Court of Appeal revives “unmanageable” £5bn class action

Fundao Dam disaster: £5bn claim

A decision to strike out an “unmanageable” £5bn group action brought by 200,000 claimants over a dam collapse in Brazil can be appealed, the Court of Appeal has decided.

After Mr Justice Turner refused permission to appeal (PTA) his decision, Lord Justice Coulson followed suit on paper, but the Court of Appeal – with the Master of the Rolls, Sir Geoffrey Vos, giving the ruling – reopened that refusal and granted permission.

It found that Coulson LJ – until recently the deputy head of civil justice – “failed fundamentally to grapple” with three of the points raised by the claimants, including the argument there was no legal basis to strike out on the grounds of irredeemable unmanageability.

The dam in south-eastern Brazil collapsed in 2015 and over 40m cubic metres of iron ore mine tailings were released into the Doce River. The resulting pollution was catastrophic.

About 202,600 individual, corporate and institutional claimants contend that the defendants – ultimate owners of one of the joint venture partners operating the dam – were liable.

But last November, Turner J concluded that the proceedings amounted to a clear abuse of process, particularly because of the claimants’ “tactical decision to progress closely related damages claims in the Brazilian and English jurisdictions simultaneously”.

He said the consequences of this would, if unchecked, “foist upon the English courts the largest white elephant in the history of group actions”.

In refusing permission to appeal, the judge said his central finding had been that the claims would be “irredeemably unmanageable”.

“That central finding comprised an evaluative judgment reached after a very thorough consideration of vast quantities of documentary evidence and following eight days of oral argument.

“I do not see how the claimants can begin to establish that this conclusion was wrong when applying the narrow and well-established parameters within which appellate interference in such cases is permissible.”

Coulson LJ said his view of the manageability of the case was one the judge was “quite entitled to come to on the material before him”.

But the Court of Appeal said this “did not address the question of whether that conclusion could justify a strike-out either at all or in circumstances where, as the claimants submit, it has not been shown that full redress has been secured in Brazil”.

It was also “not sufficient to say that the challenge to the unmanageability point was misconceived, without giving any reasons”.

The court found Coulson LJ also failed to deal with the arguments that there had been no basis for Turner J to strike out claims brought as of right against defendants duly served within the jurisdiction, and that Turner J had mistakenly prevented numerous claimants, who had made no claims in Brazil, from suing in England.

Sir Geoffrey wrote: “Evidently, like the judge, he regarded the case for a strike out as so clear-cut that subtleties of analysis should not be permitted to obscure the big picture.”

Coulson LJ’s failures “can properly be regarded as critically undermining the integrity of the process for granting PTA” and so re-opening the decision was justified.

Had he had properly “grappled” with the grounds in question, the court continued, “there was a ‘powerful probability’ that the outcome would have been different”.

Deciding to grant PTA, it said: “Whilst we fully understand the considerations that led the judge to his conclusion that the claim should be struck out, we nevertheless believe that the appeal has a real prospect of success.

“We would add that on any view the situation facing the court was a difficult and novel one which we believe would benefit from full and thorough consideration by this court.”

Sir Geoffrey cautioned “disappointed applicants for PTA” that the judgment did not mean the court would be any more ready than it has been before to re-open a decision to refuse PTA. “The combination of circumstances in this case is truly exceptional,” he said.

He added: “Secondly, although the rules no longer provide for a right to an oral hearing on an application for PTA, the court has a discretion to direct such a hearing, and with hindsight this is probably a case where that would have been the better course in view of its exceptional complexity and importance.”

However, the court made a condition of the appeal that the claimants pay the £8m interim costs order Turner J made earlier this year, but gave them until 4 September to challenge this.

Tom Goodhead, managing partner at class action firm PGMBM, which is acting for the claimants, said: “This is a monumental judgment and our clients feel like this is the first time that any judges have recognised the importance of this case.

“After the case was struck out in March there was a view that this was the end of the road for the victims. So it is incredibly rewarding for us to be able to tell them that we still believe they will see satisfactory redress through the English courts.”

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