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Supreme Court greenlights trial with landmark climate change decision

23 Feb 2024

| Author: Reweti Kohere

Strike-out application – seriously arguable nontrivial harm – tort – public nuisance – negligence – climate system damage – climate change – Climate Change Response Act 2002 – interplay between statute and common law – tikanga-related interests

Smith v Fonterra Co-Operative Group Ltd [2024] NZSC 5.

 

Ngāpuhi and Ngāti Kahu elder Michael Smith is a spokesperson on climate change for the Iwi Chairs Forum, a national forum of tribal leaders.

In August 2019, Smith sued seven large New Zealand companies for what he alleges is their individual and collective corporate failure to cease harming his whenua and moana, including places of spiritual, cultural and historical significance to him and his whānau. The seven defendants – dairy giant Fonterra, electricity generator-retailer Genesis Energy, dairy farming company Dairy Holdings, steel-making company New Zealand Steel, fuel retailer Z Energy, fuel importer Channel Infrastructure and coal-mining operator BT Mining – are claimed to knowingly emit greenhouse gases (GHGs) or supply products that release GHGs when burned.

Three causes of action underpin Smith’s suit:

  • Public nuisance – the GHG emissions associated with the defendants’ businesses are substantially and unreasonably interfering with public rights;
  • negligence – the defendants are continuing to breach a duty to take reasonable care not to operate their businesses in a way that contributes to climate change; and
  • the novel tort of “climate system damage” – the defendants are legally obliged to cease materially contributing to damage to the climate system and the adverse effects of climate change.

Smith pleads that tikanga Māori should inform the reach and content of his causes of action. He doesn’t, however, allege the defendants directly owe, or violate, any obligations under tikanga Māori. He seeks declaratory relief and injunctions ordering the defendants to reach net-zero emissions by 2030.

The defendants sought to strike out the proceedings on the basis that Smith raised no reasonably arguable case and that Parliament is best placed to address the complex policy matters underscoring his claim.

Wylie J in the High Court struck out the first two causes of action on the basis they couldn’t be contorted to fit Smith’s pleadings. However, Wylie J declined to strike out the proposed new tort. While noting it faced “significant hurdles”, considering the current state of public policy on climate change, the court was “reluctant” to conclude the novel tort was untenable.

Smith and the defendants appealed to the Court of Appeal, which unanimously found for the corporates. In striking out all three causes of action, the court concluded that tort law wasn’t an appropriate vehicle for addressing climate change.

 

Supreme Court – preliminary issues

Smith appealed to the Supreme Court, arguing “no re-invention of tort law is required”. The respondents argued the court, if it were to allow Smith’s appeal, would have to “stretch, bend and invent” tort law to injunct sectors of the New Zealand economy.

In dealing with a strike-out application, the court was concerned only with whether the pleading disclosed, partly or wholly, a reasonably arguable cause of action – and not the claim’s chances of success.

According to long-standing strike-out principles, a “measured approach” is appropriate where a novel claim is at least founded on seriously arguable nontrivial harm, even if it may be hard to attribute the harm to individuals.

In these cases, Williams and Kós JJ said, courts should lean toward receiving the claim and evaluating it based on evidence and argument at trial, rather than pre-emptively eliminating it, which is appropriate only where the case is bound to fail, whatever the facts proved or policy arguments advanced at trial.

The court first considered whether Parliament had excluded any common law response to GHG emissions, for if it had, then none of the causes of action could succeed. The centrepiece of Parliament’s response is the Climate Change Response Act 2002 (CCRA), which provides a legal framework for New Zealand to meet its international emissions-reduction obligations.

Both of the lower courts held that one of the policy factors negating the imposition of a duty of care was the case’s inconsistency with Parliament’s emissions regulatory framework. Contrary to the Court of Appeal’s view that Smith’s common law claim would cut across a comprehensive legislative framework, his lawyers submitted it supported Parliament’s response. Counsel for the defendants argued the claim invited “judicial criticism” of the efficacy of the statutory framework and would require the creation of a “parallel and inconsistent” regulatory regime.

In the court’s view, that the CCRA excluded torts was “inherently unlikely”. First, in the absence of any clear indication from Parliament that a particular field was a no-go area for the courts, the common law remained available. And second, the CCRA doesn’t purport to cover the entire field of GHG emissions. Policing the actual environmental effects of the activities of individual emitters is primarily the province of the Resource Management Act 1991, not the CCRA. Resorting to the common law for solutions to adverse environmental effects has been “expressly preserved” in the RMA, the court said. A pathway remained open for the common law to “operate, develop and evolve (if that is thought to be required in this case)”.

