Court orders £8m interim costs payment in huge group action

Dam collapse: Permission to appeal refused

A High Court judge has ordered an £8m interim costs payment after striking out a huge group action and deprecated the claimants’ solicitor accusation that the defendants had used “legal chicanery”.

Mr Justice Turner also rejected each of the 15 grounds put forward by the Fundão dam claimants for permission to appeal.

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 his latest ruling, 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.”

Subject to detailed assessment, the defendants’ total claim for costs was just over £16m and Turner J found that the claimants “did not even come close” to displacing the usual order – they had argued they should only be liable for half of the costs incurred.

The defendants sought 60% of the costs as an interim payment on account, while the claimants suggested 30%.

“At first blush, the sum spent by the defendants’ on costs would appear to be extremely high,” Turner J said.

“I commented in my substantive judgment that I had witnessed a forensic arms race. I must certainly bear this consideration in mind as a factor which introduces greater than usual breadth of argument over the proper assessment of an interim award.”

The claimants did not reveal “the headline figures” of their own costs bill. “This, of course, they are fully entitled to do although it inevitably means that the court is likely to be more circumspect about the overall weight to be applied to the challenges applied to narrower fronts.

“It is to be noted that the claimants have pointed out that over 1,000 lawyers and paralegals were involved in investigating, considering and pleading the claims and a team of nearly 50 English barristers were deployed on the case.

“Of course, the magnitude of the work involved in making claims, as opposed to responding, to them is likely to be greater but these statistics are, at least, illustrative of the scale of the conflict.”

He decided to award 50% of the bill, rounded down to £8m. Slaughter and May, instructing a team of three QCs and four juniors, is acting for the defendants.

In previous rulings, the judge was critical of the huge amount of documentation submitted by the claimants and said the same had happened for the latest hearing.

“Perhaps it would have been naïve of me to have expected that these observations might have had some, at least modest, impact on the conduct of this litigation thereafter…

“I do not understand how it could possibly have been thought that the draft grounds of appeal now before me could be considered to be compliant with the practice direction.

“The draft relied upon comprises no fewer than 70 paragraphs spread out over 39 closely typed pages. This is the very antithesis of the conciseness required by the practice direction.”

The grounds were also “replete with material which is plainly intended to be excluded under para 5(2) of PD52C” – this says the reasons why the decision under appeal is wrong or unjust must be confined to the skeleton argument and not in the grounds of appeal.

Turner J said the “bloated draft grounds serve only to obfuscate rather than to illuminate what they may perceive to be the merits of their challenge”.

“This, in turn, gives rise to the risk that a judge, whether at first instance or on appeal, may be persuaded to give permission to appeal not through a focussed analysis but having been worn down by a process of relentless documentary attrition.”

While suggesting that the grounds of appeal were drafted “as part of an unsubtle recruitment and retention initiative” for the claimants, rather than aimed at the court, the judge said it would not be helpful to rule on the point.

In his reaction to the strike out, Tom Goodhead, managing partner of the claimants’ solicitors, PGMBM, described the ruling as “fundamentally flawed” and accused the defendants of “legal chicanery”.

Turner J said the latter comment was “even putting the matter at its lowest, both extremely regrettable and entirely without substance”.

“I will assume, in his favour, that Mr Goodhead did not fully understand what the word ‘chicanery’ means before he chose to deploy it.”

The Oxford English Dictionary says it means “the use of trickery to achieve one’s purpose”.

But Turner J said his decision on the appeal and costs would be “uncontaminated by what Mr Goodhead has since acknowledged to have been his ‘somewhat hyperbolic’ utterances”.

“The fact remains, however, that, setting aside speculation as to the explanation for the tumidity of the draft grounds, my task and, I have little doubt (since this application to me for permission to appeal will be refused), that of one or more judges of the Court of Appeal has, as a result, been made far more time consuming than ought to have been necessary.”

Mr Goodhead said they would now be seeking permission to appeal from the Court of Appeal.

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