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5 Mar 2019

Ben Slade, Legal Counsel at Maurice Blackburn (Australia)

Addressing inequalities of power: Landmark class action seeks justice for 15,500 Indonesian seaweed farmers affected by 2009 Montara oil spill

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Business & Human Rights Resource Centre

In 2009, the Montara wellhead, managed by PTTEP Australasia, released thousands of litres of oil into the Timor Sea for over 70 days from an uncontrolled leak. The oil spilled over the south of Indonesia and destroyed seaweed crops. In 2016, Daniel Sanda, the lead applicant, brought a claim in Australian courts on behalf of 15,500 Indonesian seaweed farmers against PTTEP Australasia. The legal action seeks damages for loss of seaweed crops arising from the oil spill.See our summary of the lawsuit here.

What has made this lawsuit possible? What is the legal argument/ cause of action?

In the common law of Australia, when you owe a duty of care and if you are negligent and your negligence, or carelessness, causes foreseeable injury, the courts can impose an obligation to compensate the victims.

[…] We say that the defendants in this case, PTTEP Australasia (Ashmore Cartier) (Pty Ltd), a division of a significant Thai mining oil exploration engineering company (PTTEP), managed the Montara Wellhead No.1 negligently. In August 2009, the wellhead, located in the Northwest shore off Port Headland in Western Australia, equidistant between the North of Australia and the Southernmost part of Indonesia, blew out, spilling oil and gas into the Timor Sea for about 74 days. PTTEP says that the consequences of that were minimal, that there was some destruction of wildlife, that there was some environmental damage around the oil rig that was near Ashmore Cove, and there was short term damage. But, as far as the spread of the oil was concerned, PTTEP said it didn’t get very far - the Australian coast was fairly clear of environmental damage, and otherwise there was no injury caused. The Indonesian Government and citizens of Indonesia think otherwise. Around 2012, an Australian lawyer, Greg Phelps, who was assisting Indonesian fishermen whose fishing vessels had been destroyed by the Australian navy, met a man called Ferdi Tenoni of the West Timor Care Foundation who was very concerned about the losses suffered by Indonesian fishermen and seaweed farmers.

What practical, legal challenges and procedural challenges have you experienced, or can be expected, as the case progresses?

There have been lots of practical challenges. The initial problem was to work out what law applies. You have an oil rig in Australian waters managed by an Australian company but it is a subsidiary of a Thai parent company. It was not clear who was managing the rig, who was giving the instructions about its management and the response to the spill and who was the responsible boss.

[…] The victims are seaweed farmers who live in south west Timor near Kupang and those who live on an island called Roti, in the South of Indonesia that most Australians have never heard of. Almost no one in Australia knew there was even a seaweed industry there. Greg Phelps was introduced to Ferdi Tenoni who took him to see seaweed farmers. They told Greg that in September 2009, waxy muddy looking stuff appeared in the water and on the shore and that their seaweed died. For many people, the crops have not yet returned, and many others, even after all this time, are struggling to get the same yield as they were receiving in the past.

Greg Phelps contacted a professor at Sydney University who is also a barrister, Peter Cashman. He worked out that the Commonwealth had delegated the power to issue and manage the licence regime to the Northern Territory (NT). Thus, he concluded that the Northern Territory law applied. The Northern Territory law has a three-year limitation period subject to certain exceptions. This means that one can only commence an action within three years of the date that the cause of action accrues. However, the court has a right to grant applicants a 12-month extension from the date that they become aware of the facts material to their claim. In October 2014, Professor Cashman and Greg Phelps travelled to Roti and West Kupang to try and find out whether the community was concerned and whether there was a good case. They had to be careful not to inform the community of the facts material to their claim or they would have had to commence proceedings within 12 months of that.

To figure out how to fund that claim, Professor Cashman approached Maurice Blackburn on a few occasions asking us if we would be involved in the investigation with a view to run the case on a conditional fee basis. We declined the invitation as it looked to us to be expensive, hard and an enormously huge undertaking. […] Fortunately, an English based litigation funding company called Harbour was a bit more enthusiastic and contacted Leigh Day, a London law firm. Leigh Day kicked off the investigation, spent a significant amount of time and resources on talking to seaweed farmers to understand what the causes were. Harbour agreed to fund the class action and approached Maurice Blackburn. As Australia was the jurisdiction, we had to decide to whether the Federal Court was the right place or whether the NT Supreme Court was the appropriate forum, despite its lack of class actions facility. We also needed to determine whether the loss suffered by the seaweed farmers was sufficient to justify the resources that Harbour was looking to spend on the case. During that time Greg Phelps went to Indonesia to find a person who was willing to be a representative applicant for the class. That was when he found Daniel Sanda who was quite enthusiastic about participating in the litigation. Our work concluded there was potentially over $200 million plus interest in lost revenue from seaweed farms caused by the oil spill.

