Alleged Obfuscation by the Respondents
13 All of the applicants attacked the way in which the respondents had hitherto complied with the discovery orders made by the Court. Senior Counsel for the Maurice Blackburn class action applicants (the MB applicants) made oral submissions in support of this attack. The other applicants adopted his submissions.
14 Senior Counsel for the MB applicants submitted that the respondents had failed entirely to engage with their discovery obligations in these proceedings. He said that the respondents were guilty of obfuscation and of frustrating the discovery process. He argued that, in relation to category 1 of the categories for discovery ordered by the Court on 14 February 2017, the respondents had set about creating a pool of documents which were guaranteed not to produce a single document that recorded or evidenced a management decision by Volkswagen AG and its related corporations to design software to be installed in the EA189 diesel engine which would enable that engine to recognise at any given point in time whether the vehicle in which it had been installed was being tested in laboratory-type conditions or was travelling on the open road in normal driving conditions with a view to altering the level of NOx emissions depending upon which mode the vehicle was operating in.
15 In support of these contentions, the applicants read and relied upon the affidavit of Angus James Francis affirmed on 5 July 2017 and tendered the exhibit to that affidavit (Exhibit AF-3). Counsel also referred to two affidavits read and relied upon by the respondents, namely, the affidavit of Gregory John Williams sworn on 22 February 2017 and the affidavit of Mr Williams sworn on 13 July 2017.
16 Senior Counsel for the MB applicants endeavoured to make good his ultimate proposition by making submissions in relation to the respondents' compliance with production of documents in category 1 of the categories for discovery ordered by the Court on 14 February 2017. He submitted that the documents produced in answer to existing category 1 had been unduly confined and that production in respect of that category had been "woefully incomplete". He said that there had been certain limitations put into place by the respondents within the agreed categories by the imposition of a relevance filter and by restricting the searches undertaken. He said that the respondents had produced to the applicants "unindexed swathes of documents" on USB sticks with no indexation or categorisation. Senior Counsel pointed to various paragraphs in Mr Williams' two affidavits and to correspondence between the solicitors in order to endeavour to make good his ultimate proposition.
17 At pars 7-11 of his affidavit of 13 July 2017, Mr Williams said:
7. Data and documents of the German Respondents has been, and continues to be, collected by Deloitte GmbH Wirtschaftsprṻfungsgesellschaft (Deloitte Germany) and stored within Relativity databases located in Wolfsburg, Germany (together, the German Relativity Databases).
8. I am informed by Alicia Rause, Associate Director, Deloitte Advisory (Hong Kong) Limited (Deloitte), who operates the role of managing the review and production of documents contained in the German Relativity Databases, and believe that:
(a) in total, the German Relativity Databases contain over 110 million documents, which comprise documents from 123 non-individual and 591 individual custodians who occupied, and/or continue to occupy, a range of roles within the German Respondents (714 custodians in total);
(b) collation and retrieval of material that is currently being stored in the German Relativity Databases is on-going; and
(c) the documents contained in the German Relativity Databases are made up of approximately 75% German documents and 23% English documents (with 2% of the documents in other languages) among the documents identified for language.
9. In February 2017, in response to orders made by the Court on 14 February 2017, I made enquiries as to whether it would be possible to identify a list of custodians from the 714 custodians outlined above at sub-paragraph 8(a) that were most likely to be custodians of documents relevant to the issues to be heard and determined at the Stage 1 Trial (Technical Issues).
10. As a result those enquiries, a list of 30 Volkswagen AG custodians was identified (Key Engineer Custodians). Those were the key engineers in software development who would most likely hold documents relevant to the Technical Issues. To the best of my knowledge, the Key Engineer Custodians continue to remain the most likely sources of relevant documents. Volkswagen AG is conducting ongoing investigations in relation to the circumstances of the development of the software in EA189 Diesel engines. Those investigations are being conducted for the purposes of diesel emissions litigation and so are subject to a claim for privilege. If further document custodians who may be relevant to the development of software are identified by those investigations, and searches of their documents are to be conducted for the purposes of Stage 1 trial discovery, that is likely to affect the Respondents' ability to complete discovery by 8 September 2017.
11. The total number of documents currently collated from the Key Engineer Custodians is approximately 7.2 million. I note for completeness that this is the same pool of documents referred to at paragraph 16(b) of my 22 February 2017 Affidavit, and that, since 22 February 2017, additional documents have been collated from these custodians and included in the searches.
18 At pars 35-38 of the same affidavit, Mr Williams went on to say:
35. On 6 April 2017, the Court directed the Respondents to produce documents in respect of a further category of discovery, being the Management Decision Category. In order to identify the most likely sources of documents containing information relevant to management decisions, enquiries were made of Jones Day and targeted searches were conducted for documents which may be responsive to the category.
