Court of Appeal overturns decision striking out class action arising from 2015 collapse of Fundão Dam in Brazil

The Court of Appeal has held that claims brought in the English court by over 200,000 claimants arising out of the 2015 collapse of the Fundão Dam in Brazil can proceed, overturning the High Court's decision which had struck out the claims as an abuse of process in light of concurrent proceedings and compensation schemes in Brazil: Municipio de Mariana v BHP Group (UK) Ltd [2022] EWCA Civ 951.

The High Court had concluded that the proceedings would be "irredeemably unmanageable", and that allowing the claims to progress simultaneously in England and Brazil would “foist upon the English courts the largest white elephant in the history of group actions”. The Court of Appeal, however, held that unmanageability could not itself justify a finding of abuse of process, and in any event a conclusion as to unmanageability could not be reached safely at such an early stage of the proceedings, when the precise nature and scope of the issues between the parties had yet to be identified. The proper time for considering how to manage the proceedings would be at a case management conference before the assigned judge, at which point the parties would be obliged to co-operate in putting forward case management proposals.

It was also significant that the Court of Appeal disagreed with the judge's conclusions as to the claimants' ability to obtain full redress in Brazil against the particular defendants. In light of the particular procedures in Brazil, and the uncertainty as to which entities could properly bring proceedings, the court was satisfied that there was a real risk that full redress could not be obtained.

Background

The background to the case is explained more fully in our blog post on the High Court's decision.

The claims are brought by a large number of individuals, together with a small percentage of corporates, Municipalities and other institutions, against two BHP entities domiciled, respectively, in England and Australia, claiming compensation in relation to the collapse of the Fundão Dam in Brazil in 2015.

The High Court (Turner J) struck out the claims on the basis that the proceedings “amounted to a clear abuse of process”. The factors on which he reached that conclusion included that: the proceedings would give rise to an acute risk of irreconcilable decisions between the courts of England and Brazil; the concurrent proceedings would lead to “utter chaos” in both jurisdictions as well as wasted time, cost and duplication of effort; a large proportion of the claimants were taking (or had reserved their rights to take) steps to achieve compensation in Brazil for the same losses; and the claimants had access to multiple existing routes of redress in Brazil.

In the alternative, had Turner J not struck out the claims as an abuse of process, he would have stayed the proceedings as regards the English entity under Article 34 of the recast Brussels Regulation (which continued to apply to the proceedings under the Brexit transitional provisions) and as regards the Australian entity on the grounds of forum non conveniens at common law.

He also considered that his reasons for concluding that the English proceedings were an abuse of process would have been adequate to ground a stay on case management grounds, but acknowledged that if his findings on abuse of process were wrong, a free-standing decision to impose a stay on case management grounds would probably be unsustainable.

Decision

The Court of Appeal (Underhill, Popplewell and Carr LJJ) allowed the appeal, dismissing the defendants' applications to strike out the claims.

Abuse of process

The court noted the power at CPR 3.4(2)(b) to strike out a valid claim where there is an abuse of process. As stated by Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13, an abuse involves “misuse of [the court’s] procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people.”

The Court of Appeal noted that the categories of abuse of process are varied and not closed. However, there are certain well-established categories of abuse. These include proceedings which are (objectively) pointless and wasteful, in the sense that the benefits to the claimants from success are likely to be extremely modest and the costs to the defendants in defending the claims wholly disproportionate to that benefit.

Although the court is concerned to ensure that its resources are appropriately and proportionately used, the fact that proceedings may place a very heavy burden on the court’s resources cannot itself constitute a ground of abuse. Further, it is necessary to consider the question of abuse by reference to claims individually; a claim brought by one claimant, which is not itself abusive, cannot become abusive merely because other claimants have chosen to bring abusive claims. And, importantly, claimants "should not be deprived of their claims without scrupulous examination of all the circumstances and unless the abuse has been sufficiently clearly established". Accordingly, it is only in “clear and obvious” cases that it will be appropriate to strike out proceedings as an abuse of process.

Here, the Court of Appeal concluded that the judge’s decision to strike out the proceedings as an abuse of process was wrong, for a number of reasons:

• the fact that a claim properly advanced is said to be “unmanageable”, or would place a significant burden on the court's resources, cannot be an independent basis for a finding of abuse;
• in any event, the judge's conclusion that the proceedings were “irredeemably unmanageable” was not sustainable - and, the court said, no such conclusion could safely be reached at such an early stage;
• the judge was wrong to rely on forum non conveniens factors as part of his analysis on abuse of process (as opposed to when considering whether to decline jurisdiction on forum non conveniens grounds, in the case of the Australian entity - but not the English entity given that the court had jurisdiction against it as of right under the recast Brussels Regulation);
• the judge’s error in relation to the manageability of the litigation infected his conclusion that there was nothing to be gained by the claimants in the English courts; and
• the judge failed properly to analyse the position of each claimant or group of claimants individually, in circumstances where there were material distinctions between them in particular relating to their alternative routes to redress in Brazil.

Accordingly, the Court of Appeal had to decide afresh whether the claims should be struck out (or stayed) for abuse of process. It concluded that the defendants had not discharged the burden of establishing that the proceedings were clearly and obviously pointless and wasteful, in particular as they had not established that the claimants were clearly able to obtain full redress in Brazil. There was therefore a realistic prospect of a trial in England yielding a real and legitimate advantage for the claimants, so as to outweigh the disadvantages in terms of the expense incurred by the parties and the expenditure of court resources.

Stay against English entity under recast Brussels Regulation 

The Court of Appeal also held that Turner J was wrong to conclude that it would be appropriate to stay the claims against the English entity pursuant to Article 34 of the recast Brussels Regulation, in view of the related proceedings pending in Brazil. The court was not satisfied that a stay would be necessary for the proper administration of justice, which is one of the necessary criteria under Article 34. This was for various reasons, including because of the potential for very significant delay if a stay were granted.

Stay against Australian entity at common law

The Court of Appeal also held that Turner J was wrong to conclude that it would be appropriate to stay the claims against the Australian entity (which had been served at its offices in England) on forum non conveniens grounds. In such circumstances it is well established that the defendant must establish (at stage one) that there is another available forum which is clearly and distinctly more appropriate for the case to be tried. The court will nevertheless refuse a stay (at stage two) if the claimant satisfies the court that justice requires it, including if it is established by cogent evidence that there is a real risk that the claimant will not obtain justice in the foreign forum.

In this case, the Court of Appeal considered the the application for a stay must fail at stage two, even if not at stage one, since it concluded that the claimants had established a real risk that they could not obtain substantial justice against the particular defendants in the only realistic alternative forum identified by the defendants (because of the particular processes applicable in Brazil, as to which there was significant uncertainty as to whether new proceedings would have to be brought by the federal public prosecutor or individual municipalities or could be brought an association of claimants).

Stay on case management grounds

Finally, the Court of Appeal noted that the court has a discretion to order a stay to await the outcome of foreign proceedings on case management grounds, but will only exercise it in rare and compelling circumstances (Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173) and cannot do so in a manner that would be inconsistent with the recast Brussels Regulation.

For the same reasons it set out in considering the abuse of process and Article 34 applications, the Court of Appeal concluded that a case management stay would not be in the interests of justice, and in any event a stay against the English entity would be inconsistent with the recast Brussels Regulation.

Note: The Supreme Court has refused an application for permission to appeal this decision.