We decided not to pursue the claim on behalf of fishermen because their case is a bit more difficult.  This is because they don’t own the fish whereas seaweed farmers own the seaweed. Fishermen have a pure economic loss claim, whereas the claim for seaweed farmers is more direct.  That is, their property that has been destroyed and as a consequence they have suffered financially which makes a big difference as far as Australian law is concerned.

In October 2015 […], the litigation funding company agreed to start proceedings and Daniel gave us formal instructions. Funding was limited because we needed to get over that three-year limitation period issue. We needed the court to grant Daniel a right to proceed with his case.

Additionally, there were two fundamental problems. The first was that the class had to be limited to those people who agreed to the funder’s terms.  This is known as the closed class requirement. Here, the class was defined not just by those seaweed farmers who lost their crops as a result of the oil spill, but also by those who had agreed to the terms of the litigation funding agreement. That meant that Greg Phelps and his team had to run around signing up as many seaweed farmers as they could before we filed. It also meant that each one of the farmers who had signed up would need to be seen by the Australian court as having commenced proceedings for the purpose of the Limitation Act, to allow them in the future to prosecute their claim even though they did not commence it in the three-year limitation period.

Not only did we file the closed class representative proceedings in the Federal Court where Daniel Sanda purported to represent all those seaweed farmers who had contracts with Harbour, but we also filed protective proceedings […], naming over 10,000 Indonesian seaweed farmers, just in case […]. We ran an argument before Justice Griffiths, which was to the effect that Daniel Sanda’s class action was sufficient for each group member to be seen to have commenced their proceeding so they can, in due course, seek an extension under the Limitation Act. This argument was successful. During that time, we filed an amendment to the statement of the claim which fixed up some issues about what we say happened to the seaweed. We also amended the group member definition to bring in the new people that signed contracts with Harbour, and we now have just under 15,500 seaweed farmers who have signed contracts with Harbour.  Harbour has agreed to pay the costs of prosecution of this claim in return for a percentage of the damages (about 30%).

To get to trial has been outrageously complicated and expensive but I hope it is going to be worth it for the seaweed farmers

Are you aware of any repercussions/attacks the clients may have experienced as a result of pursing this legal action?

I am pretty sure they haven’t, no. The suffering is all due to the fact that their incomes have been decimated. It was a nascent industry, they only started in 2001 or 2002, so they had only seen happy days for a few years before it all went back again, which was sad and a bit cruel […]

Has funding been a challenge and how has this been managed?

The issue for Harbour is that it is an expensive undertaking. I think Harbour is doing this to some degree with a view to show the world that litigation funding is not just about entrepreneurial investors making money out of shareholder class actions and that there are good things you can do with litigation funding […]. But the challenge for them was there are significant hurdles:

The first one was whether or not Justice Griffiths was going to conclude that the class had made the initial application to keep limitation periods at bay. […].

The second was whether Daniel Sanda would be allowed to prosecute his claim, in spite of the fact that he had commenced the proceeding outside of the three-year limitation period. Harbour was holding back on releasing funds for the purpose of investigating and compiling causation evidence until we got over the hurdle of Sanders’ application […].

After […] signing up the seaweed farmers, we had to prove causation. In other words, we had to prove that the oil got to Kupang and Roti and that it killed the seaweed. This has cost a great deal to prove. PTTEP says the oil got to within about 95 miles from Rote and that it didn’t get any further. The Australian authority that was throwing dispersant uselessly into the water only took pictures of the oil until it got to Indonesian waters and stopped taking photos. No-one tracked it although there are satellite images of water washing up onto Roti beaches. All of these things that should have been relatively easy but the reality is that they are very complicated. Much more so because we think the company actively engaged in misleading the authorities about how much oil was coming out of the pipes - they say 400 barrels a day, we say it was more like 1000 barrels a day. They also said the oil just floated around the oil rig for a bit and disappeared thanks to the dispersant. We say that the oil went over massive distances and washed north around Roti and Kupang. We say the dispersant did not work at all and only added to greater environmental destruction. There’s significant factorial dispute but I think that the evidence we have compiled is pretty persuasive, and that the court will find that the oil went to the region and destroyed the seaweed.

