Court of Appeal u-turn reopens US$7bn Fundão Dam proceedings

Published: 30/7/2021

On 27 July 2021, the Court of Appeal reversed the decision of Lord Justice Coulson, which refused the Claimants permission to appeal the decision to strike out the claim as an abuse of process, potentially reopening one of the largest class actions in English legal history.

The Claimants now have permission to appeal the strike out decision on 15 grounds. That appeal is expected to take place at some point next year and will determine whether the claim can continue in the English courts.

The claim

The reopened claim relates to the collapse of the Fundão dam in South-eastern Brazil in November 2015 which resulted in catastrophic environmental damage and loss and nineteen deaths. The claim is brought by over 200,000 individual, corporate and institutional claimants including churches and municipalities that claim to have suffered loss as a result of the disaster. The defendants are BHP Group plc, an English company, and BHP Group Limited, an associated Australian company, part of the joint venture that owned the operator and owner of the dam, Samarco Mineração S.A.

The procedural background

The proceedings were issued in England in November 2018. On 7 August 2019, the Defendants applied for the proceedings to be struck out or stayed.

In November 2020, following an 8-day hearing in July 2020, Mr. Justice Turner delivered a 76-page judgment and struck out the Claimants’ claim as an abuse of process of the English Court in light of parallel proceedings and compensation schemes taking place in Brazil. Turner J concluded that allowing both actions to progress concurrently in both England and Brazil would "foist upon the English courts the largest white elephant in the history of group actions". He also concluded that, if necessary, he would have stayed the proceedings under the recast Brussels Regulation or the common law doctrine of "forum non conveniens".

The Claimants appealed the decision and produced 15 grounds of appeal, seeking permission to appeal. In March 2021, Lord Justice Coulson refused permission to appeal on paper, describing the November judgment as "the first and last night of the show". Lord Justice Coulson agreed with Mr. Justice Turner’s conclusion that there was an adequate court process already underway in Brazil, and that allowing the proceedings in England to continue would be "irredeemably unmanageable". He was critical of the Claimants’ approach, concluding that "by their grounds of appeal, they want to relitigate the entire eight day hearing in a new forum", referring to the July 2020 hearing before Mr. Justice Turner.

In April 2021, the Claimants applied for permission to re-open Lord Justice Coulson’s decision contending that he had failed properly to address the grounds of appeal. In an unexpected turn of events, three Court of Appeal judges have now satisfied themselves that this is a case where permission to appeal should be granted, concluding that "the appeal has a real prospect of success". We explore their decision (Município de Mariana and others v BHP plc and BHP Ltd [2021] EWCA Civ 1156) in further detail below.

The July 2021 Court of Appeal decision

The Claimants challenged the appellate judge’s reasons on abuse of process and the jurisdictional grounds. The focus of the Court of Appeal’s judgment was the former, abuse of process, which they concluded was "by far the most important".

In reaching their decision to grant the Claimants permission to appeal, the Court of Appeal concluded that the appellate judge had not squarely addressed various points relating to abuse of process, namely:

  1. 'Unmanageability': the appellate judge did not address the point of principle that unmanageability is not a proper ground on which to strike out a claim for abuse of process, particularly in circumstances where the Claimants submit that full redress has not been made in Brazil.
  2. Jurisdictional abuse: this point had been dealt with only briefly by the appellate judge, which was concerning but not sufficient on its own to allow the Claimants' challenge.
  3. There was no basis to strike out claims brought as of right against defendants duly served within the jurisdiction: the appellate judge did not squarely address this point.
  4. The so-called rule in Henderson v Henderson that there should be finality in litigation and that a claimant should bring their whole case in one set of proceedings. The Claimants contended that the judge had wrongly invoked the rule and in fact had prevented numerous claimants, who had made no claims in Brazil, suing in England: the appellate judge did not really grapple with the arguments made that most claimants, including some of the 58 institutions, had brought no other claims. The Court of Appeal added that "the unmanageability or complexity of such proceedings is not really an answer" and that "the claimants were entitled to be told why, in the appellate judge’s view, the Henderson point was bad."

On the jurisdictional grounds, the Court of Appeal briefly concluded that they agreed with the Claimants’ counsel that the appellate judge did not grapple with the full points made by the Claimants. They added however that this was not a criticism, since the appellate judge’s conclusion on the jurisdiction grounds had been entirely academic given his determination on abuse of process.

For the above reasons, the Court of Appeal concluded that important aspects of the grounds had not been addressed, including points that go to the heart of the Claimants’ challenge to Mr. Justice Turner’s decision on abuse of process. This undermined the integrity of the permission to appeal process and, in their view, had the appellate judge grappled with these grounds, there was a "powerful probability" he would have come to a different conclusion.

The Court of Appeal’s decision to grant the Claimants permission to appeal was conditioned on payment of a large costs order to the Defendants, which will need to be settled by 3 September to reopen the claim. This presents a potential barrier to the appeal. The costs in these proceedings are very substantial, reflective of the 'scorched earth' approach taken by the Claimants in pursuing these proceedings in England.

Permission to appeal also came with two important statements from the Court of Appeal. Disappointed applicants for permission to appeal should consider these carefully before going down the same route as the Claimants in these proceedings. First, in their words, "the combination of circumstances in this case is truly exceptional". The Court of Appeal was keen to stress a decisive factor was that the claim is of exceptional importance, both on account of the number of claimants and the importance to them of securing compensation that they may be entitled to. Second, the Court of Appeal emphasised this judgment does not mean that the Court will be any more ready to re-open decisions to refuse permission to appeal, again citing the exceptionality of these proceedings.

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