Capic v Ford Motor Company of Australia Limited

Introduction 1 This case is a class action. The lead applicant, by her lawyers, seeks inter alia orders restraining the respondent from communicating offers of settlement to group members. For the reasons which follow, the application will be dismissed with costs.

The Proceeding 2 The lead applicant acquired a Ford Focus on 24 December 2012 from a Ford dealer by means of a novated lease. It is alleged by her that the respondent, the Ford Motor Company of Australia Limited ('Ford'), has imported, sold, supplied and distributed a range of specifically identified models of the Ford Focus, Ford Fiesta and Ford EcoSport. The gravamen of the group claim is that the vehicles in question all share an automatic transmission ('the PowerShift transmission') which is defective. The difficulties allegedly exhibited include excessive transmission clutch shudder during light acceleration, delayed or harsh gear shifts, loss of transmission gear engagement while driving and sudden loss of power. This is not, I should note, an exhaustive list of the difficulties alleged. 3 The formal structure of the group's claims is twofold. First, it is said that the vehicles have been supplied in breach of a statutory guarantee under the Australian Consumer Law ('the ACL'). Secondly, it is said that promotional literature distributed by Ford about the PowerShift transmission failed to mention the existence of the alleged problems and was misleading and deceptive. The relief claimed in the originating application is a refund of the purchase price of each vehicle, alternatively damages reflecting the diminution in the value of the vehicles caused by the defect, and aggravated damages. Before me the claim for aggravated damages was explained as resting on the proposition that the difficulty with the PowerShift transmission was known in the United States before sales in this country began. 4 The class action was commenced in this Court on 17 May 2016. There is presently no litigation funder. The solicitors with the conduct of the case are a firm trading under the name Bannister Law. Bannister Law maintains a website with the address www.fordclassaction.com.au. Persons visiting that website may register with it and if they do so they then may, but are not obliged to, enter into a fee agreement with Bannister Law. At present, it appears that this retainer is on a no-win no-fee basis. As at 24 June 2016, there had been 3,462 people who had registered on the website. By 27 July 2016, some 2,001 people had entered into retainers with Bannister Law. Ms Chapman, the solicitor with the conduct of the litigation for the lead applicant, estimated that there were presently around ten new registrations per day coming through the website. 5 Of course, Bannister Law is not the only entity which has been contacted by purchasers of the allegedly defective vehicles. Many have, unsurprisingly, approached Ford or its dealers. Some of these contacts have been initiated by way of telephone, others in writing. In some cases, Ford has, after a degree of to-ing and fro-ing, eventually communicated offers to some vehicle owners either to buy back, on various terms, the vehicle in question or, in other cases, to allow the vehicle to be traded in to assist with the purchase of a new vehicle. These various offers have also included proposed releases of the owners' rights together with confidentiality clauses. Where a trade-in to a newer model has been offered, this has required the payment by the vehicle owner of some additional money. This was said in the lead applicant's submissions to mean that such a vehicle owner was out of pocket in the amount of this additional cost. There is no need to assess the correctness of this proposition at this stage although, at first blush, it appears to put at nought the higher value of the new vehicle. 6 For the purposes of these reasons, it is convenient to assume that the proposed releases are legally sufficient to release any rights which a vehicle owner might have against Ford in the class action. This was certainly Ford's position on the present application. Dr Cashman, for the lead applicant, submitted that there might well be arguments available that such a release was not effective, but he did not seek to develop this aspect of the matter as providing a basis for the relief which he sought. 7 Obviously enough, as individuals settle with Ford or its dealers and give releases, this will reduce the size of the class. 8 The lead applicant now seeks by interlocutory application to restrain Ford from: (a) communicating in respect of the allegedly defective vehicles with group members who are clients of Bannister Law; (b) sending letters to group members of the kind Ford has in fact been sending; and (c) communicating with group members other than in accordance with a detailed protocol attached to the interlocutory application.

Communications with clients of Bannister Law 9 Issue (a) need not take up any time. Ford does not desire to communicate with group members who are clients of Bannister Law, but experienced difficulty in achieving that end when Bannister Law would not say who its clients were. By the time the matter was argued before me this problem had been solved. There remained vestigial disagreement about whose fault it was that the situation had ever come to pass in the first place, but there is no present utility in my resolving that debate. I am satisfied that there is no threat or risk that Ford will contact group members who are clients of Bannister Law. The contrary was not suggested to me. An injunction to restrain such conduct is, therefore, unnecessary.

