Court of Appeal allows Brazilian environmental group litigation to proceed

In Municipio de Mariana v BHP [2022] EWCA Civ 951,  a group claim brought by over 200,000 Brazilian claimants following the collapse of the Fundão dam in Brazil has been revived by the Court Appeal. It overturned the High Court’s decision to strike out the group claim as an abuse of process. The case provides guidance on when a claim may be struck out as an abuse of process under the Court’s general case management powers in CPR 3.4(2)(b) and, importantly, signals that the English courts are willing to hear multi-jurisdictional ESG group actions.

Background

The claims for compensation for losses suffered by the group of claimants were brought against the Brazilian subsidiary of BHP, which jointly owned the Fundão dam, and various other BHP entities, including the English parent company. The defendants applied to strike out/stay the claims in the High Court on four grounds:

1. Brazil was the more appropriate forum;
2. there was a risk of irreconcilable judgments due to parallel proceedings in Brazil;
3. there was an abuse of process; or alternatively
4. the claims should be stayed on case management grounds.

In the High Court, Mr Justice Turner struck out all the claims as an abuse of process due to the perceived risk of irreconcilable judgments and cross-contamination from parallel proceedings in Brazil and the burden placed on the court’s resources by high volume group claims. The judge noted that the claims would be “irredeemably unmanageable” in England and that the claimants could not expect to receive any more advantageous redress in England than in Brazil.

Court of Appeal decision

The Court of Appeal reversed the High Court’s decision to strike out the claims. The Court of Appeal concluded that the claimants’ claims were not “clearly and obviously pointless and wasteful” and therefore should not be struck out.  In reaching this conclusion, it considered the correct approach to striking out a claim for abuse of process. While there is no exhaustive list or clear definition, for a claim to amount to an abuse of process it must either be manifestly unfair to the litigating parties or bring the administration of justice into disrepute among “right-thinking people”.

Unmanageability is not a sufficient basis for an abuse of process ‘without more’

In his first instance judgment, Mr Justice Turner referred extensively to the burden placed on the courts by hearing these claims which involved a high volume of claimants with complex and potentially divergent claims. In his view, the deemed unmanageability of the claims established an abuse of process. The judge also considered that the risk of parallel proceedings in Brazil contributed to making the claims unmanageable. The Court of Appeal reversed this and held that unmanageability could not be a sufficient ground for finding that proceedings were an abuse of process without ‘anything further’, such as deliberate or vexatious conduct. Such complexity may require a greater use of case management powers, highlighted in the recent Lloyd v Google decision, but does not necessarily make the claims an abuse of process.

In any case, it was not permissible to draw the conclusion that these proceedings were “irredeemably unmanageable” given the early stage of the proceedings. The nature and scope of the issues in dispute had not yet been finalised and no case management proposals had been made.

The realistic prospect of a trial providing a “real and legitimate advantage” for the claimants outweighed the disadvantages for the parties in terms of expense and the wider public interest in the management of the courts’ resources.

The question of the correct forum is anterior to any question of abuse of process

The Court of Appeal held that the judge at first instance had erred in taking account of forum non conveniens factors, such as the risk of irreconcilable judgments, when considering an abuse of process for the purposes of a strike out application. Questions around jurisdiction are logically anterior to considering abuse of process: where jurisdiction has been determined it would be ‘nonsensical’ to strike out the claim for this same reason.

When will a claim be ‘pointless and wasteful’ so as to be an abuse of process

The Defendants argued that litigation in the English courts would be ‘pointless and wasteful’ as the claimants were able to seek “full redress” in Brazil. The Court of Appeal disagreed. The Defendants to the claims in the English courts were not subject to the claims brought in Brazil and so parallel proceedings could not be deemed oppressive or disproportionate. The Court was keen to not discourage the claimants from seeking redress in Brazil but it was of the view that “remedies available in Brazil are not so obviously adequate that it can be said to be pointless and wasteful to pursue proceedings in this country”.

Key takeaways

1. By allowing this appeal, the Court of Appeal not only recognised the viability of such group claims, but also highlighted the procedures available under English law for managing large group claims, particularly in an environmental context. The judgment suggests that the English courts are ready and willing to hear complex cross-border group actions, particularly in the ESG context, and will utilise their case management powers to control high volume claims.
2. This case follows the string of recent cases concerning parent company liability for the actions of overseas subsidiaries. It demonstrates the potential for parent company liability even where there are parallel proceedings and compensation schemes set up in another jurisdiction more closely connected to the underlying cause of action. This highlights the risk for UK parent companies in respect of the actions of overseas subsidiaries and third parties in the global supply chain. Given ongoing geo-political events, many businesses are looking to alternative suppliers in order to meet current demand and so it remains imperative that businesses remain vigilant in identifying and seeking to mitigate any associated liability risk.
3. The mere volume and complexity of a claimant class in a group action will not be sufficient for a defendant to establish an abuse of process. Instead, the court must exercise its discretion carefully. Where there is a realistic prospect of trial yielding an advantage for the claimants, the burden on the courts’ resources will not establish an abuse of process without anything further. The court may be left with a challenging role in dealing with this at trial and greater emphasis will be placed on the use of case management techniques.
4. The reference to potential “lack of adequacy” of the redress available in Brazil in comparison to that sought in England may encourage ‘forum shopping’ amongst claimant-side law firms. They may seek to bring such claims in what they consider to be a more advantageous legal forum, even where there is a lack of clear proximity between the underlying cause of action and the jurisdiction in which the claim is being brought.

The defendants may appeal to the Supreme Court so this case should be watched closely.

With thanks to Emma Lai for her assistance in preparing this post.