In the previous article, we discussed the fundamental aspects of tort law. In this article, we will determine potential (non)applicability of legal aspects of tort law to Dieselgate affair.
Basic on facts that these are contractual (usually sales) relationship between sellers and buyers of vehicles, we conclude that (theoretically) tort relationships are based on business tort liability for breaches of contracts by the debtor – seller, particularly on the basis of liability for material (and legal) defects of goods. In our opinion, the positive premise of this liability is that it is actually objective (or an approximation of objectivity), as the seller can be exonerated of contractual liability only for exceptional objectified exculpatory reasons (circumstances that arose after the conclusion of the contract that the debtor could not prevent, eliminate or avoid).
The rights – claims arising from liability for material defects – expire within the preclusive deadlines (in one year according to Obligations Code and in two years according to the Consumer Protection Act), while claims for damages have longer (usually three years for subjective and five years for objective) limitation periods (the right itself does not extinguish, the enforceability of the right to compensation extinguishes).
For the affair in question, the following legal options or situations, which are defined below, seem to be legally interesting, based on all of the above.
It is possible to imagine property damage (normal damage – as a reduction in the value of property), as handicapped vehicles are allegedly inferior on the vehicle market (of course, until the eventual elimination of defect). It is damage based on a business relationship (against the seller) or not (against the manufacturer). The fact of this damage seems to us somewhat logical (more environmentally harmful vehicles may be cheaper on the market, while more environmentally friendly are more expensive due to increased consumer awareness and information), but it is essential that the damage (existence and amount) must be fully demonstrated by the injured party (as well as a causal link to this damage), which without a concrete analysis of the partial and global economic market of vehicles, a concrete analysis of the scale of the affair and vehicle defects, which without a properly substantiated (relatively expensive for/per an individual victim) expert opinion would not be easy. General statements and claims for damages in this regard, in accordance with the burden of adducing evidence and the burden of proof under the Contentious Civil Procedure Act, especially considering the fact that the opposing party will dispute all concrete claims and attempt to prove the opposite (which is already established by the fact that sellers dispute the existence of material defect as such on vehicles). Otherwise, it is generally possible to understand the fact, if an individual can prove that their vehicle is less valuable, that it will (continue to be) be less valuable when they sell or exchange it, etc. The essence of commercial damage under Article 243 of the Obligations code is the fact that it was predictable for the debtor (specific sellers). Undoubtedly, this is a difficult obstacle to overcome on the way to compensation based on a business relationship. In connection with the otherwise hypothetical exoneration of the debtor’s liability on the basis of Article 240 of the Obligations Code, we find that this is not / will not (should not) be possible for the manufacturer, given the fact that it admits fraud (otherwise, a lawsuit for damages against the manufacturer on the basis of business liability for damages is not possible in any case; only a lawsuit based on a non-business civil tort is possible, as the manufacturer is usually not a contractual partner to end customers according to the Group’s policy and dodgy market operations). If the buyer claims the damage due to the inferiority of the vehicle from the opposing contracting party – the seller, a dilemma may arise regarding the objectified exculpatory reasons. We believe that the sellers should not be burdened too much, if it turns out that the sale of fraudulent vehicles could not (in any way) be avoided, prevented or eliminated. The standard of diligence of the seller as a specialised economic entity with the status of an authorised seller, especially (exclusively) vehicles of the Group’s brand, must in this sense and in accordance with the provisions of the law be assessed strictly and in accordance with the legal standard of a diligence of a good expert. If an individual seller is in any way able and should have foreseen the harmful conduct and fraud of the Group, they should not be exculpated (successfully). The answers to the questions and our opinions in this regard will, of course, be given by the relevant case law in the event of such disputes. The fact is that the seller will most likely not be guilty (they did not act intentionally or grossly negligently, and the issue of minor negligence in our opinion, in the sense of the above, remains in the connection of the seller – not closed) or responsible for the actions of the third party that the third party acknowledges (the manufacturer who acted with obvious culpability – intentionally).
