Counsel for the Australian Competition and Consumer Commission, Jeremy Kirk SC, confirmed the agreement in a case management hearing before Federal Court Justice Lindsay Foster on Monday.

The terms of settlement will remain confidential pending court approval, with the ACCC and Volkswagen agreeing to make joint submissions regarding penalties at a hearing next Thursday. Volkswagen confirmed the agreement in a statement and said it expected the proceedings to be concluded by the end of this year.

The agreement comes one week after VW confirmed it had settled five class actions against it for a minimum settlement sum of $87 million, plus costs. If approved, the ultimate settlement figure would increase up to $127.1 million based on 100 per cent participation by eligible group members.

The ACCC proceedings were filed against Volkswagen in 2016 and Audi in 2017, alleging the car companies violated the Australian Consumer Law by installing dual-mode software in diesel vehicles to cheat on emissions tests.

Three class actions were filed by Maurice Blackburn and two by Bannister Law in 2015 on behalf of approximately 100,000 Australian car owners alleging that the car companies were strictly liable under the ACL for compensation. The proposed class action settlement does not involve any admission of liability.

Judge to consider approval of class action settlement

Maurice Blackburn principal lawyer Julian Schimmel confirmed that consumers would receive an average of $1,400 per vehicle under the proposed settlement if they achieved 100 per cent participation.

“We see this as a really significant victory for motorists who launched this case almost four years ago. It’s an important step in providing justice and redress to motorists,” Schimmel said at a press conference announcing the class action settlement last week.

“The amounts per car will vary and if the participation rate is less than the full amount then the average per car amounts and the actual per car amounts will actually increase… we will just need to wait and see how many people come forward.”

The settlement is subject to Federal Court approval, which will involve assessment of Maurice Blackburn and Bannister Law’s legal bills. Both firms are eligible for a 25 per cent uplift on their fees for a successful outcome.

VW and Audi have agreed to cover the two firms’ legal fees separately from the proposed settlement sum, but some group members could still be required to hand over up to 10 per cent of their payout to Bannister’s litigation funder, Grosvenor Litigation Services Pty Ltd.

Grosvenor negotiated a fee between 25 and 30 per cent of any proceeds of the Bannister Law class actions, but this was to be reduced to 10 per cent or less where a common fund order was granted.

Depending on court approval, the fee would be payable by Bannister’s clients and possibly other group members who have not signed on with lawyers. The fee would not apply to Maurice Blackburn’s clients, including their lead plaintiffs and approximately 15,000 group members who have already retained them as their solicitors.

The emissions scandal erupted in 2015 when Volkswagen admitted to intentionally cheating on emissions tests for at least six years with dual-mode software that can detect when certain diesel engine cars were being tested for emissions and being driven on roads.

The car manufacturer pleaded guilty in the United States last year to fraud, obstruction of justice and falsifying statements as part of a US$4.3 billion settlement.

A former executive was recently jailed for seven years and fined US$400,000 and a former engineer was jailed last year for three years. Former VW boss Martin Winterkorn was charged in the US and Germany in May with conspiracy and fraud. Winterkorn stepped down in 2015 after the scandal.

The ACCC was represented by Jeremy Kirk SC with Naomi Sharp and Radhika Withana, instructed by the Australian Government Solicitor. Volkswagen, Audi and Skoda were represented by Garry Rich SC with Imtiaz Ahmed and Emma Bathurst, instructed by Clayton Utz. The Maurice Blackburn-led class actions were represented by Cameron Moore SC with Adam Hochroth. The Bannister Law-led class actions were represented by Dr Peter Cashman.

The ACCC cases are Australian Competition and Consumer Commission V Volkswagen Aktiengesellschaft & Anor, and Australian Competition and Consumer Commission V Audi Aktiengesellschaft & Ors.

The Maurice Blackburn cases are Alister Dalton & Anor V Volkswagen AG & Anor, Robyn Tanya Richardson V Audi AG & Ors, and Steven Roe V Skoda Auto A.S. & Ors.

The Bannister Law cases are Richard Cantor v Audi Australia Pty Ltd and Josefina Tolentino v Volkswagen Group Australia Pty Ltd.