Defendant Seeks Joint Liability of Plaintiff and Funder

Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia (No 2) [2021] NSWSC 1137 (7 September 2021)

The parties are in dispute over whether Regency Funding should be jointly and severally liable for the defendant's costs. VW seeks an order that Professor Dwyer and Regency Funding be jointly and severally liable for VW’s costs on an indemnity basis. On the other hand, 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. The Court, in ruling upon this dispute, relied on relevant jurisprudence and the submissions of the parties. 

Facts:

On 23 August 2021, through its solicitor, Regency Funding informed VW’s solicitors that it did not seek to be heard on the application.  VW seeks an order that Professor Dwyer and Regency Funding be jointly and severally liable for VW’s costs on an indemnity basis: (a) for 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 (b) generally, from 6 April 2021, on which date a Calderbank offer was served.  VW sought to establish that, from the time that Dr Pleatsikas’s report was served, a “high degree of certainty concerning the deficiencies in Professor Dwyer’s case” and  the deficiencies show 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”.  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. 

Professor Dwyer relied upon the evidence of Professor Baddeley such as “Discrete Choice Experiments”, consisting of the survey evidence and a “Structural Break Analysis”, being an analysis of auction dates of used vehicles.  The Structural Break Analysis was 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.  On 25 March 2021, VW’s solicitors sent Professor Dwyer’s solicitors a Calderbank letter proposing that proceedings be discontinued because there would be no order as to costs and the security for costs presently lodged with the Court would be released upon Court approval.  In the letter the proposal was also on the basis that the Plaintiff release and discharge the Defendant from any and all claims and 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. 

Issues:

I. Whether or not the funder should be jointly and severally liable for defendant’s costs.

II. Whether or not the defendant should have certain costs on an indemnity basis.

III. Whether or not the plaintiff should have appreciated his case on loss and damage would fail following service of defendant’s expert report.

IV. Whether plaintiff unreasonably failed to accept the offer. 

Applicable law:

Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246 - language adopted by the Court in ruling that 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”.

Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2015] VSC 644 - where 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”. 

Carter v Caason Investments Pty Ltd [2016] VSCA 236 - where it was provided that the matters relevant in determining whether it is appropriate to make such an order including whether the non-party has a direct interest in, and entitlement to, a substantial part of the fruits of the litigation; was involved in the litigation purely for commercial gain; and  had a right to information and involvement in decision making in relation to the litigation. 

Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia [2021] NSWSC 715 - where Stevenson J published his principal judgment in this matter on 18 June 2021.

FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 - provides that whether the non-party has provided the funds for the litigation is a matter relevant in determining whether it is appropriate to make such an order.

Gore v Justice Corp Pty Ltd (2002) 119 FCR 429; [2002] FCA 354 - where whether a non-party has agreed to provide an indemnity to the unsuccessful party for any adverse costs order is a matter relevant in determining whether it is appropriate to make such an order.

Yu v Cao (2016) 91 NSWLR 190; [2015] NSWCA 276 - provides that the Court has power to order that a non-party pay costs. 

Analysis:

Regency Funding provided the funds for this litigation, including security for costs of $2.15 million.  VW’s submitted 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.  VW submitted that 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”.  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.  In deciding regarding the Calderbank offer, Professor Dwyer was obliged to consider the interests of Group Members.  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.

Conclusion: 

Professor Dwyer’s claim against VW, as representative of the Group Members, failed. The proceedings are to be dismissed with costs.  The funder to be jointly and severally liable for those cost.  An order is made 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.  The Court concluded that it was not unreasonable of Professor Dwyer not to accept the Calderbank offer.  The Court is to answer the common questions as set out in the schedule.