Thousands of UK motorists have won the first stage of a High Court action against Volkswagen over the installation of emissions cheating devices in its diesel vehicles.
It follows a preliminary hearing in December, when the court was asked whether software installed in the cars was a "defeat device" under EU rules.
In a judgement on Monday, Mr Justice Waksman ruled that it was.
Volkswagen said it was "disappointed" and said it may appeal.
A spokesperson for the German carmaker said: "To be clear, today's decision does not determine liability or any issues of causation or loss for any of the causes of action claimed. These remain to be determined by the court as the case continues."
The case being heard at the High Court is the latest in a global storm of litigation facing VW.
So far, the group has paid out €30bn (£26bn) worldwide.
About 90,000 motorists in England and Wales have brought action against VW as well as Audi, Seat and Skoda, which are also owned by Volkswagen Group.
They are seeking compensation in a case which could be the largest consumer action in English legal history.
The so-called "dieselgate" scandal broke in September 2015.
The use of defeat devices meant that Volkswagen's cars were certified as conforming to EU pollution standards. But, in reality, the vehicles were emitting up to 40 times the legally permitted amount of nitrogen dioxide.
The German carmaker admitted that 11 million vehicles worldwide, including almost 1.2 million in the UK, were affected.
Since then, senior bosses including chief executive Martin Winterkorn have stepped down, while some have been charged with criminal offences in Germany and the US.
The High Court ruling applies not only to VW cars, but also to those manufactured by Audi, Seat and Skoda.
Mr Justice Waksman described some of Volkswagen’s arguments that the vehicles did not contain defeat devices as “completely irrelevant”, “hopeless” and “highly flawed”.
Depending on who you speak to, this is either a ruling that confirms wrongdoing by Volkswagen and puts huge pressure on the company to reach a settlement - or one that changes absolutely nothing.
The reality is that the judge has settled a couple of specific points, and in doing so has been scathing about the arguments the car giant put forward.
But the litigation still has a very long way to go.
The background, of course, is a worldwide scandal that has already cost VW tens of billions of pounds in fines and compensation payments, left blood on the boardroom floor, tarnished its reputation and led to a senior executive being jailed in the US.
But here in the UK, Volkswagen has consistently denied using prohibited defeat devices - and insists its customers have not suffered any losses, so there is no need for any compensation.
And despite Monday's ruling, the signs are it plans to stick to its guns.
Gareth Pope, who leads the legal team at Slater and Gordon, which represents 70,000 claimants, said: “This damning judgment confirms what our clients have known for a long time, but which VW has refused to accept: namely that VW fitted defeat devices into millions of vehicles in the UK in order to cheat emissions tests.
He added: “VW’s utter failure to convince the court of the merits of its case means that now is surely time for it to settle these claims and put this shameful episode behind it.”
A spokesperson for VW said: "Volkswagen remains confident in our case that we are not liable to the claimants as alleged and the claimants did not suffer any loss. We will continue to defend our position robustly.
"Nothing in this decision today changes this."