Another step forward for value chain liability claims: the Court of Appeal's decision in Dhan Kumar Limbu & Others v Dyson Technology Limited and Others

The Court of Appeal in Kumar Limbu & Others v Dyson Technology Limited & Others [2024] EWCA Civ 1564 ("Limbu CoA") has overturned a High Court decision^[1] which had declined jurisdiction to hear claims against members of the Dyson Group brought by 24 migrant workers from Nepal and Bangladesh. This means that the claim, which seeks to hold the Defendants liable for alleged forced labour practices and similar human rights abuses at the facilities of one of the Dyson Group's Malaysian suppliers, will now proceed in the English courts.

Claimants are increasingly bringing claims in England for alleged harms suffered overseas as a result of activities within the "value chain" of English-domiciled businesses. The English Courts have been reluctant to dispose of these claims at an early stage – such as for summary judgment or jurisdictional reasons – instead allowing them to proceed to trial. The Court of Appeal's decision in this case is the latest example of that approach, and of the litigation risks faced by English-domiciled corporates with overseas value chains.

What is a value chain?

A "value chain" refers to the activities related to the production of goods/provision of services by a company. This includes the development and distribution of the product or the service. It also includes the related activities of established upstream and downstream business relationships. Including downstream activities distinguishes the "value chain" from the more familiar concept of "supply chain" which is focused on upstream business relationships

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Summary: What did we learn?

This decision indicates the English court's willingness to accept jurisdiction in respect of claims for alleged harms suffered overseas as a result of activities within the "value chain" of English-domiciled businesses. It will be of interest to all corporate groups with UK-based headquarters or group companies which have global operations and / or value chains.

Although the scope of a company's tortious liability under English law for the acts and omissions of those in its supply chain or corporate group remains to be determined at trial, Claimants are increasingly bringing claims asserting liability in respect of such acts. All businesses with English headquarters or group companies should be mindful of the parent company and value chain liability issues which are currently being raised in the English courts, as well as in courts around Europe, and take steps to identify where their potential risk exposure lies.

Companies should monitor the position on an ongoing basis whilst the litigation landscape continues to evolve both in England and Europe, and take steps to identify potential group company and value chain risk exposure arising from operations and supply value networks, both in the UK and abroad.

Deep dive: The claim in Limbu

The case concerns claims by 24 Nepalese and Bangladeshi migrant workers (the "Claimants") employed at factory facilities in Malaysia that manufactured products and components for Dyson-branded products. The Claimants issued proceedings in England against three Defendants that were part of the Dyson group of companies ("Dyson"), referred to as D1, D2 and D3 in the judgment. D1 and D2 are domiciled in England; D3 is domiciled in Malaysia.

The Claimants allege that they have been subjected to highly exploitative and abusive conditions while living and working in facilities operated by "ATA/J", a Malaysian-domiciled supplier to Dyson with which D3 had contracted for the manufacture of Dyson components. The Claimants allege that they were trafficked to Malaysia and there subjected to forced labour and, in the case of some of them, detention, torture and beating.

Dyson did not itself own the relevant facilities or employ the Claimants, but is alleged to be liable for various torts and by way of unjust enrichment as a result of:

the high degree of control it exercised over the manufacturing operations and employment practices of ATA/J; and
how it promulgated, implemented, audited and enforced mandatory policies and standards concerning the working and living conditions of workers in the Dyson Group's supply chain.

The Claimants served the English-domiciled defendants (D1 and D2) in England and obtained permission to serve the Malaysian-domiciled defendant (D3) in Malaysia. All of the defendants challenged the jurisdiction of the English Court to hear the proceedings, on the basis that the proper forum was Malaysia.

The common law test for jurisdiction:

Following the end of the Brexit transition period, an English court when considering a jurisdictional challenge will apply the common law principles set out in Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460 ("Spiliada"). In applying those principles:

With respect to service in the jurisdiction cases, the burden of proof rests on the defendant to show that England is not the natural or appropriate forum and that there is another available forum which is clearly and distinctly more appropriate (Stage 1); and
If so, then the burden shifts to the claimant to show that there are "special circumstances" such that justice requires the trial to take place in England (Stage 2).^[2]

With respect to service outside the jurisdiction, the burden of proof is on the claimant at Stage 1 to show that England is the appropriate forum for the trial of the action. If the claimant is not able to establish that England is the appropriate forum, then Stage 2 applies.

The High Court at first instance had concluded that there were no realistic impediments to the Claimants' ability to pursue their claims in Malaysia, and no "special circumstances" such that justice required the claims to proceed in England. The Court accordingly had no jurisdiction to hear the claim. You can find our analysis of the first instance decision here.

The Court of Appeal decision

The Claimants appealed to the Court of Appeal. Although there were nine separate grounds of appeal, they amounted in summary to an assertion that the High Court had erred in concluding that England was not the natural or appropriate forum to hear the claims, and that there were no special circumstances such that justice required the trial to take place in England.^[3]

The Court of Appeal agreed with the Claimants. It concluded that England was the "natural or appropriate forum" for the claims, including because:

D1 and D2 were each domiciled and served in England;^[4]
the allegations of breach of duty of care were, at heart, allegations of failures by management and personnel of Dyson in England, notwithstanding that the harm was suffered in Malaysia. Similarly, the alleged unjust enrichment of D1 and D2 took effect in England;^[5]
hearing the claims in England would enable them to be case-managed together with related defamation proceedings brought by D1 and D2 in the English High Court, reducing the risk of conflicting or irreconcilable judgments;^[6] and
the Defendants' defence of the claim would be coordinated and conducted from England.^[7]

The Court of Appeal also disagreed with the High Court that there were no "special circumstances" requiring that the claims be heard in England. In that regard, the Court of Appeal placed particular weight on the difficulty that the Claimants would face in funding their claims if brought in Malaysia. It found that the Defendants' undertakings to fund the reasonable costs of the Claimants to bring the claims in Malaysia were not sufficient to overcome those funding difficulties, including because the undertakings: would give rise to a conflict of interest on the part of the Defendants; would likely require the Claimants to waive privilege in the event of a dispute regarding the reasonableness of any costs; could not realistically be policed by the English Court; and were limited to the costs of specified issues and stages of the proceedings, in circumstances where it could not be confidently said at this early stage that the dispute would be so limited.^[8]

Having concluded that the High Court had made a number of errors of principle in applying the Spiliada factors, the Court of Appeal performed its own evaluation and concluded that England was the most natural and appropriate forum to hear the claims. In reaching that conclusion, it relied on its findings outlined above regarding the errors of the High Court. However, it also relied heavily on the fact that there was funding available to pursue the claims in England that would not be available if the claims were pursued in Malaysia, as well as the practical convenience of bringing the proceedings in England (including the fact relevant disclosure was likely to be held there) and the fact that the parties' legal teams were all based in England.

Footnotes

[1] Limbu & Ors v Dyson Technology Ltd & Ors [2023] EWHC 2592 (KB) ("Limbu First Instance").
[2] Limbu First Instance, paragraph 28.
[3] Limbu CoA, paragraph 30.
[4] Limbu CoA, paragraph 34-36.
[5] Limbu CoA, paragraph 38.
[6] Limbu CoA, paragraph 42.
[7] Limbu CoA, paragraph 47.
[8] Limbu CoA, paragraphs 49 to 58