Dieselgate (or truth through engineering or vorsprung durch teknik …)

Photo by Cesar Salazar on Unsplash

Readers may recall a previous blog – “If only everything in life was as reliable as a VW …” in which I discussed the legal problems the Audi/VW motor corporation was facing as a result of the emissions scandal which affected the corporation’s diesel vehicles:

https://seancrossansscotslaw.com/2019/03/16/if-only-everything-in-life-was-as-reliable-as-a-vw/

A link from the The Guardian’s website can be found below which discusses the background to the emissions scandal:

https://www.theguardian.com/business/ng-interactive/2015/sep/23/volkswagen-emissions-scandal-explained-diesel-cars

Misrepresentation?

Essentially, it is alleged that Audi/VW Group deliberately misrepresented data about the environmental impact of its vehicles (principally in relation to its diesel models) in a cynical attempt to increase sales. Environmentally minded consumers may well have been heavily influenced by the favourable presentation of emissions data when considering whether to purchase a new diesel vehicle.

The issue of misrepresentation is a factor which can invalidate a contractual agreement. The Audi/VW scandal is an excellent discussion point for this area of contract law as I often remark to my students.

If one party (e.g. a seller of goods) makes exaggerated or false claims (the misrepresentation) about a product in order to encourage or induce a buyer to enter the contract, the buyer may be decide to treat the agreement as voidable. This will mean that the buyer may have the right to the following remedies:

  • Rescission (or cancellation) of the contract; and/or
  • An award of damages

Critically, the innocent parties must be able to demonstrate to the courts that the misrepresentation actively encouraged them to enter contracts. It is not enough to say that a false statement has been made therefore the contract should be cancelled or there is an automatic entitlement to damages. The false statement must have influenced the decision of the innocent parties to enter into a legally enforceable agreement.

In Scotland, three types of misrepresentation have been recognised by the courts since the decision of the House of Lords in Hedley Byrne & Co Ltd Heller and Partners Ltd [1964] AC 365:

  • Innocent (no intention to deceive/an honest mistake)
  • Negligent (a statement carelessly made)
  • Fraudulent (a deliberate intention to deceive)

In the United States of America, the Group has had to pay out a huge amount of money in the form of fines to the regulatory authorities and compensation to consumers who bought the offending motor vehicles.

Well, Dieselgate (which is the moniker which seems to have stuck to this particular scandal) has at last come to the United Kingdom.

Class action

Today, in the English High Court in London, lawyers representing approximating 90,000 customers of Audi/VW have initiated the UK largest class action for damages against the Group.

Audi/VW are countering this action by stating that the claims are essentially misconceived because none of the litigants has suffered a loss.

Interestingly, the English High Court action presents me with the opportunity to highlight a key difference between Scotland and England in relation to misrepresentation. South of the border, the Misrepresentation Act 1967 applies and victims of a false statement (even one innocently made) are entitled to claim damages.

This is a case which is set to keep on running for the foreseeable future …

… we await developments with interest.

Links to the story from the BBC’s and The Guardian’s websites can be found below:

Volkswagen: UK drivers fight for ‘dieselgate’ compensation

Tens of thousands of UK car buyers start a compensation claim over the Volkswagen emissions scandal.

https://www.theguardian.com/business/2019/dec/02/vw-accused-of-using-innovative-defences-in-high-court-battle

Copyright Seán J Crossan, 2 December 2019

If only everything in life was as reliable as a VW …

Photo by Julian Hochgesang on Unsplash

In the 1980s, Volkswagen UK ran a very successful marketing campaign using the slogan “If only everything in life was as reliable as a Volkswagen.”

A link to one of the VW adverts regularly shown on UK television can be seen below:

Fast forward more than 30 years later and, globally, VW is still dealing with the fallout from a major scandal which was exposed in September 2015. The American Federal Government Agency, the Environmental Protection Agency (EPA) discovered that VW had installed software in many of its models which had the purpose of giving much lower emissions readings. This was an attempt by VW to beat strict environmental pollution controls by giving the impression that its cars and vehicles were “greener”. Consumers are much more aware of their carbon footprint nowadays (think of concerns, for example, about single use plastic) and car manufacturers are not immune to these types of demand for environmentally, sustainable products and services.

Essentially, it is alleged that VW deliberately misrepresented data about the environmental impact of its vehicles (principally in relation to its diesel models) in a cynical attempt to increase sales. Environmentally minded consumers may well have been heavily influenced by the favourable presentation of emissions data when considering whether to purchase a new diesel vehicle.

In Chapter 2 of Introductory Scots Law, I discuss the issue of misrepresentation as a factor which can invalidate a contractual agreement. In particular, I relate the VW scandal to this area of contract law.

If one party (e.g. a seller of goods) makes exaggerated or false claims (the misrepresentation) about a product in order to encourage or induce a buyer to enter the contract, the buyer may be decide to treat the agreement as voidable. This will mean that the buyer may have the right to the following remedies:

  • Rescission (or cancellation) of the contract; and/or
  • An award of damages

Critically, the innocent parties must be able to demonstrate to the courts that the misrepresentation actively encouraged them to enter contracts. It is not enough to say that a false statement has been made therefore the contract should be cancelled. The false statement must have influenced the decision of the innocent parties to enter into a legally enforceable agreement.

In Scotland, three types of misrepresentation have been recognised by the courts since the decision of the House of Lords in Hedley Byrne & Co Ltd Heller and Partners Ltd [1964] AC 365:

  • Innocent (no intention to deceive/an honest mistake)
  • Negligent (a statement carelessly made)
  • Fraudulent (a deliberate intention to deceive)

In the United States of America, the latest twist to the scandal has emerged with the Securities and Exchange Commission taking VW to court in relation to allegations that the company defrauded investors. This is a bitter blow for VW which has already settled many of the claims brought by US consumers.

Across the UK, however, British customers of VW are also being encouraged to sign up for a class action against the company by some leading UK law firms.

It would seem that the advertising slogan from the 1980s is now a very hollow one in 2019.

As the VW scandal demonstrates, a misrepresentation (whatever its nature) can be very costly.

A link to an article about the US legal action against VW can be found below:

US sues VW for “diesel scandal fraud”
https://edition.independent.co.uk/editions/uk.co.independent.issue.160319/data/8825131/index.html

Copyright Seán J Crossan, 16 March 2019