Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia

Indemnity costs

1. VW seeks an order that Professor Dwyer and Regency Funding be jointly and severally liable for VW's costs on an indemnity basis: 1. "[f]or all costs attributable to the loss and damage aspect of the proceedings" from 29 January 2021, on which date Dr Pleatsikas's report was served; and 2. generally, from 6 April 2021, on which date a Calderbank offer was served.

Costs from 29 January 2021 attributable to loss and damage

1. 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: 1. there was, from the time that Dr Pleatsikas's report was served, a "high degree of certainty concerning the deficiencies in [Professor Dwyer's] case"; and 2. the deficiencies were "sufficiently manifest and clear such that it can be inferred that [Professor Dwyer] would or should have appreciated them when the action was … continued [beyond 29 January 2021], at least if [he] had given proper consideration to, or been properly advised about, the merits of [his] case". [9]
2. 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.
3. In this regard, Professor Dwyer relied upon the evidence of Professor Baddeley.
4. I did not accept Professor Baddeley's evidence for the reasons I gave at [J224] to [J252].
5. Professor Baddeley relied upon two bases to identify and calculate "negative price differentials" between "defective vehicles" and "non-defective vehicles".
6. Those two bases were: 1. "Discrete Choice Experiments", consisting of the survey evidence that I described at [J212] to [J220]; and 2. a "Structural Break Analysis", being an analysis of auction dates of used vehicles that I described at [J233] and on which Professor Dwyer abandoned reliance prior to closing submissions.
7. In his report, Dr Pleatsikas identified what he called "fundamental flaws" in both the Discrete Choice Experiments and the Structural Break Analysis.
8. 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]
9. 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.
10. 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]
11. All of these matters were clear to me following Professor Baddeley's evidence for the reasons I set out in the principal judgment.
12. 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]".
13. 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.
14. 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.
15. 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.
16. The matter is clearer in relation to the Structural Break Analysis.
17. 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".
18. 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.
19. 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.
20. Otherwise, I decline to make the order sought by VW.

The Calderbank letter

1. On 25 March 2021, VW's solicitors sent Professor Dwyer's solicitors a Calderbank letter proposing that proceedings be discontinued on the basis that: "(a) there be no order as to costs and the security for costs presently lodged with the Court would be released upon Court approval; (b) the Plaintiff release and discharge the Defendant from any and all claims (known or unknown) of any nature which the Plaintiff now has, at any time had or may have against the Defendant; and (c) the funder and the solicitors for the plaintiff agree not to fund, promote or otherwise have any involvement in any matter concerning the same or similar subject matter against the Defendant or any related body corporate of the Defendant".
2. 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.
3. The question, however, is whether it was unreasonable of Professor Dwyer not to accept it.
4. I am not able to come to that conclusion.
5. 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.
6. 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.
7. 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.
8. Further, Professor Dwyer was obliged to consider the interests of Group Members. As was submitted on his behalf: "31. The second fundamental problem is that if the Calderbank offer had been accepted, group members would have been unable to continue pursuit of the existing representative proceeding (or institute a new representative proceeding) unless they could identify and secure the services of an alternative funder and solicitors. Individual group members could continue their own individual claims - or bring new proceedings - but only via a different solicitor. 32. Whilst the prospect of continuing representative proceedings via a new funder and solicitor, or bringing or continuing individual claims on a self-funded basis via new solicitors, was theoretically open, the practical reality was that both options were unlikely; hence the commercial reason for including condition (c) in the Calderbank offer."
9. In these circumstances, I am not satisfied that it was unreasonable of Professor Dwyer not to accept the Calderbank offer.
10. Accordingly, I am not prepared to make an order for indemnity costs based on that offer.

Common questions

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

Endnotes

1. Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia [2021] NSWSC 715.
2. For example, Yu v Cao (2016) 91 NSWLR 190; [2015] NSWCA 276 at [137] (McColl JA with whom Sackville AJA and Adamson J agreed).
3. FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 at [210] (Beazley, Giles and Basten JJA).
4. Carter v Caason Investments Pty Ltd [2016] VSCA 236 at [38] (Weinberg, Ferguson and Kaye JJA); FPM Constructions at [210].
5. Carter v Caason at [38].
6. Carter v Caason at [38].
7. Gore v Justice Corp Pty Ltd (2002) 119 FCR 429; [2002] FCA 354 (O'Loughlin, Whitlam and Marshall JJ).
8. Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2015] VSC 644 at [15] (Elliott J).
9. To adopt the language of Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246 at [11], to which both parties referred as stating the relevant test.
10. They were based on an unrealistic premise: [J238]; only measured willingness to pay rather than the vehicle's market value: [J240]-[J241]; contained an "Opening Statement" which asked participants to assume a false level of risk: [J245]; were confusing: [J248]; did not contain quantifiable information about the probability that the airbag's safety risk might eventuate: [J250]; and were not answered by participants at a speed or in a manner that suggested they gave thoughtful attention to the survey: [J251].
11. See [J222].
12. At [J232]-[J234].

Amendments 09 September 2021 - Footnote 10 - typographical error corrected DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 September 2021