Could you elaborate on what you think could help overcome current challenges?

The immediate challenge is waiting for PTTEP’s expert evidence, and seeing what they are going to throw at us. […] We expect that we will have substantial evidence from scientists, for example someone in dispersants will say that dispersants work really well, when we just think that it is fundamentally wrong. We expect we will get an expert to say that the ocean currents south of Indonesia will have washed all the oil away. We say that is completely wrong and to suggest this fails to understand how eddies, water currents and winds impact on oil. […]

If we go into mediation, we will not just have to prove Daniel Sanda’s loss, but we need to satisfy PTTEP that the evidence we have for all 15,500 seaweed farmers’ loss is of sufficient weight to ultimately convince the court that they have collective losses of a certain value. Indonesian seaweed farmers do not have computers and do not pay taxes in the same way small businesses in Australia do. The money earned is recorded by a number of different methods including notebooks […], and other records, not all of which are easy to interpret. The documents can be understood and inconsistencies clarified. These issues can be sorted out, but it is hard to do so when you have got a cynical company that is trying to beat you up on every single front […]. We will keep going until they know they cannot deny the damage any more.  Hopefully, the company will agree to compensate but by how much? We do not know. These farmers deserve to be compensated for the destruction of their livelihoods […]

Is there any way in which the international community can help?

The government of Indonesia is understandably upset by the environmental damage that was caused by the oil, as well as the killing of the seaweed crops. […] The Indonesian Government could, with help from the Indonesian community, assist in the prosecution of this claim more than it’s been able to do to date. Obviously, we would very much appreciate a greater level of cooperation if the International community that cared about the environment would assist in that regard. It is not too late to do so […]

How can the Resource Centre generally, and/or the Corporate Legal Accountability programme specifically, support and/or highlight your work going forward?

It is always important that companies that cause mass injury be called to account, and class actions are one way of doing that that works really well. Independently funded class actions add some balance to the playing field, by allocating the resources needed to fight these massively powerful entities that have caused mass wrongs - but that’s not all that needs to be done. […]  The company has, we say, avoided its responsibilities to the environment and to many people who have suffered as a result of its negligence.  The parent company, a very large and powerful entity, should take active steps to right the wrong that has been done.

Have you worked with lawyers from other countries in connection with the case? If so, how, and has this collaboration been useful?

No, except Leigh Day, the UK lawyers who handed the file over to us. In terms of working with people from other countries, the main contact has been Ferdi Tenoni of the West Timor Care Foundation, but he is not a lawyer.  He has been a tireless campaigner for the seaweed farmers. We’ve worked with a number of wonderful Indonesians who’ve worked and helped with things like translation, and a number of very enthusiastic students in Indonesia who have been involved in talking to Indonesian seaweed farmers.

What are the implications of the cross-jurisdictional nature of the case for bringing the company to account?

Well nothing insofar as we are suing the subsidiary of the parent company […]. The problem comes from the fact that the parent company is Thai-based. We expect that the shots are being called by the parent company. The money hopefully will be paid by the parent company but it could try and strip the assets from the local subsidiary if it wanted to although we would have strong grounds for a freezing in those circumstances. […]. The Thai parent company has been totally silent in this process. There has been no attempt by the Australian Government to engage with the company. The Indonesian Government has tried but apparently not successfully […]

How have limitations on the legal accountability of the Thai parent company, and the operation of the corporate veil, impacted on the conduct of the case?

The parent company should be held accountable for the wrongs of its subsidiary. We cannot get anywhere near it.

What is the biggest legal hurdle you face going forward?

There are two: first, proving, on the balance of probabilities, that the oil got to the region and killed the seaweed. I think we have done that with the evidence but whether the judge agrees will depend on how the trial goes.

Secondly, proving that Daniel Sanda’s records and recollection about his loss is sufficient to satisfy the judge that Daniel’s damages claim is valid. We think we have got there.  Daniel is a very honest man who should be believed. It comes down to one judge of the Federal Court who will make the decision. But it is not easy, and like many consumer class actions and human rights class actions, the ability of the court to understand and accept the evidence of unsophisticated claimants is coloured by the fact that the courts are not on familiar ground […] So it is very difficult to present a case for Indonesian seaweed farmers to a sophisticated and clever judge of the Federal Court in a manner that satisfies him that the case is valid.