36. On 22 May 2017, Clayton Utz wrote to the Applicants in the Maurice Blackburn Proceedings and informed them that the Respondents had identified some documents that met the description of the Management Decision Category and also fell within Category 1. A copy of that letter is at pages 77 to 78 of exhibit AF-3 to the Affidavit of Angus James Francis.
37. On 31 May and 1 June 2017, the documents referred to at paragraph 36 above were produced to the Class Action Applicants and the Applicants in the ACCC Proceedings respectively. Copies of letters to the Applicants enclosing those documents are at pages 25-26 and 27-28 of exhibit GJWC respectively.
38. The European Respondents are continuing their review in respect of documents responsive to the Management Decision Category and I estimate that production of documents responsive to that category cannot be completed before the end of August.
19 At par 17 of his affidavit of 13 July 2017, Mr Williams defined the expression Management Decision Category as requiring the production of documents in relation to the management decisions made by the respondents in respect of the two modes of software operation in the EA189 diesel engine.
20 Counsel drew my attention to a number of exchanges between Senior Counsel for the respondents and me at various Case Management Hearings conducted in late 2016 and in the first half of 2017 where the question of discovery of management decision documents was canvassed. Those exchanges demonstrate that while, for a time, the respondents may have interpreted the scope of category 1 of the discovery categories ordered on 14 February 2017 as being confined to technical documents, as time progressed, they came to accept that that category also encompassed management decision documents which were not necessarily of a technical nature. It was submitted on behalf of the applicants that, notwithstanding that the respondents accepted that they were required to discover management decision documents, they had nonetheless carefully constructed their search criteria in respect of category 1 in a way which would exclude such documents and which would confine the searches to engineering documents of a technical nature.
21 Whatever may have been the position prior to late May 2017, the matter was clarified to a large extent by Clayton Utz in their letter to Maurice Blackburn dated 22 May 2017. In that letter, Clayton Utz stated that Volkswagen AG had identified some documents which met what was then described as "Proposed New Category 1 (documents evidencing the decision by management to develop two modes of software operation in the EA189 engine)" and which also fell within existing category 1. Clayton Utz went on to say that those documents would be produced in the next tranche of category 1 documents.
22 As I understand the facts, the next tranche of category 1 documents was produced on 31 May 2017. Also, as I understand matters, as at late July 2017, further production of documents responsive to category 1 was intended.
23 It was then submitted on behalf of the applicants that, in light of the respondents' alleged non-compliance with the Court's orders in relation to existing category 1, the Court needed to impose a radical remedy. Senior Counsel for the MB applicants submitted that the radical remedy which he had in mind was the making of an order requiring the narrative historical document described at [10(b)] above to be produced and provided to the applicants or, in the alternative, for proposed interrogatories 1 and 2 to be administered by the applicants to the respondents. He also pressed for an order requiring the respondents to provide discovery of documents in proposed category 31 (as to which, see Issue 8 described at [10(h)] above).
24 When the hearing of the discovery applications resumed on 24 July 2017, the respondents read and relied upon a further affidavit of Mr Williams sworn on that day.
25 In that affidavit, Mr Williams said that none of the collections of documents stored in the German Relativity Database (which he defined in that affidavit) has been identified as sufficiently close to any category proposed to date by the applicants for discovery with the result that, in his view, he did not consider that the German Relativity Database could be used as a single source from which to identify documents responsive to the management decision category.
26 He then went on to explain in more detail a number of facts and circumstances which he contended answered the allegations made by the applicants against the respondents in respect of their approach to discovery, including the serious allegations that they had deliberately determined to frustrate the discovery process and to obfuscate at every turn in relation to that process.
27 Mr Williams' affidavit of 24 July 2017 is an important affidavit. In my view, it provides a satisfactory answer to the most serious allegations made by the applicants against the respondents in respect of discovery and also provides a sound basis for dealing with most of the discovery issues remaining in dispute after 1 September 2017.
28 Mr Williams was not cross-examined in relation to the contents of his affidavit of 24 July 2017 or in relation to the contents of his earlier affidavits. All of his evidence was left unchallenged. Further, each group of applicants was given an opportunity to respond to Mr Williams' affidavit of 24 July 2017 (it having been served very late). The ACCC chose not to offer any evidence in response to that affidavit. The Bannister Law class action applicants (BL applicants) took the same position. The MB applicants filed and served a further affidavit from Mr Francis (his affidavit of 28 July 2017). However, that affidavit did not provide any basis for challenging the evidence of Mr Williams. To a large extent, particularly in relation to the production made by the respondents on 31 May 2017, Mr Francis' affidavit confirmed the evidence of Mr Williams.
