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Representative Actions: Jalla & Another v Shell International Trading and Shipping Co Ltd & Shell Nigeria Exploration and Production Company Ltd (Appeal (2): Representative Action)

  • Legal Development 09 November 2021 09 November 2021
  • UK & Europe

  • Commercial Disputes

On 29 September 2021 the Court of Appeal dismissed the appeal in the case of Jalla v Shell of a decision that the claims could not be pursued as a representative action. In its ruling, the Court of Appeal helpfully analysed the circumstances in which a case can be brought as a representative action, and what are the specific requirements for and limitations on this.

Representative Actions: Jalla & Another v Shell International Trading and Shipping Co Ltd & Shell Nigeria Exploration and Production Company Ltd (Appeal (2): Representative Action)

Background

The case arises out of what has been described as the largest-ever oil spill in the history of Nigeria. On 20 December 2011, during a routine transfer of oil into a tanker, approximately 40,000 barrels or 1.68 million gallons of crude oil leaked into the sea. The damage that this caused to the local community was extensive, including harm to fishing, farming, the mangrove forest, and the supply of drinking water in the affected area.

The claim was issued by Mr Jalla and Mr Chujor as claimants in their own right and for “others”, who were later identified, in general terms, as more than 28,000 individuals and communities in Nigeria (“The Bonga Community”), although there were questions around whether the other individual claimants had in fact given their authority to the named claimants by the time the claim was issued or at all. The claims were not brought until 13 December 2017 – being only a week shy of the 6-year limitation period, counting from the date of the original oil spill.

The defendants took various points including on limitation, jurisdiction, and the representative nature of the action. This led to a series of decisions on limitation (including by the Court of Appeal) and on other issues, prior to this decision. Further, the 28,000 plus represented parties were by this time pursuing claims for individual damages in separate proceedings. The scope of the present proceedings therefore concerned the individual claims by the appellants, together with claims for remediation relief (either a mandatory injunction or the cost of the clean-up) of all the represented parties.

The decision at first instance held that although there were some common issues of fact and law between the claims of the named parties and those they claimed to represent, this was not enough. Each individual or community needed to prove damage to it, and in this case, damage to an extent that justified a claim for remediation relief. There were difficult questions of causation which could not be said to be subsidiary to a main issue in the proceedings. The defendants may have different defences, including in limitation, depending on when the individuals or communities had suffered damage.

Why the claim could not constitute a representative action

The appeal was based on two grounds: (1) Firstly, it was argued that the case was not materially indistinguishable from the case of Lloyd v Google[1] (see our previous commentary here) and that it was a representative action as the “same interest” requirement was satisfied; (2) Secondly, it was argued that the lower Court judge erred in deciding that the named claimants and the Bonga Community did not have the same interest because each individual would need to prove they individually suffered loss and damage.

The first ground of appeal

The Court held that on the first ground, the case was materially different from Lloyd v Google, and it was not suitable for representative action. The main difference was that in Lloyd v Google all claimants had suffered the same breach and the same type of damage, namely the loss of control of their personal data. In the present case, there were different causes of action, including nuisance and negligence claims, which required proof of actual damage. The Court of Appeal held that it was highly likely that the spread, scale, and long-term effect of the oil spill was different in different parts of the affected area.

Furthermore, no limitation issues were raised in Lloyd v Google, whereas in the present case “limitation issues are front and centre”. According to the Court, if the claims brought by the two appellants were time-barred, in a true representative action it would mean that all claims would fail.

The Court also pointed to the ambiguity of proving causation as each individual would need to show a causative link between the 2011 spill and the damage. The Court referred to the “sad fact that there is much oil pollution in this area”, such as another oil pipeline leak in 2008 which Shell settled by paying $65 million to some 15,000 people and the local state.

The second ground of appeal

With regards to the second ground of appeal, the appellants submitted that the mere presence of individual community claims did not mean there could not be a representative action.

The Court of Appeal held that this was a threshold question and that in this case, the claim could not constitute a representative action. Lord Justice Coulson explained that the basic ingredient of claimants having the same interests was entirely missing. Specifically, there was no same interest as to the quantum of the claim. Each individual claim would need to be “tried to a conclusion”, leading to a patchwork of success – which simply could not be called a representative action.

Commentary – the requirements and limitations for representative action

The benefits of a representative action are the considerable saving of time, cost and effort – as well as the avoidance of procedural complexity. Parties should, however, consider carefully whether the claims in a particular case can be brought as a representative action.

The Court of Appeal gathered a list of requirements and limitations for representative action which are summarised in the below checklist. A party seeking to bring a representative action should ensure that all the below are present before commencing proceedings:

  • A representative action is a particular form of multi-party proceeding with very specific features, including the congruity of interest between representative and represented;
  • Representing parties must have the same interest in a claim as the parties they represent;
  • The same interest is a statutory requirement which cannot be abrogated or modified;
  • Represented parties are bound by the result of the representative action;
  • The Court will adopt a common-sense approach to the issue;
  • In a representative action the claimed wrong and loss is the same for all represented parties and their representatives. The parties therefore have the same interests;
  • It may not affect the making of an order if the represented parties have their own separate claims for damages;
  • The existence of individual claims for damages is not necessarily a bar to their being dealt with in some way via a representative action;
  • The analysis of the same interest is undertaken by the Court at the time of application. The Court must consider what the issues are likely to be by reference to the information then available;
  • It is necessary to consider the likely defences as this may mean that each case would be decided differently, and the parties would not have the same interests;
  • Limitation defences have to be taken into account;
  • Membership of the represented class must be capable of being ascertained at the outset of the proceedings.

Alternatives to representative action

The Court of Appeal noted that representative actions are relatively uncommon in English law and practice, and it is more usual to choose one of two other options, a Group Litigation Order (“GLO”) or alternatively submitting individual claims which are each pursued but where a representative sample is taken for the purposes of determining the substantive issues that can be extrapolated between the case.

In summary of each of these:

GLOs

GLOs (governed by CPR Part 19) are often considered the principal procedure for collective actions.

GLOs operate by way of an opt-in system and individual claimants are not included unless they take steps to join the GLO, meaning that the claim form must contain the name of each of the claimants. In comparison, representative actions are based on an opt-out system.

There are many case-management advantages to a GLO which are similar to a representative action, directed at saving significant time and resources. There is also a cost benefit to claimants in the sense that the liability of all costs will not be considered joint and several between the claimants. Instead, each claimant’s costs liability is ringfenced.

GLO proceedings usually set out defined “GLO issues” which are broad in definition and allow for differences in the individual claims. In comparison, representative actions are used more sparingly, given the typical issues outlined above with regards to the “same interests” requirement, which often requires almost identical interests.

Individual actions

It is also possible to bring a collective action more informally either (a) by submitting a single, consolidated claim form, naming multiple claimants; or (b) by bringing separate single claims, which the Court can consolidate and order to be tried at the same time.

The obvious benefit of this is that it provides more flexibility, as the individual claimants would not have to consider issues such as having the same interests or quantum when making the application. The Court would use its case management powers to find common grounds for decisions and sample claims together in order that they can be dealt with efficiently.


[1] Decision of the Supreme Court on the appeal of Lloyd v Google is due shortly

End

Additional authors:

Karla Viinikainen

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