What to do if/when the defect is rectified and the car becomes (if this is duly confirmed by the profession) less powerful and consumes more fuel? In this case, consumer claims must not have a limitation period – also available (again for those who have been able to assert claims of guarantee in terms of time and subject, or again for those whose claims for guarantee have expired due to the age of the vehicle) claims of guarantee or warranty claims, as in accordance with Article 463 of the Obligations Code, in our opinion, the limitation period for claims of guarantee from the engine repair (which will obviously require intervention of the manufacturer or seller – software or hardware) is considered for the same whole engine, again from the delivery of the repaired vehicle (engine) onwards (for the delivery of the repaired item, according to the logic in question, the engine of the vehicle is also considered as such). However, if the consumer does not exercise this option (successfully), a situation arises when they incur (and incur continuously) other ordinary property damage in terms of reduction of property (legally recognised form under Article 132 of the Obligations Code), as they use (if so confirmed by the profession, and with the causal link also confirmed) more money for fuel for the vehicle for the purpose of its basic use – driving from point A to point B. For this damage we have (all) similar concerns as in regards to the damage arising from the inferiority of the vehicle (with a defect) itself (the problem of concretisation and establishing damage, calculation of consumption, current and future, appropriate analysis of habits and consumption, and concrete analysis of the market price for oil and oil derivatives, while two key problems are also the assumption of damage under Article 243 and the so-called foreseeability of damage). The same reasons regarding the exoneration of the seller’s liability or the seller as regarding the inferiority of the vehicle also apply in connection with (hypothetically) higher fuel consumption. In any case, the manufacturer can (must) be held culpable for this damage (if it is established).
If the defect is completely rectified (professionally and without consequences/changes to the vehicle), the above findings (considerations) may be irrelevant, but only for the condition and use of the vehicle in the future (from the moment the defect is rectified); however, the question remains whether the injured parties are entitled to reimbursement for damage that existed and for the period when the claim arising from this issue was not yet time-barred. In this sense, the consumers whose main motivation for purchase was the fact that the car (as advertised) was environmentally friendly, and the consumer throughout this time used the car (which excessively and also illegally) polluted the environment, would have their non-material interest violated. This form of non-material damage – interest – according to the Obligations Code involves so-called numerus clausus (limited number) of non-material damage cases. It is also possible to imagine a case of non-material damage for a specific case, if it turns out that an individual vehicle is less powerful (has lower horsepower), which would (possibly) violate the buyer’s interest by reducing their enjoyment of a dynamic and leisurely drive. This non-material interest – non-material damage under the Obligations Code – is also not legally recognised. The theory is divided, and the case law on the recognition of non-material damage in breach of contract itself does not in fact exist. In fact, case law does not allow non-material damage for material defects.
Regardless of the above (established), in a review of case law, we have found the only (and more recent) exception to the case law of the Supreme Court of the Republic of Slovenia (one case), when it nevertheless acknowledges non-material damage due to breach of contract, namely in a specific area and in conjunction with the Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours, where the court, on the basis of the latter (notwithstanding the numerus clausus of non-material damage by law), recognises non-material damage as a result of loss of holiday enjoyment. This case appears to be a kind of bright spot for the future and an exception to the strict and rigid case law.
The general tort liability (non-commercial) on the basis of Article 131 of the Obligations Code and Article 10 of the Obligations Code is questionable in possible disputes against sellers (if we start from the premise that the seller is not, and in principle most likely will not be, guilty). In this part, the liability of the distributor and the manufacturer is then more likely. The latter publicly acknowledges (in/through the media) even the intentional form of culpability (intent), and thus the illegality (deliberate defrauding of customers) of their actions. In this regard, the following emphasised questions or dilemmas are legally interesting, namely in regarding proving (the existence of) the illegality of conduct, forms of material and non-material damage on the basis of civil tort separately (although we have discussed the latter so far and although the very basis of liability – contractual or non-contractual – does not in principle change the forms and dilemmas regarding the existence of damage).