29 In his 28 July 2017 affidavit, Mr Francis informed the Court that, notwithstanding that, as at early July 2017, he had been of the opinion that no management decision documents had been produced to Maurice Blackburn by Clayton Utz in the additional production effected on 31 May 2017, he now accepted that, after further consideration of those additional documents, some were appropriately classified as management decision documents.
30 In the circumstances, for the reasons explained at [21]-[29] above and having regard to Mr Williams' evidence, I am not satisfied that the respondents have been deliberately obfuscating in relation to discovery nor am I satisfied that they have put in place a process designed specifically to avoid the production of damaging documents. The allegations made by the applicants against the respondents and their lawyers in respect of the respondents' approach to discovery were serious and would require proof to a standard which left the Court in no doubt that they had been made good. I am not satisfied that the applicants have established their allegations to such a standard of proof. I now turn to consider Mr Williams' 24 July 2017 affidavit in a little more detail.
31 I interpolate here to note that production of documents was, as at mid July 2017, ongoing and, as far as I am presently aware, continues. On more than one occasion in the correspondence to which I was taken in oral address, Clayton Utz had indicated that there would be further production of documents and that some of the tranches to be produced in the future would include management decision documents. To a large extent, the applicants' submissions in relation to Issues 2, 3, 4 and 8 as described in [10] above were founded upon the proposition that the respondents and their solicitors were deliberately managing the discovery process in such a way as to exclude as far as possible damaging documents in relation to the provenance of the software concept which permitted the EA189 diesel engine to run in two modes and the execution of that concept in the real world by manufacturing motor vehicles with engines into which that software had been installed. I will approach my consideration of Issues 2, 3, 4 and 8 with these observations in mind.
32 At pars 10-13 of his 24 July 2017 affidavit, Mr Williams said:
10. The Key Engineer Custodian set of documents have been used for keyword searches in relation to the following categories (including those categories not yet agreed):
(a) category 1 of the 14 February 2017 categories; and
(b) categories 1, 3, 4, 5, 7, 8 and 19 of the further proposed categories for the Stage 1 Trial.
11. Mr Dawson several times characterised the documents of the Key Engineer Custodians as "technical engineering documents only" or similar (see, for example, T133.33-34) and submitted that, as a result, they were not a suitable set of documents in which to conduct searches for the purposes of giving discovery. Further, Mr Dawson submitted that the documents of the Key Engineer Custodians were not broad enough to capture documents relevant to category 7 "particularly because one would expect the engineering database to refer to a different point in time, albeit - in addition to the fact that it refers to different subject matter" (see T160.8-10). Mr Dawson submitted that the reliance on this group of documents as the primary source of material for the purposes of giving discovery was "obfuscation and frustration of the discovery process" (T130.20-21). For the following reasons, that characterisation is incorrect:
(a) this group of documents represents all of the documents collected from the Key Engineer Custodians for the purposes of assembling the German Relativity Database, including but not limited to their emails. As at 21 July 2017, they:
(i) include:
A. 2,167 million emails; and
B. 240,806 Powerpoints; and
(ii) are dated between 29 November 1979 and 15 June 2017.
(b) They are not only technical engineering documents. Some of the Key Engineer Custodians are or were in management positions within Volkswagen's Engine Development Department (and in particular within the Diesel Engine Development Department). Annexed to this affidavit and marked "GJW-59" is a confidential list of the Key Engineer Custodians and their positions as at 2007. I have picked 2007 because this year falls roughly in the middle of the period during which the EA189 engine was developed;
(c) I am aware, as a result of my review and review by my team members of the Key Engineer Custodians and my own investigations into facts relevant to this matter, that decisions in relation to the development of the EA189 engine and its software were made within the Engine Development Department and, in particular, the Diesel Engine Development Department; and
(d) in the course of discussions about categories for Stage 2, the applicants have identified a list of 23 individuals from whom they sought "to the extent not produced by category 1, documents created from 2006 to date sent or received by any of the following referring to the implementation of the dual mode operation software installed in vehicles with the EA189 engine". Of that list, 16 individuals are Key Engineer Custodians.
12. At T159.46 - 160.3 Mr Dawson said, "let's take category 4 as an example - not much chance that the technical documents numbering 7.2 million about the function of the software across engineering software databases, are going to include communications between the respondent and Bosch and Continental, who are the software development firms that came up with the feature". I understand the reference to "technical documents numbering 7.2 million" to be a reference to the documents of the Key Engineer Custodians. In fact, the documents of the Key Engineer Custodians include communications between Volkswagen or Audi and Bosch and Volkswagen or Audi and Continental. For example, in respect of the documents responsive to Category 4 of the Applicants' Further Technical Categories for the Stage 1 Trial, 91,600 documents (including family documents) comprise such communications. The review by my team of the documents of the Key Engineer Custodians to date suggests that communicating with Bosch in relation to various aspects of the development of EA189 engines was a significant part of the work undertaken by some of these engineers in the course of developing the EA189 engine.
