Rule against abuse of process is an obstacle to pursuing foreign group tort claims in England


KEY LEGAL POINTS

In recent years, the English Courts have ruled on a number of attempts to litigate claims in England against English companies at the head of multinational corporate groups arising from alleged wrongdoing by local subsidiaries within the corporate group.

Forum shopping is of course nothing new. London's reputation as a centre for the resolution of international disputes is built on the perceived advantage that English Law and access to the English Courts brings to the confidence of commercial parties that disputes between them will be resolved justly and efficiently. But so-called 'class action tourism'[1] has raised difficult issues of legal policy and international comity, because:

  • These are not cases in which commercial parties have decided that their relationship should be governed by English law and disputes between them resolved by the English Courts. These are tort cases, in which the rationale (in some cases expressly[2]) has been a concern that justice will not be available to the claimants in the local Courts of the jurisdiction in which the damage occurred.
  • These cases seek to implicate parent companies in claims which arise from the alleged wrongs of their foreign subsidiaries operating in the jurisdiction in which the alleged harm has occurred. They do so either for substantive reasons, to access the perceived 'deeper pockets' of the main corporate entity rather than a local operating subsidiary, or as a procedural device: having an 'anchor defendant' in England as a means of giving the English courts jurisdiction over the whole claim.

The English courts have often been reluctant to entertain these claims. Domestically, the concept of 'piercing the corporate veil' to look behind the corporate personality of a wrongdoer in order to access 'deeper pockets' is a difficult and controversial area of the law. The unattractiveness in terms of international comity of finding foreign courts incapable of doing justice is easy to see. Should claimants be permitted to litigate in England rather than the national courts of the jurisdiction in which the alleged harm was suffered?

The latest such case to come before the English Courts Municipio de Mariana & Ors v BHP Group plc & Anor[3]  (the "BHP Case"). Having avoided serving out of the jurisdiction on the foreign subsidiary by not naming the foreign subsidiary (and primary alleged wrongdoer) as a defendant at all, the claimants had their claims against the English parent company struck out as an abuse of process based on the Henderson v Henderson[4] line of authority.

FACTUAL BACKGROUND

In November 2015, the Fundão dam in south eastern Brazil collapsed, causing loss of life, personal injury, and massive damage to property and the environment. 

The claimants in the BHP Case numbered 202,600 municipalities, businesses, churches, utility companies and individuals. Most had also brought claims in the Brazilian courts, including numerous group actions and thousands of individual lawsuits against the Brazilian mining company which owned and operated the dam, and others. One of the group claims had been settled by the creation of a foundation to mitigate environmental damage and compensate individuals. 

Many of the claimants in the BHP Case had benefitted from this settlement, or had otherwise received compensation in the context of Brazilian proceedings. They were, however, dissatisfied with the redress available in Brazil including the speed and fairness of the compensation schemes there.

The defendants in the BHP Case were BHP Group plc ("BHP") and BHP Group Ltd ("BHP Ltd"). BHP Ltd was an Australian company and was linked with BHP (a company domiciled in England) in a dual-listed company arrangement which provided for a unified management structure. BHP Ltd was the ultimate owner of BHP Billiton Brasil LTDA ("BHP Brasil"), which had participated in a joint venture for the ownership and operation of the dam. Neither BHP nor BHP Ltd were defendants in the Brazilian proceedings, though it was agreed that it would be possible, in principle, for claims to be brought against them in Brazil and they had both offered to submit to the jurisdiction of the Brazilian Courts. 

BHP and BHP Ltd applied to halt the English proceedings, on the bases that:

  1. The claims should be struck out or stayed as an abuse of the process of the court.
  2. The claims against BHP plc should be stayed by the application of Article 34 of the Recast Brussels Regulation.
  3. The claims against BHP Ltd should be stayed because England is forum non conveniens.
  4. Alternatively, both claims should be stayed on case management grounds.

DECISION

Turner J found for the defendants on all four points.

Abuse of process

Turner J had little hesitation in finding that the claims were an abuse of process. He sought to indicate the circumstances in which an abuse of process would arise, and what would be its consequences: 

  • Abuse of process is a use of the court process for a purpose or in a way which is significantly different from ordinary and proper use. But litigants should not be denied the right to bring a genuine claim without a scrupulous examination of the circumstances.
  • Although relevant, bad faith is neither a necessary nor sufficient condition for the finding of an abuse.
  • Where the claimant has already taken (or foregone) the opportunity to bring a claim in other proceedings, a further claim may be an abuse, depending very much on the facts.
  • The court is entitled to take into consideration the likely impact on the business of the courts.
  • The court must take a two-stage approach. First, it must address the question whether an abuse had been clearly proved. This was not a question of discretion – either there is or there is not an abuse of process. If there is, the court must then exercise its discretion to determine the consequences. There may be cases where striking out is the only appropriate response.

