NZ Supreme Court opens door to climate litigation against corporates. What does it mean for Australia?

Claire Smith, Emily Tranter and Caitlin McConnel
16 Feb 2024
5.5 minutes
Corporate entities should consider whether they are either at risk of, or have grounds to pursue, claims relating to damage caused by climate change.

If you've been watching climate change litigation in Australia, you'll know that the volume is increasing, although the success rate is mixed, particularly against companies where causation has been difficult to prove. A case underway in New Zealand could however change the calculus for plaintiffs and defendants alike, as it provides a world-first opportunity for the torts of public nuisance, negligence, and a proposed climate system damage tort, to be tested at trial against private companies.

The decision in Smith v Fonterra Co-Operative Group Limited [2024] NZSC 5 will be closely scrutinised by Australian claimants seeking to continue to test the boundaries of climate change responsibility.

The three bases of Mr Smith's claim against emitters

The plaintiff Mr Smith is a Maori elder. His statement of claim against seven companies in the agriculture and fossil fuel industries alleges that in emitting greenhouse gas emissions (GHGs), or facilitating their release via their products, each company has:

  • contributed materially to the climate crisis; and
  • damaged, and will continue to damage, places of customary, cultural, historical, nutritional, and spiritual significance to him and his whānau (a complex concept roughly analogous to an extended family group).

His statement of claim raises three causes of action in tort:

  • public nuisance, alleging that the respondents have interfered with the public rights to health, safety, comfort, convenience, peace, and a safe and habitable climate system,
  • negligence, alleging that the respondents owe a duty of care not to operate their businesses in a way that will cause loss by contributing to dangerous anthropogenic interference in the climate system; and
  • a proposed new tort (climate system damage tort).

This climate system damage tort would be a duty to cease materially contributing to:

  • damage to the climate system;
  • dangerous anthropogenic interference with the climate system; and
  • the adverse effects of climate change;

Mr Smith seeks a declaration of breach of a duty owed, and/or public nuisance. The remedy would be injunctions requiring the respondents to peak their emissions by certain time frames or to cease emitting net emissions immediately.

Common law on climate change "must develop, if at all, in the fertile fields of trial"

Although Mr Smith's claim was initially struck out, the Supreme Court significantly drew upon reports by the Intergovernmental Panel on Climate Change to identify as common ground or indisputable:

  • Climate change threatens well-being and planetary health, and choices made, and actions implemented, in this decade will have impacts both now and for thousands of years.
  • Humans have warmed the atmosphere, ocean and land, principally through the emission of GHGs.
  • Human-caused climate change has caused widespread impacts, losses and damage to nature and people.
  • Vulnerable communities, which historically have contributed the least to climate change, are disproportionately affected.

Against that background the Supreme Court reinstated Mr Smith's statement of claim and held that:

  1. A claim in tort relating to damage caused by climate change is not excluded by statute in New Zealand. Instead, Parliament has "left a pathway open for the common law to operate, develop and evolve (if that is thought to be required in this case) amid a statutory landscape that does not displace the common law by the interposition of permits, immunities, policies, rules and resource consents".
  2. How the law of torts responds to "cumulative causation in a public nuisance case" involving newer technologies and newer harms, such as GHGs, is a matter requiring evidence and policy analysis.
  3. The negligence and climate system damage torts are also to be considered at trial, in circumstances where strike out would be unlikely to produce a material saving in hearing time or other court resources.
  4. Whatever the cause of action, the trial court will need to consider the principles of tikanga Maori, which include conceptions of loss that are neither physical nor economic.
  5. A declaration of unlawfulness may be a valid remedy for tort claims relating to damage from climate change, as the "inconsistency jurisdiction in public law suggests the court should not dismiss the power of purely declaratory relief in private law".

The evolving risk in climate change litigation for Australian corporate entities

Behind the United States, Australia has the second-largest volume of climate litigation cases globally with case numbers continuing to grow.

While a significant percentage of climate litigation to date in Australia has been focused on administrative decisions made by governments, there has been an increasing focus on claims against corporate entities, particularly the large emitters.