13. I reject the allegation that the process by which the Respondents are giving discovery involves "obfuscation and frustration of the discovery process" or otherwise of misleading this honourable Court.
33 In those paragraphs, Mr Williams said that some of the Key Engineer Custodians who were identified in the manner he described at par 11 of his affidavit were in management positions within Volkswagen's Engine Development Department (EDD) and, in particular, within the Diesel EDD (DEDD). He then informed the Court that the relevant decisions were made within the EDD and, in particular, within the DEDD. He had mentioned the Key Engineer Custodians in his earlier affidavit of 13 July 2017.
34 During his oral address to the Court, Senior Counsel for the respondents informed the Court that all of the top level management personnel likely to have been involved in the development of the EA189 diesel engine had been identified by the respondents and were on the Key Engineer Custodians list of 30 names which was exhibited to Mr Williams' affidavit and marked GJW-59. That list came into evidence on a confidential basis. Some of those persons were in key management positions within the EDD.
35 Mr Williams then testified that appropriate searches had been conducted of the Minutes of the Volkswagen Brand Management Board and of the Volkswagen Group Management Board and that there were no documents in those groups of documents which could be appropriately classified as management decision documents of the kind sought by the applicants.
36 At par 16 of his affidavit, Mr Williams said that the respondents had not applied any relevance filter above and beyond the words of the category.
37 At pars 17-21, Mr Williams said:
17. On or about 11 January 2017 Volkswagen AG entered into a Plea Agreement with the United States Department of Justice. That plea agreement is publicly available and can be found at: https://www.justice.gov/opa/press-release/file/924436/download
18. Exhibit 2 to that plea agreement is a Statement of Facts which Volkswagen AG agrees and stipulates is true and accurate. That Statement of Fact discloses that the development and implementation of the switching software in US vehicles occurred under the supervision of employees of Volkswagen AG in its engine development department who were below the level of the management board.
19. On the basis of my own review of documents, the review of documents by members of my team, my discussions with employees or agents and the Respondents and with lawyers acting for the Respondents and other members of the Volkswagen Group in relation to diesel emissions:
(a) I believe that it is also true that the development and implementation of the switching software in vehicles sold in Australia occurred under the supervision of employees in its engine development department; and.
(b) I am not aware of any document which is a formal record of the decisions made in respect of such software.
20. There are documents which record statements made by, or discussions with, persons in management positions within the Volkswagen AG engineering department about developing and implementing the software for EA189 engines. Some documents of this nature have been produced to the Applicants already and some are proposed to be produced in the next tranche of discovery, intended for 31 July 2017. It is often difficult to tell whether such documents are recording a decision of a manager. However, in my view such documents are generally speaking not "management decision documents" in the sense described in paragraph 14 above. For document production purposes, the question of whether such documents are "management decision documents" is largely academic because such documents in any event fall within category 1 ordered on 14 February 2007.
21. In seeking to identify documents evidencing decisions or consideration by managers or management of the development, approval, installation or use of switching software in EA189 vehicles (and not limited to those that fall strictly within the words set out in paragraph 14 above) regard is being had to work carried out by lawyers acting for Volkswagen, including but not limited to lawyers in the United States. Such searches are not limited to the documents of the Key Engineer Custodians.
38 At par 26 and par 27 of his affidavit, Mr Williams said:
26. In addition to the provision of a Source List, each production of documents to the Applicants by way of a USB or CD is accompanied by a list provided electronically in accordance with the eDiscovery Protocol (MDB Data). The MDB Data includes the following types of information about each document (as applicable):
(a) document ID;
(b) document date;
(c) document type (eg. email, spreadsheet, presentation);
(d) document title (eg. by way of file name or email subject);
(e) correspondence type (eg. "to", "from", "between", "CC");
(f) persons (eg. for emails, the name or email address of the sender, recipient, persons carbon copied or blind copied);
(g) organisation; and
(h) file path (eg. where available, the custodian / directory from where the document was collected).
27. I understand that the information in the electronic list, along with the documents themselves, can be loaded into most commercially available document management platforms including, for example, Relativity and Ringtail. If the Applicants choose to do so, they can then search and sort the documents by reference to any of the information in the electronic list, as well as, in most cases the content of the document itself.
39 In addition to Mr Williams' evidence, the respondents produced a table which was provided to the Court as Tab 3 in MFI-6, in which they set out in considerable detail their responses to the particular criticisms of their compliance with the orders of the Court in relation to discovery. I do not need to refer to that table in detail. However, to the extent that it remains relevant, I found it to be a most helpful document to which I have had regard in addressing the remaining discovery issues.