In this case, Turner J focussed on the practicalities of maintaining parallel proceedings in England and Brazil:

  • Advancing substantively the same case simultaneously in two jurisdictions would create significant practical difficulties and would lead to wasted time, cost, and duplication of effort. The concurrent proceedings would lead to “utter chaos”[5] in both jurisdictions; "the Brazilian and English judges would constantly be stepping on each other's toes"[6] and developments in one set of proceedings would lead to a shifting landscape in the other (for example the parties had been required to revise their submissions in the run up to the hearing to take account of recent developments in the Brazil litigation). 
  • The court was entitled to have regard to the demands that would be placed on its resources by group litigation on this scale, particularly in light of the difficulties identified above. 
  • There was also a risk of irreconcilable decisions if the English proceedings were permitted to continue (for example, the liability of BHP Brasil as an indirect polluter is yet to be determined in the Brazil proceedings, and the status of BHP Brasil would also need to be determined in any English proceedings to determine the existence of any duty of care). This was a factor that ought properly to be considered in relation to the question of abuse of process as well as the question of jurisdiction.
  • It was evident that the claimants had access to multiple existing routes of redress in Brazil. Turner J rejected the claimants’ suggestion that they would not be able to secure substantial justice in Brazil, given that there was evidence that a large proportion of the claimants “are taking (or have taken or have reserved their rights to take) steps to achieve compensation in Brazil for the same losses as those in respect of which they wish to establish a right to damages against the Defendants in England”[7]. Whilst the Claimants conceded that they must give credit for compensation already received, all but one had not relinquished their right to pursue further any claims they may have in Brazil and were now effectively seeking to have a “second bite of the cherry in England”[8] .
  • In any event, regardless of any alleged problems facing the claimants to obtain redress in Brazil, these would not be alleviated by opening up parallel proceedings in England, given that (i) English proceedings would be expensive and unmanageable, and (ii) the fact that the claimants had agreed to pay their English solicitors a success fee of up to 30% out of any damages received in the English proceedings. In contrast, legal aid is available in Brazil and there are no costs in seeking to join the Brazilian compensation scheme.

Recast Brussels Regulation / forum non conveniens

Having struck out the claims as an abuse of process, Turner J decided the other grounds obiter. 

Relying on many of the same matters he had taken into account in the context of abuse of process, Turner J held that he would have stayed the English proceedings both pursuant to Article 34 of the Recast Brussels Regulation (in view of the related proceedings pending before another court)[9] and on the grounds of forum non conveniens (on the bases, inter alia, that Brazilian law was to be applied, witnesses were for the most part in Brazil, documents would have to be translated from Portuguese, the Brazilian proceedings were more advanced and no convincing evidence had been produced that justice was not available to the claimants in Brazil)[10].

Stay on case management grounds

Although a stay on case management grounds can only be granted in rare and compelling circumstances, Turner J held that the same reasons he gave in arriving at the conclusion that the English proceedings were an abuse of process would have been adequate to ground a case management stay[11].

COMMENTARY

The reluctance of the English Courts to entertain forum shopping by groups of litigants seeking redress in respect of alleged wrongs in foreign jurisdictions continues. The BHP Case adds an additional dimension to the issues explored in recent cases focussing on the potential liability of English domiciled parent companies for alleged wrongs by their foreign subsidiaries. Turner J also provides useful clarification, which will have implications beyond the context of group tort litigation, of the circumstances in which a Henderson v Henderson abuse of process will arise.

However, group tort litigation such as this will remain in the spotlight: an appeal in the Shell case was heard by the Supreme Court in June 2020 and that judgment is eagerly awaited[12]. Here is our comment on the Court of Appeal decision in that case.  For the time being, parent companies seeking to avoid litigation in England in relation to the alleged wrongs of their foreign subsidiaries:

  • Offer formally to submit to the jurisdiction of the relevant local courts. Turner J's judgment reinforces the impression given by the judgment of the Supreme Court in the Vedanta Case that the English courts will have regard to the viability of proceedings against the parent company in the relevant local courts when considering questions of its own jurisdiction.
  • Avoid exercising any form of direct operational control over the activities of foreign subsidiaries. Ensure they have empowered local management teams and that central control is exercised through mandatory policy frameworks, rather than specific direction on individual issues.

Gareth's previous commentary on this topic:

Lungowe and Ors v Vedanta, Supreme Court, 2019

AAA v Unilever, Court of Appeal, 2018 

Lungowe and AAA decisions compared, 2019

Key contact

Gareth Jones

Gareth Jones

Legal Director, Dispute Resolution
Leeds

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1.AAA & Ors v Unilever plc & Anor [2018] EWCA Civ 1532 (the "Unilever Case"), Okpabi & Ors v Royal Dutch Shell Plc & Anor [2018] EWCA Civ 191 (the "Shell Case"), and Vedanta Resources plc & Anor v Lungowe & Ors [2019] UKSC 20 (the "Vedanta Case").
2.As in the Vedanta Case.
3.[2020] EWHC 2930 (TCC).
4.(1843) 3 Hare 100
5.[2020] EWHC 2930 (TCC), [92].
6.[2020] EWHC 2930 (TCC), [96].
7.[2020] EWHC 2930 (TCC), [90].
8.[2020] EWHC 2930 (TCC), [126].
9.[2020] EWHC 2930 (TCC), [234].
10.[2020] EWHC 2930 (TCC), [259].In doing so, Turner J applied the analysis of Lord Briggs in the Vedanta Case concerning the risk of inconsistent decisions being mitigated by the offer of BHP and BHP Ltd to submit to the jurisdiction of the Brazilian Courts – see [241].
11.Though he 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 - [2020] EWHC 2930 (TCC), [264].
12.https://www.supremecourt.uk/cases/uksc-2018-0068.html