submit the word “including” in the chapeau is necessary to reflect that the question of true value is not restricted to the circumstances set out in (a) and (b) of each question, which have been included at the suggestion of the Defendants as they are reflected in the various defences filed by the Defendants.

In oral argument and in submissions, Subaru (with the Defendants excluding Toyota agreeing) suggested an alternative wording of the chapeau of questions 18, 20 and 21 as to ask “can the Group Members have suffered any loss or damage” (T25/48-T26/2). The Plaintiffs accept this alternate wording, provided the word “including” remains in questions 18, 20 and 21.

The Defendants (excluding Toyota to which I will return) resist the insertion of “including” into the chapeau of these three questions. This is because the Defendants (excluding Toyota) contend the insertion of “including” has the effect of converting questions 18, 20 and 21 away from the relatively confined issue of loss or damage as posed by the Defendants into an assessment of loss or damage of the Potts v Miller (1940) 64 CLR 282; [1940] HCA 43 (“Potts v Miller”) kind (difference between price paid and value of what was acquired). They submit the proportionate reduction approach of the Plaintiffs ignores the first element of Potts v Miller damages: purchase price paid.

They stress the hypothetical proportionate reduction approach of the Plaintiffs ignores the critical integer of purchase price paid for the vehicles, and that the Plaintiffs should not be permitted to raise Potts v Miller damages as a common question. The Defendants (excluding Toyota) submit this is because the purchase price paid by an individual group member is plainly something particular to each person, and is therefore not a common issue and not capable of being framed as a common question.

Toyota takes a more radical position and rejects questions 18, 20 and 21 entirely on the basis that whether the group members have suffered loss or damage is not a common question. It criticises the Plaintiffs’ reference to loss or damage calculated as a percentage or proportionate reduction as ignoring the basic theory of loss. This is because Toyota contends loss is always determined on the particular circumstances of each case, the facts, the price paid and the particular vehicle acquired by each group member.

In an aside and clearly as an alternative argument, Toyota notes its agreement with the other Defendants that “can the Group Members have suffered any loss or damage” is a preferable way to frame the chapeau to questions 18, 20 and 21.

In my view, the resolution of this dispute concerning proposed questions 18, 20 and 21 is resolved in part by reference to the pleadings, and particularly paragraphs [24(A)], [33(A)], [46(A)] and [50(A)] of the Plaintiffs’ pleadings, all of which reference “true value”. No objection has been made by the Defendants to this pleading to the extent that it relies on the phrase “true value” as somehow meaningless or ignoring the particularity of how much each individual group member paid for their vehicle.

Therefore in my view, on its face, damages (or “loss and damage”) can be phrased as a common question, and it is not correct to reject questions 18, 20 and 21 as not truly common between the parties. Framed in a sufficient level of generality, damages can be a common question. To this extent I disagree with Toyota’s submissions.

However, I agree with the other Defendants that “including” should not be in the chapeau to proposed questions 18, 20 and 21 because it impermissibly broadens the scope of the questions raised. In my reading of these questions, to insert “including” would invite a nebulous inquiry into damages that involves questions of damage peculiar to group members and not substantially common between the group members.

Questions 19, 22, 23, 24, 25, 26, 27, 28 and 29 are agreed and in my view are appropriate common questions that will assist in the resolution of these proceedings.

I invite the parties to provide short minutes that give effect to my reasons.

I invite the parties to provide common questions which accord with my reasons.

If the parties cannot agree on the form of orders and/or the question of costs I invite them to approach my Associate to have the matter relisted for argument.