In particular, Australian claimants have continued to test the boundaries of established legal principles to extend to climate related harm and responsibility. We have seen this in the growing body of cases extending misleading and deceptive conduct principles to greenwashing claims by shareholders and activist groups (for example, the ongoing Federal Court proceedings Australian Centre for Corporate Responsibility v Santos Limited and Australian Parents for Climate Action Ltd v Energy Australia) as well as test cases dealing with duty of care principles in the context of Commonwealth Ministerial decisions.

Tort-based claims such as negligence, nuisance, and trespass have traditionally faced the technical difficulty of asserting a causal link between corporate action and climate change due to limitations in scientific modelling. However, there is precedent in Australia in establishing such a nexus. For example, in 2019, the court in Gloucester Resources Ltd v Minister for Planning [2019] NSWLEC 7 held (amongst other findings) that "the construction and operation of the mine, and the transportation and combustion of coal from the mine, will result in the emissions of GHGs, which will contribute to climate change", and that "there is a casual link between the project's cumulative greenhouse gas emissions and climate change and its consequences". In addition, in the Sharma case, the Federal Court accepted the applicant's expert evidence in relation to climate science which was not disputed by the respondent.

With the developing sophistication of scientific modelling and increasing assessment of climate-related risks, it is inevitable that claimants will continue to test corporate actions and issues of causation using climate attribution science. This is particularly against the background of the incoming mandatory climate reporting in Australia where, like in New Zealand, corporations will have statutory obligations to disclose climate-related risks in their operations including GHGs metrics and actions to mitigate such risks. The information provided in such disclosures will be closely scrutinised by the community, NGOs, climate activists and shareholders alike, with such likely to be tested in the context human rights. While the need for business decision-making to respect human rights is not yet legally enshrined across Australia, some States now require government to act and make decisions in a way compatible with certain human rights.

In Queensland, the Human Rights Act 2019 (Qld) requires administrative decision makers to have regard to 23 human rights in law, including the right to life, the rights of children, and the rights to enjoy human rights without discrimination. In the matter of Waratah Coal Pty Ltd v Youth Verdict Ltd (No 6) [2022] QLC 21 the court considered whether an application to the Minister for a mining lease and environmental authority to mine thermal coal in the Galilee Basin by a private company should be approved on the merits, in circumstances where a number of objections included that the projected GHGs from the proposed mine would "unjustifiably limit the enjoyment of several human rights". Significantly, the Court held that:

  • there was a rational connection between authorising the applications, and the environmental harm that will be caused by the emission of GHGs when the coal that is mined from the site is burned; and
  • this connection created sufficient causal relationship to establish that the proposed project would limit several human rights, notwithstanding the potential economic benefits.

While the QLD Human Rights Act does not require businesses to consider human rights in the context of making investment or governance decisions, the decision in Waratah Coal demonstrates that:

  • to the extent Queensland Government approvals are required by business to act upon an investment or governance decision,
  • the impact of decision on human rights must be considered by the administrative decision-maker, and could therefore impact private investment or governance decisions made in Queensland.

Further, the new Climate Change (Net Zero Future) Act 2023 (NSW) features several "guiding principles", which will shape the development of policies and action in NSW to address climate change in an Australian first, includes the guiding principle that "action to address climate change should be consistent with the right to a clean, healthy and sustainable environment". The concept of a right to a healthy environment has already been substantially developed in other jurisdictions worldwide, particularly in Europe in connection with the European Convention of Human Rights. The reference in the NSW Climate Change Act to this right does not necessarily impose a corresponding duty on the Government or any other person to act consistently with that right. However, the recognition of the right is an important step towards the framing of corresponding obligations, or at least significant considerations for Government decision-making, and it could influence the direction of climate-related litigation.

Although we can expect Australian courts to continue to defer to domestic legislation and established domestic precedent, the judiciary and claimants will continue to closely monitor the development of Smith v Fonterra and the applicable evidentiary issues raised during trial and the extent to which tortious actions can be established.

As a result, corporate entities should consider whether they are either at risk of the following claims relating to damage caused by climate change:

  • Tort based claims such as negligence, nuisance, and trespass;
  • Claims concerning the nexus between climate and biodiversity;
  • Challenges to emissions-reduction commitments; and
  • Challenges to climate or nature-based reporting, or development/environmental approval decisions, that impede human rights.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.