In a significant blow for the class, the Supreme Court of New South Wales has dismissed the plaintiff’s claim against Volkswagen (VW) in relation to the use of Takata airbags in its cars.  The case emphasises the need for the plaintiff in product liability claims to prove that the product was unsafe, and that they have actually suffered damage.  Justice Stevenson found that the plaintiff failed to establish:

  • any link between the propensity of the propellant to degrade and any propensity to degrade in the airbag as installed so as to cause it to explode or malfunction; and
  • that he had suffered any damage by reason of the installation of a Takata airbag in his vehicle. VW had replaced the Takata airbag without charge for a replacement airbag product.[1]

The case also is an important reminder to litigants that expert witnesses must remain independent.  The plaintiff’s econometrician was criticised for becoming too closely aligned with the interests of the plaintiff and group members, ultimately becoming an advocate for the cause.  The lack of independence meant that the evidence was given no weight.

The plaintiff’s claim

Section 54 of the Australian Consumer Law (ACL) provides that if a person supplies, in trade or commerce, goods to a consumer (and that supply is not by auction), there is a guarantee that the goods are of “acceptable quality”.  Goods are of “acceptable quality” if they are relevantly free from defects and safe.  The test is what a reasonable consumer would regard as acceptable having regard to any relevant circumstances relating to the supply of the goods.

The plaintiff claimed damages for breach of the consumer guarantee in s54 of the ACL, alleging that his vehicle was of unacceptable quality.  The alleged defect was the use of a certain propellant in the airbag inflators which, he alleged, meant that the inflators within the airbags would have the propensity to explode or malfunction by deploying too rapidly or with excessive force.  The plaintiff claimed he was entitled to recover damages, being the difference between the price he paid for his car and the “true value” of the vehicle.[2]

Steps taken by VW to assess the risk of Takata airbags in its vehicles

VW did not manufacture the airbags.  It gave Takata specifications for the airbags and certain requirements that Takata was required to meet when designing the airbag system.  Critically, VW did not specify what propellant should be used in the airbags.  The propellant was chosen by Takata.[3]

VW installed Takata airbags with the relevant propellant in approximately 20 million Volkswagen vehicles worldwide.  The plaintiff did not adduce any evidence that any Takata airbag in any of these vehicles had mis-deployed.  The evidence was about 440,000 of the 20 million vehicles had been involved in a collision that resulted in deployment of the airbag.[4]   The plaintiff had not had any problems with the airbag in his vehicle.  There was no evidence that the airbag in his car would not have deployed as intended.[5] 

VW became aware from public sources that Takata was conducting internal investigations in relation to airbags supplied to manufacturers other than VW.  VW decided to conduct its own Empirical Analysis Program (the Program) to investigate whether the propellant used in the airbags in Volkswagen vehicles constituted a safety risk.  Approximately 20,000 airbag inflators were collected from the field and from various geographical areas with different climatic conditions.  The geographic and age spread was important as the propellant degradation observed in other brands and airbags was thought to be more likely to occur in hot and humid conditions and ageing vehicles.  VW concluded from the Program that there was a systemic risk of rupture or mis-deployment of the airbags that would warrant a recall.  The Program also, however, demonstrated that Volkswagen airbag inflators were different from the inflators in the vehicles of other manufacturers in ways that might materially affect their performance.[6]

The result of the Program was the only evidence before the Court as to how the airbags were likely to perform.  The results suggested that the airbags were safe.  Importantly, Justice Stevenson observed that even if the Court had been persuaded that there was some defect or flaw in the manner in which the Program had been conducted that would warrant its results being put aside, it would not follow that the Court would conclude that there was a systemic risk of rupture or mis-deployment.  All it would mean is that the results of the Program cast no light on the relevant issues.  The plaintiff still had to prove that the airbags were unsafe.[7]

Further, the plaintiff had not adduced any evidence that any airbag had malfunctioned by reason of aggressive deployment short of rupture in any car (let alone a Volkswagen).[8]  The upshot was that there was no evidence that there was any real possibility of mis-deployment or a risk of mis-deployment that was meaningful to a consumer.  This meant that the plaintiff failed to demonstrate that his vehicle was not of acceptable quality for the purposes of s54 of the ACL.