Should Ford be restrained from making offers? 10 Turning to the injunction relating to Ford's correspondence, the evidence suggested that the correspondence was not issued as a result of Ford seeking to initiate contact with vehicle owners. Rather, it was the final step following contact with Ford initiated by the vehicle owner. I return to this matter in more detail below. 11 It seems that two kinds of letter have been sent. The first was a letter in which a refund, not necessarily in full, was offered. A generic example of this kind of offer is as follows: Date Customer Name c/- Dealer Name Confidential and Without Prejudice Dear Customer Name, Re: Vehicle description Petrol, VIN: VIN NUMBER (the Vehicle) I refer to your contact with Dealer Name and Ford Motor Company of Australia Limited (Ford Australia) regarding concerns with the Vehicle. On a goodwill basis only and in full and final settlement of all matters surrounding the Vehicle, Dealer Name and Ford Australia are willing to make an offer subject to the following terms; • Dealer Name will arrange a refund of the purchase price of $xxxxxx of the vehicle in full and final settlement of all issues and claims you may have (including costs, interest and GST) relating to the Vehicle. • You agree to sign all necessary papers to effect the transfer of ownership of the Vehicle to Dealer Name. • You warrant that at the date of transfer of the Vehicle to Dealer Name, the Vehicle will be unencumbered and that you have full and clear title to transfer the Vehicle to Dealer Name. If the Vehicle is not unencumbered at the date of transfer, then Dealer Name shall be entitled to commence proceedings against you and enter judgment against you for all costs incurred by Dealer Name in order to secure the discharge of the relevant encumbrance, plus legal costs, and this Agreement may be produced to the Court as evidence of your consent to the entry of judgment in those terms. • You agree to release Dealer Name, Ford Australia and all associated parties, including their agents, employees and suppliers from any and all actions, suits and claims of any nature now and in the future (including claims for legal costs) associated with the Vehicle. • You agree that you will not in any way make or continue to make any disparaging comments or allegations of an adverse nature against Dealer Name, Ford Australia or any other Authorised Ford Dealer concerning the Vehicle or these Terms of Settlement, including removal of any existing comments currently visible on media forums of any type. • You agree that you will not take any actions, whether by yourself or in concert with other persons, which would have the effect of interfering with or preventing the normal trading activities of Dealer Name or Ford Australia or any other Authorised Ford Dealer in Australia. This offer is subject to being kept strictly confidential between you, Dealer Name and Ford Australia, except for the purpose of obtaining legal or financial advice in relation to this agreement. The above offer will remain open until insert date. If you wish to accept the offer please sign this document below and return to Dealer Name insert date. Yours Sincerely, CRC Dp Name Ford Customer Relationship Centre Dealer Principal Ford Motor Company of Australia Limited Dealer Name I acknowledge receipt of and agree with the above terms and conditions. Signature - Customer Name Date 12 A second type of offer was referred to as a 'changeover' offer. In essence, this was a trade-in to a higher or more recent model. The price used by Ford for the new vehicle was the concessional price it offered to its own staff. An example in the evidence of this second kind of offer was as follows: Date Customer Name c/- Dealer Name Confidential and Without Prejudice Dear Customer Name, Re: VEHICLE DETAILS, VIN: VIN NUMBER (the Vehicle) I refer to your contact with Dealer name and Ford Motor Company of Australia Limited (Ford Australia) regarding concerns with the Vehicle. On a goodwill basis only and in full and final settlement of all matters surrounding the Vehicle, Dealer name and Ford Australia are willing to make an offer subject to the following terms; • Dealer name will arrange to replace the Vehicle with a new Vehicle Description ('the Replacement Vehicle') in full and final settlement of all issues and claims you may have (including costs, interest and GST) relating to the Vehicle. • You agree to pay Dealer name the amount of $XX,000 including GST upon delivery of the Replacement Vehicle. • You agree to sign all necessary papers to effect the transfer of ownership of the Vehicle to Dealer name • You warrant that at the date of transfer of the Vehicle to Dealer name the Vehicle will be unencumbered and that you have full and clear title to transfer the Vehicle to Dealer name If the Vehicle is not unencumbered at the date of transfer, then Dealer Name shall be entitled to commence proceedings against you and enter judgment against you for all costs incurred by Dealer name in order to secure the discharge of the relevant encumbrance, plus legal costs, and this Agreement may be produced to the Court as evidence of your consent to the entry of judgment in those terms. • You agree to release Dealer name, Ford Australia and all associated parties, including their agents, employees and suppliers from any and all actions, suits and claims of any nature now and