 

Causes of action

The Supreme Court used the Court of Appeal’s framework of questions for public nuisance:

  • whether actionable public rights were pleaded;
  • whether independent illegality was required;
  • whether the special damage rule was met or required; and
  • whether there was a “sufficient connection” between the pleaded harm and the companies’ activities.

On the first and second questions, the court agreed with the Court of Appeal. Smith’s pleaded public rights to health, safety, comfort, convenience and peace all fell tenably within the particular rights traditionally viewed as founding a public nuisance pleading. Moreover, it’s not necessary to prove, separately from the tort itself, that the defendants’ act or omission is illegal. As the court said, “the tort can stand on its own two feet”.

On the third and fourth questions, however, the court differed from the Court of Appeal. The special damage rule, essentially a rule of standing, requires a private plaintiff to have suffered damage that is different (or “special”) from that suffered by other members of the community.

With the leading authority on the rule dating back to the 19th-century decision of Mayor of Kaiapoi v Beswick (1869) 1 NZCA 192, the court observed that the rule required reconsideration in a 21st-century context. However, contrary to the Court of Appeal, the Supreme Court held Smith’s alleged special damage was tenable because he pleaded damage to coastal land in which he and others he represents claim a legal interest and distinct tikanga interests.

The fact that climate change is being caused by an infinite number of contributors who couldn’t all be brought before the court was, in the eyes of the Court of Appeal, a fatal obstacle for Smith to proceed to trial. On this issue of causation, however, the Supreme Court disagreed.

“Logic and experience suggest the fundamental battleground between the parties lies in this part of the case: causation, substantiality and unreasonableness, and (by association) remedy,” the court said. “How the law of torts should respond to cumulative causation in a public nuisance case involving newer technologies and newer harms (GHGs, rather than sewage and other water pollution) is a matter that should not be answered pre-emptively, without evidence and policy analysis exceeding that available on a strike-out application.”

 

Final comments

The Supreme Court observed that the law of public nuisance has barely been touched, let alone grappled with, by the courts in the past century; the leading New Zealand authority was delivered by the Court of Appeal almost 75 years ago, “and most of the case law cited within it was English”, it said. However, the underlying principles shouldn’t stand still in the face of massive environmental challenges attributable to human economic activity.

“In sum, we do not consider the obstacles are so overwhelming as to meet the standard for strike-out,” the court said. “The consequence, therefore, is that they must now submit to argument, and evidence, at trial. In this area, the common law must develop, if at all, in the fertile fields of trial, not on the barren rocks of a strike-out application.”

Where the primary cause of action remains on foot, strike-out authorities generally discourage striking out any remaining causes of action as a point of principle, unless they meet the threshold for striking out and will likely add materially to costs and hearing time.

The court followed suit – the same facts are alleged in negligence and climate system damage tort. And while all three have theoretical differences, they all share “deeper questions of necessary relationship, proximity, causation, disproportionality and indeterminacy”.

On whether tikanga can help with formulating tort claims, the court emphasised that Smith’s specific loss is partly based on tikanga – an essential question of fact for the trial court to engage with. “This is not a new phenomenon,” the court said, citing two prior cases from the 19th and 20th centuries.

“Whatever the cause of action, the trial court will need to grapple with the fact that Mr Smith purports to bring proceedings not merely as an alleged proprietor who has suffered loss, but as a kaitiaki acting on behalf of the whenua, wai and moana – distinct entities in their own right,” it said. “And it must consider some tikanga conceptions of loss that are neither physical nor economic. In other words, addressing and assessing matters of tikanga simply cannot be avoided.”

 

Applicable principles: strike out application – whether claim should be allowed to proceed to trial – whether claim is founded on seriously arguable, non-trivial harm – common law and statute – whether Parliament has displaced public nuisance tort for climate change – whether defendant’s acts or omissions have substantially and unreasonably interfered with public rights – whether actionable public rights have been pleaded – whether independent illegality is required – whether special damage rule has been met – whether the pleaded harm and defendants’ activities are sufficiently connected – whether remaining causes of action will add materially to costs, hearing time – role of tikanga where pleaded harm invokes tikanga-related interests.

Held: Appeal upheld. Supreme Court refused to strike out Smith’s claim and reinstated it fully.

 

Smith v Fonterra Co-Operative Group Ltd [2024] NZSC 5.

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