Penningtons Manches' transport specialist sets out options for automotive companies following the VW scandal

Posted: 08/10/2015

David Niven, transport litigation and group action lawyer, examines the likely impacts and possible options for dealerships, fleet owners, motor resale, car hire and lease finance companies.

Out of the 11 million affected vehicles worldwide, we now know that nearly 1.2 million Volkswagen vehicles sold in the UK are fitted with the type of software known as “defeat devices” involved in the emissions scandal. These include diesel-powered cars with the VW, Audi, Seat and Skoda brand as well as VW commercial vehicles.

The Penningtons Manches transport team is currently concentrating on how this debacle might affect the motor resale and leasing industry and fleet owners rather than individual car buyers. For example:

• How will VW’s self-confessed ‘screw-up affect the bottom line of companies that have invested heavily in VW cars on the basis of their green credentials, reliability and strong resale value?
• Companies that provide cars for employees may find themselves facing substantially higher bills for road taxes, if the amended testing results in the cars being recategorised for tax purposes. Can fleet owners make a claim?
• Car lease companies calculate lease costs on predicted residual values. Could they be left with large fleets of cars where the residual value will be substantially less than predicted for the purposes of calculating lease premiums? On an initial estimate, we expect that the loss to an affected company could be about equal to the estimated rental income for one year.

What are the potential options for compensation?

If it can be shown that the defeat devices fitted to UK cars were able to bypass the European emissions tests, then Volkswagen could be in a similar position as it is in the US where lawyers are already considering bringing claims for devalued assets and for selling vehicles on the basis of false information.

It may then be possible for affected UK businesses to bring legal claims against VW to recover their losses. These are some of the possible options we are looking at to support businesses affected by this situation:

• Advising on the legal grounds on which lease companies that have purchased directly from the manufacturer may be able to make a claim based on misrepresentation/fraud or breach of implied terms.
• Providing funding packages to assist dealers with making a claim against the manufacturer or defending actions by consumers.
• Group/class action against VW for smaller lease/car hire companies who do not want to litigate individually.

Penningtons Manches LLP specialises in both individual and group action litigation and is working with leading counsel on how best to frame and pursue these claims in a way that is proportionate and cost-effective for affected business.

If you believe that your business may be financially affected by these issues or would like an initial free consultation to discuss your situation, please call David Niven or David O’Brien on 020 7457 3000.

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