Court of Appeal overturns High Court decision to strike out a class action for being "irredeemably unmanageable"
In Municipio de Mariana and others v BHP Group (UK) Ltd (formerly BHP Group plc) and another1 , the Court of Appeal (CoA) considered the circumstances in which claims brought in the English courts against a parent company for the actions of its foreign subsidiary could be stayed or struck out. The decision will be of particular interest to multinationals in the Energy and Natural Resources sector assessing the impact of ESG risks across their global supply chains.
Key takeaways
The High Court struck out proceedings brought by over 200,000 Brazilian claimants against BHP Group (UK) Ltd (BHP UK) and BHP Group Ltd (BHP Australia) (together, BHP) as an abuse of process on the basis that they would be "irredeemably unmanageable" and that ongoing proceedings in Brazil meant that the English claims were futile and wasteful. The first instance judge found that, in the alternative, the proceedings should be stayed pursuant to Article 34 of the Brussels Recast Regulation2 or on forum non conveniens grounds.
However, in a judgment handed down on 8 July 2022, the CoA overturned the first instance decision, holding that (1) the High Court was wrong to focus on the manageability of the claims when considering whether bringing the claim was an abuse of process; and (2) that inadequacies in the Brazilian proceedings meant that the fact of their availability could not justify a stay or striking out of the English claims; the overlap between the proceedings was held to be "relatively limited".3
The CoA's reasoning is dependent on a unique and unusual set of facts. However, the approach of the CoA may encourage some claimants who are considering bringing claims against parent companies in the English courts for the actions of their foreign subsidiaries. BHP Group Plc have publicly stated that they are considering an appeal to the Supreme Court and emphasised that the CoA decision was limited to issues of jurisdiction.
Facts
In 2015, the collapse of the Fundão Dam in southeast Brazil caused one of the country's most significant environmental disasters, causing the equivalent of around £25 billion in environmental and property damage to the surrounding areas, as well as loss of life.
The dam was owned and operated by Samarco, which in turn was jointly owned by two Brazilian entities (the Brazilian Companies) ultimately owned by BHP. Following the dam's collapse, the Brazilian Companies established the Renova Foundation (Renova) to facilitate compensation and remediation for those affected.
In May 2016, the Brazilian Federal Public Prosecutor (MPF) filed a form of class action procedure, known as a CPA, against the Brazilian Companies. If successful, the CPA could lead to a finding of liability against the Brazilian Companies; in such circumstances, victims of the collapse may bring liquidation proceedings in Brazil to recover compensation (subject to proving causation and quantum). The CPA has been stayed since 2017, pending ongoing negotiations between MPF and the Brazilian Companies. Simultaneously, multiple thousands of separate claims have been brought by individuals in the Brazilian courts.
Claims against BHP in the English court were brought in 2019. BHP subsequently applied to strike out or stay the English proceedings on the following grounds:
(a) BHP Australia applied to stay on the basis that England was not the appropriate forum (forum non conveniens);
(b) BHP UK applied to stay the proceedings pursuant to Article 34 of the Brussels Recast Regulation on the grounds that there were pending proceedings in Brazil (Article 34).
BHP Australia and BHP UK both applied for the Court to exercise its discretion under the Civil Procedure Rules to strike out or stay the English proceedings on the grounds that:
(c) the claims were an abuse of process (R. 3.4(2)(b)) (abuse of process); and
(d) the English claims were pointless, wasteful and duplicative of proceedings in Brazil and the work of Renova (R. 3.1(2)(f)) (case management stay)
The High Court determined all four grounds in favour of BHP. The Claimants appealed.
The CoA decision
The CoA reversed the High Court's decision on all four grounds and allowed the Claimants' appeal.
Abuse of process
The CoA clarified that a claim's unmanageability was not relevant to an assessment of abuse of process; in any event, the claims did not constitute such abuse. In particular, the CoA dismissed the suggestion that the English proceedings were pointless and wasteful as there was:
"a realistic prospect of a trial yielding a real and legitimate advantage for the claimants such as to outweigh the disadvantages for the parties in terms of expense and the wider public interest in terms of resources".4
Taking the potential inadequacies of the Brazilian proceedings into account, the CoA found that the potential advantages arising out of a trial in the English court outweighed the procedural difficulties and expense that the parties would incur should proceedings continue in both jurisdictions.
Article 34
Article 34 continues to apply in this case as the proceedings were brough in 2019, before the UK exited from the European Union.5 Article 34 operates where a court is asked to stay proceedings against a legal person domiciled in the jurisdiction, on the basis that there is a related ongoing action in another jurisdiction. The CoA held that the first instance judge had underappreciated the potential value of the English proceedings and the limitations in the Brazilian proceedings.6 In particular, the CoA considered the uncertainty as to whether, and when, the CPA would resume. The CPA would only result in a generic judgment on liability, requiring further action from the Claimants before redress could be obtained.
Forum non conveniens
In respect of BHP Australia's forum non conveniens application, the CoA held that the first instance judge had incorrectly applied the Spiliada7 test.
(a) On the first limb of the test, the judge had failed to identify the precise nature of the alternative foreign proceedings.8 The CoA held that the tenuous nature of the Brazilian proceedings (and the prospect that the CPA process could take up to 10 years) had a potential bearing on the appropriateness of the alternative forum.9
(b) On the second limb of the test, the judge had erred in finding that the Claimants were required to demonstrate that they would be unable to obtain justice in an alternative forum; the correct test was where there was a real risk of not doing so.10 The Claimants had reasonably relied on "cogent evidence" that there were "insuperable obstacles" under the CPA process, which qualified as a "real risk" of being unable to obtain justice.11 It was not incumbent on the Claimants to have "tested the water"12 by bringing proceedings in Brazil following a decision in the CPA.
Case management
The CoA refused to exercise its general case management powers to stay proceedings pursuant to R. 3.1(2)(f), as to do so was not in the interests of justice, for the reasons given in respect of the preceding grounds.
Comment
Although highly fact-specific, the CoA judgment suggests an increasing willingness to allow class actions concerning parent company liability in respect of harms suffered in other jurisdictions to proceed through the English courts. The size of a claimant class, complexity of the case management process, or the existence of parallel proceedings in another jurisdiction may not, in themselves, be grounds for strike out or stay. It should be noted that the Defendants were not parties to any proceedings in Brazil. It is possible that the outcome of the appeal would have been different were that not the case.13
1 EWCA Civ 951
2 Regulation 1215/2012 Art 34
3 [191(2)]
4 [234]
5 Brussels Recast Regulation does not apply to proceedings brought after 11pm on 31 December 2020
6 [304-311]
7 Spiliada Maritime Corp v Cansulex Ltd (The Spiliada) [1987] AC 460
8 [343]
9 [349-351]. The CoA was not addressed in detail on the first limb of Spiliada
10 [355]
11 [358]
12 [359]
13The fact that the Defendants were not parties to proceedings in Brazil was referenced in analysis at [151], [211], [235] and [309]
