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Court of Appeal strikes out class action over Fundao Dam collapse

UK judges opened a path for a group of more than 200,000 plaintiffs to bring a suit against BHP Group Ltd over its role in the collapse of a mining dam in Brazil.

BHP faces a $6 billion lawsuit due to the collapsing of the infrastructure, triggering Brazil’s worst environmental disaster and making it the largest group claim in English legal history.

What are class action claims?

Class actions or collective actions are where multiple claimants with claims sharing common characteristics seek a remedy against the same defendant or multiple defendants. The English courts have various types of procedures for collective litigation, and recent reforms have added to these with new procedures available for collective consumer and competition claims.

However, this type of action can raise several additional difficulties for the defendant as it did for BHP, and it can be extraordinarily hard to estimate the costs likely to be incurred or the duration of the case.  Even if the substantive issues of fact and law are clear cut, there are a few procedural and other preliminary points that can arise.

Court of Appeal granted permission to appeal

BHP ruled out that the case is pointless and wasteful, stating it duplicates legal proceedings and reparation and repair programs in Brazil, which will already cost $5.6 billion by year-end. Initially, the High Court granted the Defendants’ application to strike out/stay the claim against them as an abuse of process, as trying to manage the claim would be like ‘trying to build a house of cards in a wind tunnel’. 

The Court of Appeal denied permission to appeal the High Court judgment, thus the claimants applied to reopen the refusal under the infrequent use of reopening of final appeals. The Court of Appeal reopened the refusal to grant permission and went on to grant permission to appeal.

Brazilian federal prosecutor Jose Adercio Sampaio spoke to The Age and The Sydney Morning Herald quoting: “The accusation is that they knew the risks. They knew it could burst,” he said. “They should have taken steps to avoid the crime; instead, they increased production.”

BHP spokesperson responds that the company had “no reason to believe BHP people knew the dam was at risk of failing”. The spokesperson stated, “We reject outright criminal charges against the company and its employees and will continue in our defence and support of affected individuals”.

He further states that monitoring and the alarm systems at all sites had been reviewed and “all significant tailings storage facilities have emergency response plans in place”.

Practical Implications of the case

The Court of Appeal decides on whether the claim being struck out or stayed for the purposes of abuse of process is helpful for class actions. As per the Court of Appeal’s guidance, certain factors need to be considered:

  • A ‘properly advanced’ claim, which may be ‘unmanageable’ for the court does not make it an abuse of the court’s process
  • Forum non conveniense factors is not inclusive of the court’s analysis on abuse of process
  • A ‘properly arguable’ claim could be abusive if it is clearly and obviously ‘pointless and wasteful’
  • The ‘manageability’ of the litigation should not influence the court’s assessment of whether a properly arguable claim is pointless or wasteful
  • in group litigation, the assessment of whether a claim is ‘pointless and wasteful’ must be made in relation to each individual claimant or group of claimants, not the claimants as an ‘indivisible group’

Court of Appeal’s decision

The Court of Appeal stated that the claims were not to be deemed pointless or wasteful and should not be struck out. The courts emphasized that the English proceedings are not oppressive and the burden on the English courts by the proceedings are not disproportionate as the claims were arguable with significant sums included. The Court of Appeal held that the said compensation being paid in Brazil did not seem adequate hence, proceedings in the English Courts were appropriate.

In conclusion the court of appeal released a 107-page judgment that BHP, which had its headquarters in England at the time of the dam’s collapse, would have to account for its role in the disaster. The decision, on striking out class claims, was overturned by the Court.

BHP’S next steps

A BHP spokesperson said: “We will review the judgment and consider our next steps, which may include an application for permission to appeal to the supreme court. We will continue to defend the action, which we believe remains unnecessary as it duplicates matters already covered by the existing and ongoing work of the Renovo Foundation under the supervision of the Brazilian courts and legal proceedings in Brazil.”

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