in the future (including claims for legal costs) associated with the Vehicle. • You agree that you will not in any way make or continue to make any disparaging comments or allegations of an adverse nature against Dealer name, Ford Australia or any other Authorised Ford Dealer concerning the Vehicle or these Terms of Settlement, including removal of any existing comments currently visible on media forums of any type. • You agree that you will not take any actions, whether by yourself or in concert with other persons, which would have the effect of interfering with or preventing the normal trading activities of Dealer name or Ford Australia or any other Authorised Ford Dealer in Australia. This offer is subject to being kept strictly confidential between you, Dealer name and Ford Australia, except for the purpose of obtaining legal or financial advice in relation to this agreement. The above offer will remain open until Date. If you wish to accept the offer please sign this document below and return to Dealer name by Date. Yours Sincerely, Crc Dp Name Ford Customer Relationship Centre Dealer Principal Ford Motor Company of Australia Limited Dealer name I acknowledge receipt of and agree with the above terms and conditions. Signature - Customer Name Date 13 Since 20 June 2016 the letters have also had attached to them an information sheet in the following terms: PowerShift Transmission Class Action Information Sheet This information sheet should be read together with the attached offer. A class action has been commenced against Ford Australia in the Federal Court. The class action has been commenced on behalf of persons who acquired, between January 2011 and May 2016, a Ford Focus, Fiesta or EcoSport model fitted with a PowerShift transmission ("group members"). You may be a group member in the class action. The class action asserts that group members are entitled to a refund or damages by reason of certain alleged breaches of the Australian Consumer Law. Ford denies these allegations and is defending the class action. Ford has made you the attached offer. If you accept this offer, this will constitute full and final settlement of any claims which you may have against Ford. This means that you will not be able to participate in the class action. When considering the offer, you may wish to seek legal advice and may benefit from this. 14 The evidence before me also showed that the offers were generally drafted so as to give the vehicle owner at least 28 days to consider it. 15 Dr Cashman orally submitted that the two kinds offer, even with the information sheet, fell short in five ways: (a) the letters did not identify Bannister Law as a potential source of advice in terms of deciding whether to accept each offer; (b) the offers failed to indicate that the vehicle owner might get more in the class action. During oral argument this point was modified so that it was said that the correspondence ought to say that the vehicle owners might get more or less as a result of the class action; (c) the letters did not require the vehicle's owner when accepting the offer to say whether they had, or had not, obtained legal advice; (d) the letters did not permit ready identification of the legal advisers from whom the vehicle owner had taken advice; and (e) the letters did not inform vehicle owners of ways of finding out about the class action, specifically via the website. 16 There is no doubt that the Court has the power in an appropriate case to control aspects of the ability of a respondent to communicate directly with group members where the group members are not represented in the proceeding. The relevant principles were expounded by Sackville J in Courtney v Medtel Pty Limited (2002) 122 FCR 168. In that case the applicant sought to restrain the respondent from communicating with group members. His Honour accepted at [54] that s 33ZF(1) of the Federal Court of Australia Act 1976 (Cth) empowered the Court to constrain or regulate, in appropriate circumstances, communications between a respondent and unrepresented group members. Section 33ZF(1) provides: 33ZF General power of Court to make orders (1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding. 17 His Honour's reasons were as follows: 54 But just as s 33ZF(1) of the Federal Court Act does not prohibit communications between the respondent and a group member in a representative proceeding, the provision does empower the Court to impose constraints on such communications if these are considered necessary or appropriate to ensure that justice is done in the proceeding. If, for example, there is evidence that an offer is about to be or has been made to group members in terms that are misleading or in circumstances that are unfair to the group members, the Court may take the view that its intervention is necessary or appropriate to avoid injustice to the group members. Where intervention is considered appropriate, the form of intervention must depend on the circumstances of each case. 18 This passage instances the misleading or unfair nature of an offer as examples of circumstances where intervention may be warranted. However, it is tolerably clear from the last sentence and the explicit expression 'for example' that his Honour was not intending this to be an exhaustive statement or any more than illustrative. 