How should the illegal conduct in connection with the vehicles that are the subject of the affiar be proven, or is it potentially already proven? The first paragraph of Article 214 of the Contentious Civil Procedure Act stipulates that it is not necessary to prove the facts admitted by the party during the proceedings before the court, but the court may order that such facts be proven if it believes that the party admitted such facts with the intention of having disposal of a claim that it can not have at its disposal (third paragraph of Article 3 of the Contentious Civil Procedure Act). If the illegality of the conduct is acknowledged by the defendant, there is no dilemma in specific cases that such acknowledgement of facts must be taken into account. The same must apply under the second paragraph of Article 214 of the Contentious Civil Procedure Act if the defendant does not deny the fact in question or denies it without stating the reasons, as in this case they are considered admitted, unless the purpose of denying these facts would arise from (other) statements of the defendant. The defendant may (in the abstract under this Article of the Contentious Civil Procedure Act) prevent the effect of the aforementioned presumption of admission by stating that they do not know the facts, but only if the facts do not relate to that party’s conduct or perception, which in the present case is not and can not be the case (when the subject of consideration is precisely the manufacturer’s planned and systemic conduct in relation to the vehicle itself). If the defendant first acknowledged the illegality of the conduct in an individual lawsuit and then (during the proceedings) denied it in whole or in part, the court is given the power to decide freely, taking into account all the circumstances, whether such a fact should be considered admitted (paragraph 3 of Article 214 of the Contentious Civil Procedure Act). Last but not least (in our opinion, as a starting point in any procedure in which the topic will be discussed), the fifth paragraph of Article 214 of the Contentious Civil Procedure Act must be taken into account (the courts will have to argue their decisions in this direction), which stipulates that well-known (notorious) facts do not need to be proven. Well-known facts can certainly include the Group’s public media announcements, when it acknowledges defrauding of customers for all vehicles that have a specific type of engine installed (EA 189), that this was done intentionally and deliberately in the Group’s company (installation of the defeat device on the engine and software installation; the Group also acknowledges that it has misled customers and official tests, and that the promised declared vehicle exhausts are not, in fact, real). In this regard, we believe that it is sufficient (should be in civil procedure) for the buyer to prove that they had (has) installed in their vehicle that particular type of engine, which is in dispute. On the basis of the above and general allegations of illegality by the plaintiff, in our view the illegality of conduct must be regarded as established; if the defendant raised any other/additional objections to challenge the illegality, this must be assessed restrictively and in light of all (and specific) publicly (various media, press conferences, press releases, etc.) recognised facts at several levels and in several countries (practically worldwide), which are linked and (may) confirm the illegality of the Group’s conduct.
The causal link here is an indispensable fundamental element, in particular for culpable liability (in the case of an objective presumption, which does not mean that it is not the subject of an individual case, especially if the defendant objects to challenging that presumption). There are three main theories of causation, namely the theory of equivalence (sine qua non, but-for cause), the theory of the protective purpose of the norm (ratio legis), and the theory of adequate causation (proximate cause). Any questions about the causality of tortious conduct to specific damage in connection with the subject will have to be answered, in particular, by the relevant (mechanical engineering) profession, while we advocate the theory of adequate causation, i.e. the (simplified) theory that usually leads to certain consequences – damage.
Since (from the parties’ point of view) the purpose of proving is to convince the court of the truth of (their) claims on known facts or (from the court’s point of view) to verify the truth of the parties’ claims, it is logical that generally known facts do not need to be proven. This does not mean that notorious facts are not a subject of deliberation. The parties must also be able to make statement regarding such facts. In theory, there are (might be) two dilemmas (directions) in relation to the legal standard – a ‘generally known fact’, specifically in the direction of applying too narrow a notoriety (e.g. known only to a narrow circle in the first instance court area, which can lead to violation under point 8 of the second paragraph of Article 339 of the Contentious Civil Procedure Act – deprivation of participation in establishing evidence), or the requirement of excessive notoriety (which does not lead to a violation of the procedure under the Contentious Civil Procedure Act, as the court established evidence regarding generally known facts; it can only represent higher costs and duration of the procedure, and there is no influence on the meritorious outcome of the trial). Otherwise, notorious facts can be challenged (only) in two ways: by proving that the fact is not at all notorious (if successful, the party who bears the material burden of proof, i.e. the plaintiff, who claims damage, must prove its existence), or by proving that the notorious fact does not exist at all (e.g. proof of historical error).