Justice Stevenson found that the plaintiff had not established that the alleged propensity or risk:

  • had been present in any Volkswagen vehicle; or
  • would have materialised in any Volkswagen material at any identifiable point in time.[9]

Alternatively, damages were not payable because any defect was Takata’s rather than VW’s

The plaintiff’s case still failed even if his vehicle was not of acceptable quality.  The ability to recover damages against the manufacturer of goods for breach of s54 of the ACL is subject to s271(2) of the ACL.  Section 271(2)(a) provides that damages cannot be claimed if the guarantee under s54 is not complied with only because of an act, default or omission of, or any representation made by, any person other than the manufacturer or an employee or agent of the manufacturer.  Takata was the only entity responsible for the design and manufacture of the airbag and for the decision to use the relevant propellant.  It was Takata’s decision to select the propellant that could have potentially given rise to VW’s breach of s54.  Liability could not extend to VW simply because it chose Takata as its airbag supplier.  The circumstances that could have potentially led VW to breach the s54 guarantee were beyond its control.   

Failure to prove damage

Section 272 of the ACL requires an assessment of what damage the plaintiff had suffered by a result of or by reason of any reduction in the value of the vehicle below the purchase price resulting from any failure by VW to comply with the s54 guarantee. Justice Stevenson concluded that VW’s conduct had no effect on the plaintiff’s financial position.  He had had full use of the vehicle since he acquired it.  There had never been any issue with the performance of the vehicle associated with the alleged defect.  There was no evidence to suggest that the airbag would not have operated in the way in which it was designed.  The Takata airbag was subsequently replaced without any cost to the plaintiff.  The effect of the replacement is that any defect which may have affected the vehicle’s value was removed.[10]

Reliability of expert evidence

The case is also a reminder for litigants that expert witnesses must remain independent.  The plaintiff called an econometrician to calculate the reduction in value of his vehicle.  Justice Stevenson gave no weight to her evidence.[11]  Although the evidence was ultimately not relied on by the plaintiff in final submissions, Justice Stevenson considered it relevant insofar as it shed light on the reliability of the expert’s opinions.[12]  The defendant’s expert identified certain factual errors in one part of the plaintiff’s expert’s analysis.  Instead of accepting the implications these errors had on her methodology, the plaintiff’s expert attempted to justify her original methodology based on an unrelated issue that was not supported in the literature.  Further, she had prepared a draft document for discussion with the plaintiff’s solicitors that contained a note that said: “We will need some guidance from the legal team on how narrow or broad this range ought to be, based on their expectations around how much the average consumer needs to be compensated”.  Justice Stevenson said this note “represented a request from her for information so as to design an experiment that best fitted the answers the plaintiff’s solicitors hoped to derive”.  The plaintiff’s solicitors also provided the expert with a “Literature Review” they had prepared, which Justice Stevenson found contained material inappropriate to be provided to an independent expert, including purported views as to the effect of various articles on the prospects of the case as a whole and whether they assisted or detracted from the parties’ cases.[13]

Key takeaways

This case highlights:

  • The potential significance of a defendant’s own investigations into a potential product liability issue in any claim. If the defendant has undertaken reasonable investigations across a range of potentially affected products and could not establish there was an issue, a plaintiff cannot simply try and undermine the conclusions of those investigations. The plaintiff must go further and actually demonstrate that, on the balance of probabilities, the product was unsafe.  This is especially important where there may be differences between the way in which the same product is used by different manufacturers.
  • In cases where the defendant had already replaced the affected product at no cost to the plaintiff (and in circumstances where there was no evidence of the defect actually materialising) it will likely be difficult for the plaintiff to prove that they have suffered any damage.
  • Litigants should be mindful not to imperil an expert’s independence. Experts should not be briefed with material directed at prospects.  They should not seek instructions which are directed at achieving a certain level of compensation.  The experts should also be briefed about their obligations to the Court at an early stage of their retainer, including the potential impact that becoming partisan may have on the reliability of their evidence.