19 One difficulty thrown up by the class action provisions in Part IVA of the Federal Court of Australia Act 1976 (Cth) is the need to ensure that group members who are not before the Court are not unjustly disadvantaged by the actions of those parties who are. This difficulty may manifest itself in various ways. The parties who are before the Court may agree on regimes of notice to group members which are convenient to them but are, in some way, unfair to the group members who are not parties. In other situations the parties may agree upon a settlement of the class action proceedings in their entirety which is in their interests but not necessarily in the interests of group members. In both cases Court supervision is required, in the former case under s 33X and in the latter under s 33V. The Court in such cases has a role which involves ensuring that the interests of the non-party group members are not sacrificed to the interests of the parties before the Court. Its role is akin to that of a guardian, not unlike that which the Court has in the case of infant settlements, and is protective: see e.g. Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [8] per Jacobson, Middleton and Gordon JJ. 20 The jurisdiction under s 33ZF when used to regulate communications between a respondent and unrepresented group members is a member of the same supervisory family. The ability of a non-party group member and a respondent to compromise that group member's rights qua group member may afford a circumstance in which rights may be compromised in a way which would not be fair or just. 21 The categories of situation which may generate unfairness or injustice are not closed. It is worth emphasising that it is the interests of the non-party group members which are being watched over, not the interests of those running the class action. One matter which is also clear is that unfairness and injustice are not limited to unlawful behaviour: Courtney v Medtel at [61]. Ultimately, in that case Sackville J thought the following was generally appropriate in relation to settlement offers: 64 I do not think it appropriate to attempt to set out exhaustive guidelines in advance as to the form that a settlement offer to unrepresented group members might take in order to avoid the risk of being characterised as misleading or unfair. In the present case, however, I think that there is much to be said for respondents' offers of settlement to the unrepresented remaining Group Members meeting the following standards: • the offer and any accompanying material be in writing (a proposition the respondents accept); • the documentation accurately explains the consequences of accepting and not accepting the offer; • the offer allows a period for acceptance that is sufficient to the Group Member with a genuine opportunity to obtain legal advice, should the Group Member wish to do so; and • the documentation makes it clear that the Group Member is entitled to seek and might benefit from independent legal advice. 22 It will be seen that the information sheet attached to Ford's offers meets each of these requirements. First, it is in writing. Secondly, it accurately states the effect of accepting the offer as being that the vehicle's owner will no longer be in the class action. It does not say that the effect of not accepting the offer will be that the vehicle owner will not get a refund/trade-in and will remain in the class, but in the present context this is so obvious that it does not need to be said. Thirdly, the vehicle owner has at least 28 days to consider their position. This is not in the information sheet, but it was in Ford's evidence as to the procedure it adopted with the offers. Fourthly, the information sheet explicitly suggests that legal advice might be obtained, and says that this may benefit the vehicle owner. 23 There may be cases where a more rigorous regime may be necessary. As is often the case, context is everything. If the group members are definitionally under some disability relating to education or cognition, plainly a different approach may need to be taken. 24 Unsurprisingly in that circumstance, both parties in this case sought to make something of the context. For the lead applicant, it was said that many of the group members 'may' be (cf. are) desperate and vulnerable. I do not think that the evidence bears this out. The individuals involved have bought vehicles which, if the case be accepted, had a transmission which was apt to gyre and gimble in disconcerting ways. There are no particular difficulties in accepting that a person who owns such a vehicle might well be vexed by it; vexed by the on-going anxiety motoring in such a vehicle inevitably generates; vexed by the difficulties involved in seeking to sell it. I do not accept, however, that this means that this class of people can properly be described as desperate, although I would accept 'unhappy' as a plausible contention. And, whilst I would embrace the idea that ownership of such a vehicle might make offers from Ford attractive no matter how miserly simply as a means to get rid of the vehicle, I do not think that this means the class is vulnerable either. 25 The evidence contained a number of examples of email correspondence from vehicle owners detailing the travails suffered by them at the wheels of their cars, the allegedly unsatisfactory nature of Ford's offers or, in some cases, their regret at having accepted such an offer. I do not accept that these emails show much more than common sense or reflection reveal about owning a vehicle which appears defective. 