Direct material – property damage on the vehicle represents only a defect on the vehicle, which produces too much exhaust or emissions. This is damage that is the subject of a (material) defect on the vehicle itself, i.e. damage damnum quoad rem. The stated damage unequivocally exists, but it is also unequivocal that it can not be considered, to claim compensation separately and without (successful) enforcement of guarantee defects and enforcement of claims of guarantee in this regard. It is also a fact that the primary sanction as a result of this (direct) damage to the vehicle is so-called ‘natural restitution’ (restoration of the condition of the vehicles in such a way that they will not have defects and will be faultless). In concrete cases, this will obviously be the replacement of software and hardware on vehicles (engines of the latter). If this damage is successfully and fully expertly rectified, the injured parties will (no longer) be deprived of property (from the moment the damage is rectified). However, the deprivation remains (will remain) – material damage to the injured parties in the past (from the purchase and acceptance of the vehicle for possession and use, until this damage is rectified). We wonder whether the injured parties are (will be) entitled to anything (at all) and on what legal basis for the period in question, especially given the fact that the vehicles could (actually) be used normally and safely (compulsory insurance, registration, etc.), and because the Obligations Code and, in particular, rigid case law link only material damage to material defect (which, in this specific case, can not be pictured/imagined for the past period, let alone concretised and proven as such), and considering the fact that while it is possible to picture/imagine several types of non-material damage, it is not defined by law (the law does not define it in its catalogue-limited list), and is also not implemented and developed through case law, which otherwise has the power and capability – as we determine by ourselves on a daily basis – to adapt concrete life situations to the meaning and purpose of the law and a certain kind of legal justice. Non-material damage that (potentially) arises as actual damage is the already mentioned interest of the individual to drive a more environmentally friendly car, their interest in the pleasure of driving a more powerful (more dynamic) vehicle, if the manufacturer will interfere (by repairing) with this performance (and the causal link will not be established and not challenged), while non-property interest can also (we imagine) be the loss of trust and loyalty (long-term) to the brands of the VW Group (Škoda, Seat, Audi, Volkswagen) or, in other words, the disappointment of drivers – owners of vehicles of these brands, which is not only related to the (last) disputed case of a vehicle owned and used by an individual injured party, but to the long-term trust and purchase of vehicles and use of brands and types of vehicles of these brands in question. It is common knowledge that there are individuals and companies who have bought and are buying vehicles of the same brands of the same Group for many years and decades, also because (but not only) of the trust in the brand and the vehicles they drive. We also have the question whether non-material interest for the healthiest possible living environment and living in such an environment, as well as the right to a healthy living environment, is also a constitutional right.
Rigid case law and the Obligations Code (last but not least, the provisions of the Contentious Civil Procedure Act on means of evidence and burden of proof) regarding breach of contract and civil tort, which do not allow (or limit) concretely highlighted and, in our opinion, justified non-material interests of individuals in particular, will have to change (and continue to change) over time and become more flexible and vital. This is especially important in the affair in question and its quantitative and qualitative dimensions. It is completely different in Anglo-American legal systems, specifically in the US, where the same manufacturer, for example, had offered gift cards and vouchers worth thousands of US dollars to all injured parties in advance (without activating legal remedies of individuals, of whose relative performance in that system it is clearly well aware, in contrast to the continental European legal system).
Last but not least, as part of the (non)applicability of legal aspects of tort law in our legal system, we cannot ignore the provision of Article 155 of the Obligations Code (manufacturer’s liability for defective goods), which is, in our opinion, a possible legal basis for disputes in the affair in question. We highlight case law that supports our opinion, as well as case law that does not. In the interim judgement and decision of the Maribor Higher Court, ref. no. I Cpg 326/2013 of 27 February 2014, this is strict liability (liability according to the principle of causation) of the goods manufacturer that placed the defective goods on the market. Based on the cited provision of Article 155 of the Obligations Code, the burden of the plaintiff as the injured party is to claim and prove the facts that define the legal presumption of the existence of a causal link (alleged basis) that the defendant (manufacturer of the goods) placed defective goods on the market, which caused damage to the plaintiff. If the alleged basis is established, the existence of causal link is assumed. Because the plaintiff successfully established the alleged basis (that the defendant, manufacturer of the goods, placed defective goods on the market, which caused damage to the plaintiff), the existence of causal link is assumed. However, an objectively liable manufacturer of defective goods can be exonerated of liability if it proves that the damage was caused solely by the conduct (culpability is not decisive in principle) of the injured party (partial relief is also possible) because they did not use the goods in the usual and appropriate manner or failed to follow instructions, protocols. And the next, as follows from the judgement of the Ljubljana Higher Court, ref. no. II Cp 4082/2010 of 30 March 2011: the essence of manufacturer’s liability is that the manufacturer must be held liable for the consequences suffered by customers and users. The manufacturer’s liability is justified by the manufacturer influencing the trust of others by using social contacts. The manufacturer’s liability is not given if the damage did not occur during regular (normal) use of the goods, and is excluded due to the conduct of the direct injured party. However, case law also narrows the liability and limits it to product safety as such (which should not be in question in this affair, judging by public statements and written assurances of the distributor), as follows from the judgement of the Celje Higher Court, ref. no. Cp 183/2013 of 30 August 2013.
Source: Pravni vidiki afere Dieselgate [Legal Aspects of Dieselgate] (master’s thesis), 2016, Damjan Merhar