Column by Paul Smith, a commercial litigation specialist at Sheffield-based solicitors, Taylor & Emmet LLP.
We’re an enterprising bunch in South Yorkshire, none more so than our motor dealers.
With a higher than average number of independent traders in the region, the impact of any law suits arising from the Volkswagen scandal could be wide and far reaching.
VW has said little to the 1.2 million UK drivers affected by the emissions revelations, but recalls will start in early 2016.
Some law firms report hundreds of vehicle owners registering an interest in pursuing action and should any of these succeed, the floodgates will open. A typical owner will have purchased from a franchise, second hand dealer or private seller, none of whom are liable for any misrepresentations made by VW about the performance of vehicles.
And as there is no contractual relationship between manufacturer and driver, this will prevent direct claims for breach of contract.
Significantly, VW has issued statements confirming all vehicles are “safe and roadworthy” which, if correct, would preclude owners from rejecting affected models or claiming damages against franchises or second hand dealers on the basis of quality.
Fraudulent misrepresentation, which in broad terms occurs when a statement of fact is made with the intention to deceive in the knowledge those facts are false.
Any successful claim must demonstrate the purchaser relied on the statement and has suffered a loss as a result.
Whilst most purchasers look at MPG and CO² ratings, given their implications on a car’s running costs, it may be problematic to argue nitrogen oxide emissions were a key purchasing factor.
It is equally unclear whether owners will have suffered a loss.
Will depreciation in second hand values transpire?
Recent history with other companies such as Toyota and Lexus suggests no significant long term impact following recalls.
If direct running costs are increased, this could amount to an actionable loss, but there is currently no suggestion they will be affected.
In theory, owners who paid more for a ‘clean diesel,’ only to find they do not have the vehicle they thought they were buying, may bring claims on the basis that goods sold must match their description.
But the position may well be different between VW and its franchisees given the direct contractual relationship.
If sales are hit hard by the scandal, the region’s dealerships could be entitled to significant damages.
Whatever the outcome, VW is bracing itself for the fallout.
The company is reportedly setting aside more than £4 billion by way of cover.