After almost 18 months of deliberation, the Supreme Court has issued its landmark decision in Smith v Fonterra and has allowed all claims against a number of major corporates to proceed to trial. In finding that the Court of Appeal was wrong to strike out claims in tort against companies responsible for greenhouse gas emissions, the judgment will shape the future of climate change litigation in Aotearoa New Zealand.

Key takeaways

• The Court of Appeal’s decision that Mr Smith’s claims were not legally tenable has been resoundingly overturned. All three claims have been reinstated and are allowed to proceed to trial.
• The Court’s refusal to strike out is not an assessment that the claim will succeed at trial. At this point, the Court has ruled simply that the claims are not bound to fail. The Court demonstrated a reluctance to strike out a claim that is novel, if it is founded on seriously arguable non-trivial harm - even if attribution to individual respondents remains difficult. Liability will now be a matter for the High Court to determine, following consideration of complex legal issues and factual and expert evidence. 
• The Supreme Court’s judgment focussed primarily on the claim of public nuisance (being that the defendant companies are substantially and unreasonably interfering with rights to public health, safety, comfort, convenience and peace). Whether or not they are actually liable in nuisance remains a fundamental issue for trial, with the battleground between the parties focussed on causation, substantiality and reasonableness, as well as what - if any - remedy Mr Smith should be granted.
• The Court said that there was no need to consider the other two tort claims - there was no efficiency in striking them out given that the public nuisance tort was being reinstated. As such, the claim for negligence and the novel climate system damage claim will also go through to trial. 
• As the harm claimed by Mr Smith invoked tikanga-related interests, the High Court will also need to address and assess matters of tikanga at trial. In reaching this view, the Supreme Court has further cemented the role of tikanga as a fundamental aspect of the laws of New Zealand.

Background

In 2019 Michael Smith, an elder of Ngāpuhi and Ngāti Kahu and a climate change spokesperson for the Iwi Chairs Forum, issued High Court proceedings against seven large New Zealand companies^[1]. Each of the defendants is either involved in an industry which releases greenhouse gases into the atmosphere or manufactures or supplies products which release greenhouse gases when they are burned. Mr Smith claims that the climate effects of these activities have caused damage to his whenua and moana and that the defendants are liable in negligence, nuisance and for a breach of a previously unrecognised legal duty not to cause climate harm. He seeks declarations to this effect as well as orders requiring the defendants to reach net zero emissions by 2030.

This proceeding is the first in which the well-established torts of negligence and public nuisance have been used in climate change litigation in New Zealand. This, together with the request that the courts recognise an entirely new tort, created a raft of complex legal issues and all seven defendants asked the court to strike out the proceedings before trial on the basis that they lacked a reasonably arguable legal basis.

The High Court was the first to consider the issues. It struck out the claims in nuisance and negligence, on the basis that these longstanding torts could not be re-shaped and stretched in the way pleaded by Mr Smith. However, it was not prepared to rule out the new duty against climate harm and held that that claim should be tested at a full trial.

Both Mr Smith and the defendants appealed the High Court decision. The Court of Appeal resoundingly found in the defendants’ favour, striking out all three claims [see our report here]. There were four main strands to its reasoning.

• Allowing the claims to proceed would potentially open the floodgates to unlimited liability for all emitters, even individuals.
• Tort law is concerned only with unlawful activities. In this case, there was nothing inherently unlawful in the activities of the defendants.
• Mr Smith was seeking the design of a complicated regulatory regime to manage emissions, which could not be achieved through the court process. Such regimes are the domain of Parliament.
• Bringing legal proceedings against individual sub-sets of emitters on an ad hoc basis was not an efficient way of dealing with climate change. It was likely to result in arbitrary outcomes and ongoing litigation that lasts many years. 

Mr Smith appealed the judgment to the Supreme Court. The issues raised were of such significant legal and public interest that the Court gave leave to the Human Rights Commission, Lawyers for Climate Action New Zealand Inc and Te Hunga Rōia Māori o Aotearoa to make submissions, including on the applicability of tikanga in the development of tort law in the context of climate change.

