Fundao Dam disaster: Inaccurate allegations
The Times newspaper has apologised to class action law firm Pogust Goodhead (PG) and agreed to pay damages for a defamatory claim that it was improperly pressuring clients.
The firm was also wrongly accused of striking a deal to take up to half of the damages of clients in the huge Fundão Dam case it is acting on.
It represents over 600,000 individuals, indigenous community members, businesses and others over the 2015 collapse of the dam in Brazil in a High Court claim against the UK-based owners of one of the joint venture partners operating the dam.
According to a statement in the High Court yesterday read by PG solicitor-advocate Paul Hudson, last November The Times published an article about an out-of-court settlement scheme arranged by the companies responsible for the collapse of the dam.
He recounted: “The agreed meaning of the article is that there were reasonable grounds to suspect that Pogust Goodhead was improperly pressuring its clients to reject a settlement offer in relation to the [dam] collapse because the firm stood to gain financially if the High Court proceedings were to succeed.”
Mr Hudson said this allegation was “entirely false” and the article contained “factual inaccuracies”.
He explained: “Pogust Goodhead’s position is that its advice to its clients had at the time been limited to detailed communications which accurately explained all known elements of the settlement scheme.
“These communications were delivered alongside a comparative analysis of the advantages and disadvantages of participation, and at no juncture suggested that clients either accept or decline participation.
“In accordance with Pogust Goodhead’s professional standards and obligations, its advice to its clients was to consider any offers made carefully and with the assistance of their lawyers in Brazil. Pogust Goodhead was, therefore, not improperly pressuring its clients to reject any settlement offer.”
Mr Hudson said the article also wrongly alleged that PG and its financier, Gramercy, stood to be paid to up to 50% of the damages if the claim was successful.
“In fact, only a proportion of the firm’s instructions in the High Court proceedings are damages-based agreements and the relevant percentage recovery ranges from 6% to 30%, depending on the client to which the retainer relates.
“Pogust Goodhead is therefore not taking up to 50% of its clients’ damages in the English litigation, and nor was it motivated by this factor when advising its clients.”
Counsel for The Times, Katya Pereira, said the newspaper accepts that the allegations were untrue and had published an apology in January.
The Times has agreed to pay costs and damages. Legal Futures understands that this followed on the heels of another inaccurate article in the newspaper about PG’s work on the Dieselgate case that also settled with damages, although on that occasion there was not a statement in open court.
The settlement marks some good news for PG after bad press from publication of its overdue 2022 accounts, which said there was “material uncertainty” over the firm’s ability to continue as a going concern.
Signed by its auditor from MHA only last month, the accounts said PG required additional funding to enable it to meet its liabilities as they fell due within the next 12 months.
As at 31 December 2022, PG reported net liabilities of £510m and a loss of £292m, of which £239m was due to losses on accounting for fair value of financial instruments.
“The reported net liabilities reflect an accounting mismatch between revenue recognition and loan obligations,” the accounts said.
A PG spokeswoman said: “Our business is built on the strength of our case portfolio, not traditional financial cycles. Our growing portfolio of high-value litigation assets provides a solid foundation for long-term revenue generation.
“Pogust Goodhead remains in a strong position to deliver justice for over a million claimants against some of the biggest companies in the world. With our flagship cases against BHP [the dam case] and the car manufacturers reaching critical stages, 2025 is set to be the most significant year yet for our firm and our clients.
“Investor confidence in our legal claims portfolio continues to grow, with secured funding allowing us to pursue cases on behalf of claimants worldwide.”
The spokeswoman added that its next round of funding was “being finalised with an existing funder based on their continuing confidence in our cases. Given all the support already shown, we expect the funding to be completed in line with our expectations”.
There has also been a spotlight on a £4.2m loan advanced to the firm’s owner and chief executive, Tom Goodhead, that was subsequently waived.
The spokeswoman said: “The transactions reported in the accounts are just reflective of the UK companies and do not provide the full picture. They do not reflect the level of immense support that has been provided by the shareholder to the group over the years.”
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