High Court strikes out “unmanageable” 200,000-strong group action

Dam collapse: Claim should proceed in Brazil alone

The High Court has struck out a claim brought on behalf of more than 200,000 claimants over a dam collapse in Brazil, saying it risked becoming “the largest white elephant in the history of group actions”.

Mr Justice Turner described the “collective optimism” of the claimants’ lawyers about bringing the case in England as “deeply and irredeemably flawed”.

Group action firm PGMBM instructed two QCs and eight juniors for the claimants, with the defendants, represented by Slaughter and May, lining up three QCs and four juniors.

In 2015, the Fundão dam in south-eastern Brazil collapsed 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. The claimants are not a homogeneous group.

But 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 addition, it would, in my view, be manifestly unfair to the defendants to be required to engage in massively expensive and protracted litigation devoid of any realistic promise of substantive advantage to the claimants.”

In an earlier preliminary hearing we reported last month, the judge criticised the huge amount of documentation so far submitted to the court, and he reiterated this in his ruling on the strike-out application – the trial bundles contained 30,000 pages.

Turner J said the English action would be “irredeemably unmanageable”. He explained: “The wasted time, costs and duplication of effort involved in advancing the same case simultaneously in the two jurisdictions would be considerable and liable to give rise to incompossible findings…

“Furthermore, the prospect of attempting to manage the claims of over 200,000 claimants where such a high proportion of them are taking (or have taken, or reserve the right 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 is nothing short of alarming.”

Turner J predicted that “this unremitting cross-contamination of proceedings would lead to utter chaos in the conduct of litigation in both jurisdictions, the procedural position of each of which would be in a near constant state of flux”.

The task facing the managing judge in England would, he went on, “be akin to trying to build a house of cards in a wind tunnel”.

The judge noted “just how thin were the claimants’ suggestions” as to how the claims could be dealt with proportionately.

“Little more was predicted than the need for the formation of a GLO and the determination of a preliminary issue relating to the existence of the defendants’ alleged status as indirect polluters and the selection of lead cases.

“Beyond that, I was airily assured that, particularly if I were to be appointed to be the managing judge, any difficulties would be readily surmountable.

“I was as flattered as I was unconvinced. Robust case management is a tool not a magic wand.”

He added that, even if he were wrong, the proceedings would still have “a very significantly deleterious impact indeed upon the scarce resources of the English courts”.

He said “repeated visits to the Court of Appeal generating further costs, delays and uncertainties would be almost inevitable” given the complexity of the case, while the translation requirements would also be formidable.

Moreover, whatever the chances of any claimant obtaining full redress in Brazil, he went on, it was “almost a certainty” that they would not achieve it in England.

Most of the claimants have agreed to pay their solicitors a success fee of up to 30% out of any damages. While this was not improper, “even taking into account any shortcomings of the Brazilian processes… there is no need for any claimant there to forfeit a high proportion of her damages in order to fund her claim”. There was legal aid available for individual claims there as well as a compensation scheme with no legal costs.

“On the face of it, these factors might lead the casual observer to wonder what perceived advantages could lure 202,600 claimants into agreeing to participate in proceedings in England.

“The defendants claim that much of their enthusiasm is likely to have been kindled by misunderstandings arising from over-optimistic claims made either by their solicitors or those purporting to speak on their behalf.”

Though Turner J said this issue did not affect his ruling, he observed: “Whatever the source of the claimants’ enthusiasm for the prospect of litigation in England, which I assume to be genuinely felt, I consider their collective optimism to be deeply and irredeemably flawed.”

He concluded by saying that the claimants needed and deserved a mechanism by which to obtain a fair and just outcome.

“I am entirely satisfied that this would not be served up at the table of an English Barmecide feast,” he said, a reference to an Arabian Nights tale in which a rich man serves a beggar an imaginary feast.

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