Supply chain risk: Court of Appeal finds claims against Dyson relating to actions of Malaysian manufacturer should proceed in England

In a recent judgment, the Court of Appeal overturned the High Court's decision declining to exercise jurisdiction over claims brought by migrant workers against English and Malaysian companies in the Dyson group regarding alleged abusive employment practices by one of Dyson's suppliers in Malaysia: Limbu v Dyson Technology Ltd [2024] EWCA Civ 1564.

The High Court's decision had suggested there may be greater scope for UK-based defendants to resist English court jurisdiction over transnational human rights and labour disputes where the key underlying events took place abroad.

The Court of Appeal's judgment swings the pendulum back: although the English court has a discretion to decline jurisdiction over UK-based defendants on the basis that another forum is more appropriate (in contrast to the pre-Brexit position, when there was no such discretion), this decision suggests that it may be reluctant to exercise that discretion, even where the claim involves non-UK defendants and events, if the primary claims are against the UK defendants and are focused on the actions of UK management.

The Court of Appeal's decision is significant for UK-based companies with operations elsewhere for a number of reasons:

• It shows there is heightened litigation risk in the UK predicated on overseas conduct, especially when key decisions or policies are made in the UK and/or UK-based entities oversee or influence operations abroad.
• The courts will heavily weigh the practical ability of vulnerable claimants to access justice in foreign jurisdictions, including financial barriers and safety concerns. This can be expected to make English courts more favourable venues for such claims, even if the primary alleged misconduct occurred abroad.
• There is heightened risk of liability in relation to harm caused by supply chain practices for UK-based parent companies or entities with significant control over global operations – though this decision does not establish the existence of a duty of care or its breach, as the focus was on jurisdictional questions.

Background

A claim was brought against three defendants in the Dyson group of companies by a group of migrant workers who had been employed at factory facilities in Malaysia which manufactured components for Dyson-branded products. The first two defendants were domiciled in England and the third was domiciled in Malaysia.

The claimants were employed and lived in accommodation provided by separate Malaysian entities outside of the Dyson group, but with whom the Malaysian domiciled Dyson entity had contracted. The non-Dyson entities were not parties to the action but Dyson have indicated an intention to join them as necessary and proper parties.

The claimants allege that they were subjected to forced labour and highly exploitative, abusive working and living conditions. The causes of action advanced by the claimants are negligence, liability in tort for false imprisonment, intimidation and assault, and unjust enrichment.  

The claimants served the proceedings on the first two defendants in England and on the third defendant in Malaysia, having obtained the court's permission to serve the proceedings out of the jurisdiction on a "without notice" application in the usual way. All three defendants challenged the court's jurisdiction on the basis that the proper forum was Malaysia.

The Dyson entities were successful at first instance. The High Court (Clive Sheldon KC sitting as deputy High Court judge, as he then was) stayed the proceedings against the Dyson entities domiciled in England and, with regard to the Malaysian domiciled Dyson entity, set aside the order granting permission to serve out and set aside service.

For reasons discussed more fully in our earlier blog post, the High Court ultimately ruled that Malaysia, rather than England, was the appropriate forum for the claim. It was also not persuaded that there were special circumstances such that justice required the trial to take place in England.

Decision

In overturning the High Court's decision, the Court of Appeal identified several errors in the High Court's analysis, including:

• Failing to account for the significance of the primary defendants' domicile and the fact that the litigation (whether in England or Malaysia) would be managed and defended from England via Dyson's litigation centre of excellence;
• Overlooking critical factors connecting the alleged negligence and policy failures to England; and
• Misjudging the practical challenges the claimants would face in pursuing their claims in Malaysia, including inadequate funding and remote participation in the substantive trial.

Under the Court of Appeal's analysis, the fact that there was a serious risk that the claimants, who were impecunious, would be unable to fund their claims in Malaysia, together with the various factors connecting the dispute to England, meant that England was clearly the appropriate forum.

In the High Court, to address the funding concerns, the Dyson defendants had given extensive undertakings including that they would pay certain of the claimants' costs and disbursements. The Court of Appeal considered this entirely unrealistic, as it gave rise to a conflict of interest for the defendants (who would be incentivised to challenge the claimants' expenditure and obtain a tactical advantage). The fact that there was a serious risk the claimants would not be able to fund the claims in Malaysia pointed overwhelmingly in favour of England.

The Court of Appeal's decision was reinforced by a consideration of the other factors connecting the dispute to England, the most important being:

• Domicile and management of Dyson UK entities: Two of the three defendant Dyson companies are domiciled in England, and the litigation was primarily against these entities.  Moreover, England (until 2019 which covered the majority of the relevant time frame for the litigation) was the centre of management and operational control for the Dyson group, including decisions regarding the implementation and enforcement of supply chain policies.
• Creation and promulgation of policies in England: The policies central to the negligence claim – eg the Dyson Ethical and Environmental Code of Conduct and Modern Slavery and Human Trafficking Statement – were developed and issued in England by Dyson UK entities. The claimants allege that these policies are defective and inadequately implemented, failures that emanated from Dyson UK's headquarters in England.
• Control and oversight of supply chain: The Dyson UK entities exercised significant control over the supply chain, including the Malaysian factories where the alleged abuses occurred. The implementation, auditing, and monitoring of these policies were directed from the UK, demonstrating a clear connection between the alleged negligence and England.
• Focus of alleged breaches: The breaches alleged by the claimants, such as failure to enforce policies and respond adequately to known abuses, primarily related to the conduct of Dyson UK personnel based in England. Communications regarding labour abuses were directed to and allegedly ignored by Dyson UK's management.
• Enrichment and accountability in England: The claim of unjust enrichment focused on the profits derived by Dyson UK companies from the alleged abusive labour practices in Malaysia. These profits ultimately benefited Dyson UK entities.
• Coordination of litigation in England: The litigation against all defendants, including the Malaysian subsidiary, would be managed and defended by Dyson's litigation centre of excellence based in England.
• Overlap with defamation proceedings:  The same Dyson UK entities had commenced parallel defamation proceedings in England, which covered overlapping allegations regarding their responsibility for supply chain abuses. These had been discontinued pending the appeal in the current action, but if they had not been they would have been a "very powerful pointer" towards England as the appropriate forum (as otherwise they would give rise to a multiplicity of proceedings and risk of inconsistent judgments).
• Equality of arms: While the parties could expect equivalent standards of legal representation in England, this was less likely in Malaysia, and the claimants would be able to attend trial and give evidence in person in England but not Malaysia.

Note: The Supreme Court has refused permission to appeal this decision.