The Supreme Court’s decision

The Supreme Court’s judgment is unanimous. It has overturned the strike-out decision of the Court of Appeal and reinstated all aspects of Mr Smith’s statement of claim in the High Court.

The starting point for the Supreme Court was the principle that striking out claims before trial is only appropriate where a case is bound to fail. The Court found that the threshold was not met in this case. It also rejected the argument that the existence of statutes dealing with climate change (notably the Climate Change Response Act 2002) should displace the role of tort law in the realm of climate change. Rather, the legislation left a pathway open for the common law to operate and evolve.

As to the three torts at issue the Court focussed on public nuisance, which is concerned with harm caused by a substantial and unreasonable interference with public rights. In finding that the public nuisance claim was not bound to fail, the Court focussed on four issues:

• Actionable public rights pleaded: Mr Smith’s claim pleaded five public rights - to health, safety comfort, convenience and peace. These were sufficiently related to the rights traditionally relied on in public nuisance claims.
• Independent illegality not required: The Court held that it is not necessary for the defendants’ actions or omissions to be inherently unlawful. The tort can stand on its own two feet and apply to actions that are otherwise legal.
• “Special” damage: Traditionally, a private claimant (here, Mr Smith) had to have suffered “special” damage in order to succeed in nuisance. The Court held that it is time for this requirement to be reconsidered. Regardless, Mr Smith’s claim to special damage was tenable as he had pleaded harm to coastal land and tikanga-based interests.
• Causation: The fact that climate change was caused by an infinite number of contributors, who could not all be brought before the court, was a fatal obstacle for the claim in the Court of Appeal. The Supreme Court disagreed, finding that the relevance of cumulative causation in a public nuisance case is a matter for full trial and (potential) appeal. This will be a hard fought issue at trial. For example, the Court noted that New Zealand’s emissions are a fractional proportion of the global total and historic emissions are substantially contributory, noting that it will be a question for the trial whether New Zealand’s law should sanction emissions here, given this state of affairs. 

Having reached the above findings on public nuisance, the Court held that it was unnecessary to traverse the findings of the High Court and Court of Appeal on the other two claims by Mr Smith, as striking them out would not result in any significant saving in court resources for a trial. Those claims - in negligence and for a novel breach of duty not to cause climate harm - will also proceed to be heard by the High Court.

The Court concluded its judgment with remarks on tikanga. It noted that as Mr Smith’s claimed loss is partly-tikanga based, the trial court will have to engage with tikanga, including conceptions of loss that are neither physical nor economic. The approach outlined in the Supreme Court’s own decision in the Peter Ellis judgment will assist with this analysis. The Court’s remarks leave no doubt that tikanga will play an ever-increasing role in New Zealand litigation.

What does this mean for you?

There can be no dispute that the Supreme Court’s judgment is highly significant and sets an important precedent in climate-related litigation.

However, while the Court has ruled that Mr Smith’s claims have a sufficient legal basis to go to a full trial, they have not been assessed substantively. As the Supreme Court notes, the outcome will depend on evidence, as well as an analysis of complex policy factors and consideration of human rights obligations.

The nature of any remedy to be granted to Mr Smith will also be the subject of intense argument. The Supreme Court has remarked that Mr Smith may face obstacles obtaining the order he seeks requiring the defendants to cease their emissions-related activities and has pointed out that the power of declaratory relief (a declaration by the court as to the unlawfulness of the defendants’ actions) cannot be dismissed.

Overall, the judgment will be met with enthusiasm and optimism by climate activists, not just in New Zealand but around the common law world. However, until the High Court hears full argument and evidence, the real significance of the decision, and its ramifications for corporate emitters, remains unknown. Given the number of parties and complexity of issues the High Court trial and subsequent judgment is likely to be some time away and, regardless of result, will almost certainly be the subject of appeals.

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If you’d like to discuss the potential impact of this decision on your business, please get in touch with one of our experts.