26 On the other hand, Ford pointed to some elements of the context which it said were important. It was, for example, inevitable according to Ford that people who felt their vehicle was defective would return it to the dealer from which it had been purchased and seek its repair or replacement, for vehicles generally come with warranties. That initial return of the car might engender a series of further returns and escalating, or at least continuing, disputation. It was this process which, according to the evidence, might lead to an offer eventually being made. A critical aspect of this process was that it was initiated by the customer, not Ford. It is not the case, as it was by contrast in Courtney, that Ford is seeking to contact group members to settle their claims. Rather, in the real world Ford has to deal with complaining customers and it has to be entitled, so it was submitted, to resolve their complaints. The presence of the class action, although not irrelevant, ought not to be permitted to obscure that aspect of the relationship. 27 I accept this submission which I do not think is diminished by the lead applicant's observation that it signified little because customer complaints obviously originate with customers. 28 It is true that the offers contain proposed releases and confidentiality arrangements, but this is a usual aspect of the settlement of disputes of this kind, and I do not think it advances the lead applicant's case. 29 This is not a situation, therefore, in which Ford is actively seeking out group members to persuade them to surrender their rights as group members. Rather, it is a case where disgruntled vehicle owners are seeking out Ford, Ford is reaching a deal with them to refund in part (or whole) the purchase price or to trade the car up for a new one, and as a collateral aspect of this is taking the opportunity, understandably in my opinion, to obtain a settlement of the group member's rights at the same time. I fail to see anything exploitative in such a situation. 30 It might be different if the customer's attention had not been drawn to the existence of their rights as a group member, but the notice which accompanies each offer does so. Further, as I have already explained, the information sheet substantially complies with each of the suggestions made by Sackville J set out above. 31 It was submitted on the lead applicant's behalf that a person receiving an offer had little or no bargaining power. However, in my opinion this is no more than an assertion. No doubt, there will be some owners whose immediate need for their vehicle is so extreme that practicalities mean that Ford's offer will be attractive, perhaps compelling. However, there is no reason to think that this is a substantial part of the class and many reasons to think the contrary. Some of the purchasers are operators of car fleets, and even amongst the general public there is no reason to think that people who buy the Ford vehicles in question are more susceptible to exploitation than the general public. Indeed, the contrary might be said: this is the class of person affluent enough to buy a car with an automatic transmission. 32 I am prepared to accept, as was submitted by Dr Cashman, that many owners would have been unaware of their rights under the ACL. But I do not think this much matters when they were told explicitly that they might benefit from getting legal advice. I also accept that an owner who received an offer could not discern from it the nature of the claims being made on their behalf in the class action, but I fail to see why this much matters. Most people would understand that the existence of a class action about the transmission in their vehicle was likely to involve a claim for redress. I do not think that a lay person's comprehension of the situation would be much improved by being told the legal mechanics of the claim; a fortiori, when they are told they would benefit from obtaining legal advice. 33 It was said for the lead applicant that no explanation was given by Ford of the consequences of accepting 'the deal'. But this is not correct. Group members were told they would lose their rights in the class action. Also incorrect is the evidence of the lead applicant's solicitor that the persons who received the offer were not encouraged to obtain advice. They were explicitly told that obtaining legal advice might benefit them. 34 I therefore reject all of the submissions the lead applicant makes about the deficiencies in the offers. In my opinion, the offers are quite adequate from a fairness perspective and in the context in which they occur. 35 It remains under this heading to consider the various positive matters which are set out above at [15] that the lead applicant submits should have been included in the offers. 