Court of Appeal ruling addresses pleading specificity issue in Nigerian oil spill case

The underlying claims in the proceedings were brought by residents of Nigeria who alleged that spills from oil pipelines in the Niger Delta had caused environmental damage. The claims were brought against Shell and its Nigerian subsidiary. The appeal arose out of arguments about how the residents had pleaded their cases and whether they had been pleaded with a sufficient degree of specificity.

A key issue on appeal was the High Court’s finding that the residents’ claims should proceed as “global claims”. According to Lord Justice Males, one of the three judges who heard the case in the Court of Appeal, a global claim “enables a claimant to recover when loss is caused by multiple events, for all of which the defendant is responsible, but it is impossible or impracticable to identify separately the loss caused by each of those events”. However, “the downside, from a claimant’s point of view, is that the global claim will generally fail if any material contribution to the loss is made by an event for which the defendant is not responsible “.

The claimants in the class action wanted to plead their case widely, without reference to specified oil spills, because, they argued, they did not have enough information to be more specific until evidence had been exchanged.

The company contended that the claim should therefore be classified as a “global claim”, because the lack of particularisation meant that they were unable to understand the case they must meet in relation to the events relied on and the alleged causal relationship with the residents’ losses.

The company argued that if the claims were not classified as global claims, it would not be possible for the parties to select and agree “lead claims” on which the litigation would proceed, because too little information had been provided by the claimants about the specific spills relied on.

The residents resisted the attempt to establish that their claims were global, saying that this was not how the claims were pleaded and that they should not be compelled to proceed in this way.      

The High Court, which heard these arguments in the first instance, accepted the company’s argument that the claims should be classified as global claims.

The Court of Appeal set aside the High Court’s decision. On the point of “global claims,” it concluded that “no judge or court is entitled to require a party to establish their case by a particular method”. In addition, the court found that there had been no effective application to strike out, nor had the company submitted that the residents’ case was frivolous or vexatious. As a result of the judgment, the residents were entitled to plead their claims as they wished, and it would be a matter for the trial judge to decide whether the claims were made out.

The Court of Appeal commented that the proposals for a trial on global claims seemed to be a “recipe for an expensive and insufficiently focused disaster.” Lord Justice Males raised another consideration, stating that there was no pleading that Nigerian law, upon which the claim is based, would allow the claims to proceed on a global basis.

In reaching its decision, the Court of Appeal observed that there was a “major inequality in access to information” and an inequality of resources, meaning that the claimants had to fund the litigation through their lawyers’ willingness to act on a CFA, whereas the sums expended were “relatively…. trifling for the defendants as part of a global organisation such as Shell”.

However, the Court of Appeal made it clear that before the case reached trial, it would be necessary for the residents to plead their case with “sufficient particularity” so that Shell knows the case it must meet. That stage had not yet been reached, according to the court.

As part of the judgment, the Court of Appeal gave three “guiding principles” on the ways the case should be managed. First, the court should strive to ensure that the parties are on equal footing in relation to access to relevant information, with further disclosure required in this case. Second, lead cases should be selected by a collaborative process, with the court being involved as necessary. Third, once the claimants are in possession of a sufficiency of relevant information, they should be required to refine and set out the nature of their case or cases, so that the defendants have a fair understanding of the case they must meet and a fair opportunity to meet it at trial.

Katie Hancock, litigation expert at Pinsent Masons, said: “Claimants in ESG group proceedings such as this one often point to a so-called ‘asymmetry of information’ as justification for a lack of specificity in their pleadings. They also point to a disparity in resources between the claimants and the defendant companies. The Court of Appeal’s decision is likely to be welcomed by claimants who argue that their lack of access to information should not constrain the scope or availability of remedies.”

However, she added: “Following this decision, defendants may now find themselves increasingly in the dark as to the claims they must meet until relatively late in proceedings, which may increase costs and reduce the potential for disputes to be settled.”

“Commentators are closely watching the development of case law on ESG mass claims, particularly those involving UK headquartered parent companies. The next stage in these long-running proceedings is expected to be a preliminary issues trial in 2025,” she said.

The underlying claims against Shell and its Nigerian subsidiary were initiated nine years ago. In February 2021, the Supreme Court overturned a 2017 decision by the Court of Appeal, making it possible for the lawsuits to be brought in England. The 2017 ruling had stated that the class actions would have to be heard in a Nigerian court.

“These proceedings were issued in 2015 and 2016, and there remain many steps to be taken before trial. All three Court of Appeal judges stated their view that the litigation should now progress urgently but, given the potential for further disputes around case management, it remains to be seen whether this can be achieved and, if further applications are made, how the courts will address any further delays,” Hancock said.

The matter has been referred back to the High Court to provide the specifics as to how this process should proceed. The Lord Justice Stuart Smith and Lord Justice Males noted that case management decisions in a case like this should be informed by the overriding objective, with Lord Justice Males noting in particular “the court’s obligation to ensure so far as reasonably practicable that the parties are on an equal footing and can participate fully in the proceedings”.