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Royal Dutch Shell Plc (‘RDS’) is the parent company of the Shell group of companies, incorporated in the UK. The Shell Petroleum Company of Nigeria Limited (‘SPDC’, the other Respondent) is an exploration and production company incorporated in Nigeria and is a subsidiary of RDS.

The Appellants (some 42,500 people) are citizens of Nigeria and inhabitants of the areas allegedly affected by oil leaks from pipelines and associated infrastructure, that SPDC operates on behalf of an unincorporated joint venture in which numerous participating interests are held, in and around the Niger Delta. The leaks are said to have impacted their lives, health and local environment. They contend that the Respondents are responsible.

The claims against RDS and SPDC are based on the tort of negligence under the common law of Nigeria which, for present purposes, is to be regarded as the same as the law of England and Wales. The claim against RDS is brought on the basis that RDS owed the claimants a duty of care either because it exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations.

RDS applied under CPR Part 11(1) for orders declaring that the court had no jurisdiction to try the claims against it, or should not exercise such jurisdiction as it had. The Supreme Court has since clarified the law in this area, including by reference to the CA’s decision in this case, in Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) [2019] UKSC 20.

At first instance Fraser J held that there was no arguable case that RDS owed the Appellants a duty of care. The Appellants appealed to the Court of Appeal against the judgment and Order of Fraser J. The Court of Appeal upheld the decision of Fraser J.

The Appellant appealed to the Supreme Court to decide whether and in what circumstances the UK-domiciled parent company of a multi-national group of companies may owe a common law duty of care to individuals who allegedly suffer serious harm as a result of alleged systemic health, safety and environmental failings of one of its overseas subsidiaries as the operator of a joint venture operation.

The Supreme Court allowed the appeal. Lord Hamblen gave the lead judgment, with which Lord Hodge, Lady Black and Lord Briggs agreed.

Proportionality

The Supreme Court reiterates the importance of proportionality in relation to the jurisdiction issues, as previously emphasised in Vedanta and VTB Capital Plc v Nutritek International Corp & Ors [2013] UKSC 5. The analytical focus should be on the particulars of claim, or witness statement setting out the details of the claim, and whether, on the basis that the facts there alleged are true, the cause of action asserted has a real prospect of success. The filing of large quantities of evidential material is inappropriate. In the present case there were numerous witness statements and files of exhibits, running to over 2000 pages of evidential material.

Issue (i) – Material error of law

The Court of Appeal materially erred in law in that it was drawn into conducting a mini-trial which led it to the adoption of an inappropriate approach to the contested factual issues and to the documentary evidence. Instead of focusing on the pleaded case and whether that disclosed an arguable claim, the court was drawn into an evaluation of the weight of the evidence and the exercise of a judgment based on that evidence. That is not its task at the interlocutory stage. The factual assertions made in support of the claim should be accepted unless, exceptionally, they are demonstrably untrue or unsupportable.

In relation to the contested factual issues, the majority of the Court of Appeal preferred and accepted the evidence of various RDS witnesses, notwithstanding the fact that there had been no opportunity for cross-examination and minimal disclosure from RDS. Such an approach was inappropriate at this stage in the proceedings. In relation to the documentary evidence, the likely importance of internal corporate documents is well established in the context of cases concerning liability in negligence of a parent company for the acts of its subsidiary. This has been recognised in a number of authorities, most recently by Lord Briggs in Vedanta. The Court of Appeal erred in its approach to the prospect of the disclosure of internal corporate documents material to the claims made and the appellants were able to identify specific internal documentation, not yet disclosed, which is likely to be material. The appellants therefore established a material error of law in the approach of the Court of Appeal to the determination of the arguability of the claim at an interlocutory stage.

Other errors of law by the Court of Appeal were also made out. First, the majority appeared to accept a ‘general principle’ that a parent company could never incur a duty of care in respect of the activities of a subsidiary by maintaining group-wide policies and guidelines. That is inconsistent with Vedanta, in which Lord Briggs confirmed that there was no such “reliable limiting principle”. Secondly, the majority may have focussed inappropriately on the issue of control. As Lord Briggs explained in Vedanta, the issue is the extent to which the parent did take over or share with the subsidiary the management of the relevant activity. That may or may not be demonstrated by the parent controlling the subsidiary. Finally, the Court of Appeal erred in its approach to whether a duty of care exists in this type of case. The majority treated the liability of a parent company in relation to the activities of its subsidiaries as a distinct category of common law negligence, contrary to the guidance subsequently provided in Vedanta. It was therefore incorrect to analyse this case by reference to the threefold test set out in Caparo Industries PLC v Dickman [1990] UKHL 2. It is not, however, necessary to determine the disputed question of whether such errors were material to the decision reached.

Issue (ii) – Real issue to be tried

Having full regard to the appellants’ case and the respondents’ written and oral submissions and evidence, it has not been shown that the asserted facts in the particulars of claim should be rejected as being demonstrably untrue or unsupportable. On that basis, the appellants’ pleaded case, fortified by the points made in reliance on the two RDS internal documents so far disclosed, establishes that there are real issues to be tried, in light of the guidance in Vedanta. That conclusion is further supported by the evidence of the appellants’ witnesses and the very real prospect of further relevant disclosure being provided. In this regard, the analysis and conclusions of Sales LJ in the Court of Appeal is generally to be preferred to that of the majority. In particular, the Shell group’s vertical corporate structure, with organisational approval generally proceeding corporate approval, allowed for delegation of authority, including in relation to operational safety and environmental responsibility. How this organisational structure worked in practice and the extent to which authority was delegated, clearly raised triable issues. The majority of the Court of Appeal was therefore wrong to decide that there was no real issue to be tried.

For judgment, please see: Judgment

For press summary, please see: Press summary

For non-PDF version of the judgment, please see: BAILII

Watch hearing
23 Jun 2020 Morning session Afternoon session