36 First, I reject the submission that the letters should identify Bannister Law as a potential source of advice. It is true that in King v AG Australia Holdings Ltd [2002] FCA 1560 Moore J approved a form of communication by a respondent (which was not a settlement offer) that informed the recipient of the right to consult their own solicitor or the lawyers acting for the applicant in the proceeding. But his Honour did not hold, contrary to what was submitted to me, that this was necessary. Here the argument was, as I understood it, that Bannister Law, being familiar with the matter, might give any such advice less expensively. That may be so. However, the fact that the offers do not take this course does not render them unfair or give rise to any perceptible injustice. There is, therefore, no legitimate basis upon which s 33ZF(1) might warrant any intervention. It is not necessary to resolve, in that situation, the question whether Bannister Law might itself have a conflict between its own potential interest in expanding the class and its duty to give disinterested advice to a vehicle owner on whether to stay in the class action or accept Ford's offer and be removed from it. 37 Secondly, I do not accept that the offers should say that the vehicle owners might get more in the class action, as was initially submitted. That they would get more is not inevitable by any means. Indeed, they may well get less when there is brought to account the fact that legal expenses will need to be taken out of any fund recovered, and that the vehicle owners will have to put up with a defective vehicle until the group proceedings are brought to a conclusion, which will not necessarily be any time soon. Observations of that kind led Dr Cashman to modify the submission so that it was said that the offers should point out that the owner might get more or less. This has the virtue of being almost certainly correct, but it is also trite. More importantly, I do not see what injustice is visited upon a person receiving such an offer by not having the obvious pointed out to them. 38 Thirdly, I reject the submission that the offers should require the vehicle owner to indicate whether they have or have not obtained legal advice. Such a requirement does not bear upon the offer's fairness and its absence is not indicative of injustice. 39 Fourthly, I reject the related submission that the offers do not permit the ready identification of the legal advisor who gave any such legal advice. Whilst true, such a requirement is disconnected from the fairness or justice of the offers. 40 Fifthly, I do not think that a failure to draw to group members' attention the existence of the website has the effect of making the offers unfair. 41 In those circumstances, there is no basis for restraining Ford from making the offers it has been making. I reject the second injunction sought.

Is a protocol necessary? 42 Prayer 3 of the interlocutory application seeks an order that Ford only deal with non-party group members in accordance with the protocol set out in Schedule A of the application. Schedule A is as follows: Schedule A PROTOCOL FOR COMMUNICATION BETWEEN THE RESPONDENT AND GROUP MEMBERS WHO ARE NOT CLIENTS OF BANNISTER LAW 1. Subject to paragraph 5 below or further order, the Respondent, its servants, agents or solicitors shall not direct any communication to a Group Member otherwise than in writing where that communication: relates to or arises out of a complaint by the Group Member concerning (a) an Affected Vehicle which is the subject of the present proceedings (b) one or more of the defences in the affected vehicles as pleaded in the present proceedings and (c) affects or may affect the Group Members' participation in this proceeding; 2. The Respondent shall forward to Bannister Law a draft of any communication referred to in paragraph 1 above which the Respondent proposes to send itself, by its servants, agents or solicitors to any Group Members in the representative proceeding no less than 10 business days before that correspondence is to be sent. 3. The Applicants have liberty to apply on no less than 2 business days' notice in writing to the Respondent in relation to any draft communication provided to their solicitors pursuant to paragraph 2 above. 4. Paragraph 1 does not prevent the Respondent, its servants, agents or solicitors, from communicating with group members, whether that communication be in writing, oral, pictorial or otherwise, where that communication: is in connection with the repair or maintenance of the affected vehicle and/or the purchase or sale of the affected vehicle, in circumstances where the group member is not requested or required to release any legal rights that the group member may have in respect of the affected vehicle, including any rights against the respondent in the present proceedings 5. For the avoidance of doubt, nothing in this Order places any restrictions or conditions on the Respondent, its servants, agents or solicitors, communicating with Group Members about the Affected Vehicles, in whatever mode or manner considered appropriate, where such communication does not affect any right or interest that the Group Member may have in the present proceeding. 43 In a different context there may be utility in having some kind of protocol governing communications between a respondent and a non-party group member. However, when the communications which elicit the offer are initiated by the consumer this seems to me, at least in this case, inapt. If there were any evidence that Ford was independently seeking to approach group members to settle their claims, or that group members were being misled, I might well be persuaded to take a different course. But there is not.

Result 44 In these circumstances, I dismiss the interlocutory application with costs. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.