Smith v Fonterra Co-operative Group Ltd

Smith v Fonterra Co-Operative Group Ltd
Northland, NZ
Court	Supreme Court of New Zealand
Citation(s)	[2024] NZSC 5, [2021] NZCA 552, [2020] NZHC 419
Keywords
Tort, climate damage

Smith v Fonterra Co-Operative Group Ltd [2024] NZSC 5 is a landmark New Zealand tort law case, concerning liability of major fossil fuel polluters for climate damage. The NZ Supreme Court held that polluting companies could be liable in tort to pay damages from global warming and rising sea levels to people whose coastal property is damaged, overturning courts below.

Facts

Michael John Smith stated that he was of Ngāpuhi and Ngāti Kahu descent, and was the climate change spokesman for the Iwi Chairs’ Forum. He claimed customary interests in lands and other resources situated in or around Mahinepua in Northland Region, and argued that various sites of customary, cultural, historical, nutritional and spiritual significance to him are close to the coast, on low-lying land or are in the sea. Smith brought suit against several defendants that operate facilities that emit greenhouse gas emissions, including dairy farms, a power station, and an oil refinery. Smith alleges that the defendants’ contributions to climate change constitute a public nuisance, negligence, and breach of a duty to cease contributing to climate change. He argued for the companies to produce zero net emissions by 2030. He argued the damage was contributed to by a subsidiary of Bathurst Resources Group (NZ's largest coal miner), an oil refinery (owned by ExxonMobil, BP and Z Energy), a power station owned by Genesis Energy LP (held by US asset managers such as Invesco, ALPS Advisors, J. P. Morgan and Chickasaw) and other emitters. Mr Smith did not attempt to bring evidence of these entities’ contribution to climate damage, or set about detailed quantification of loss to him.

Judgments

High Court

The High Court of New Zealand Auckland Registry dismissed first two claims but not the third. It held that there was no case of public nuisance and no negligence, but potentially a duty to cease contributing to climate damage. Wylie J, giving judgment, stated that 'the defendants’ collective emissions are minuscule in the context of the global greenhouse gas emissions’, that ‘reasonable persons in the shoes of the defendants could not have foreseen the damage claimed by Mr Smith’, and it was ‘an unlikely or distant result of the defendants’ emissions’. This was a matter for legislation, because it "would require the Courts to engage in complex polycentric issues, which are more appropriately left to Parliament" and the "matters are well outside the normal realms of civil litigation."

92. ‘The most appropriately placed entity in this country to address the complex and collective problems presented by climate change is the Government. Only it can require the necessary collective action by emitters in this country, and action by the defendants alone, whether by Court order or otherwise, will not avoid the damage claimed.’

...

102. Mr Smith’s has made no attempt in pleading his third cause of action to refer to recognised legal obligations, nor to incrementally identify a new obligation by analogy to an existing principles. This, I suspect, is because such attempt cannot readily be made. The claimed duty of care is not obviously analogous to any existing duty of care and I doubt that its recognition could be described as a gradual or step by step expansion of negligence liability. The public policy reasons I have identified in [98] above in considering whether a duty of care in negligence can extend in the novel way claimed by Mr Smith, seem to me to create significant hurdles for him in trying to persuade the Court that a new legal duty should be recognised.

...

107. The Court would have to consider the extent to which each defendant should be responsible for supply chain emissions for which it is not directly responsible. It would have to guard against double counting between defendants (and entities overseas in the case of BT Mining) and potential future defendants in similar proceedings. The Court would have to select a methodology to apply to carbon dioxide equivalents, so that greenhouse gases could be meaningfully compared when taking into account the different effects of different emissions on global warming...

The Court would have to consider what if any trajectory of net emission reductions each defendant would be required to achieve between 2020 and 2030 (the target date suggested by Mr Smith). The Court would have to determine whether there should be uniform linear progression towards net zero, or whether and how the progression towards net zero should take into account each defendant’s circumstances that might suggest that a particular trajectory would be inappropriate or patently inequitable for one or more of the defendants.

Court of Appeal

The Court of Appeal held that common law requires incremental development, not a radical response. Mr Smith could not identify why the defendants should be singled out. It was accepted none had materially contributed to climate change – and if their contribution were actionable, it would apply to every individual and business: all would have to achieve net zero emissions. It would be a surprising result if every person and business in New Zealand could be brought before the courts for contributing to climate change and therefore restrained from doing so — such a situation would have tremendous social and economic consequences. Additionally, such restraint would have to be enforced and monitored by the courts which would require some sort of emissions offset and trading regime parallel to the statutory regime. Actions would have to be brought on an ad hoc basis which would be inherently inefficient and unjust. Climate change cannot be effectively addressed through tort law. It should only be addressed by the legislature.

According to the court:

every person in New Zealand — indeed, in the world — is (to varying degrees) both responsible for causing the relevant harm, and the victim of that harm.

Supreme Court

The Supreme Court, overturning the Court of Appeal and High Court, held that Smith had standing to pursue the defendants for damage to his property from climate change at trial, and held that there would be no strike out of the various tort actions. It ruled that the claim of public nuisance would not be struck out, and that given the essential element of causation was provable, it was correct to also not strike out the claims in private nuisance and negligence.

Related case law

• Lliuya v RWE AG (2015) Case No. 2 O 285/15 duty of power company in tort to compensate for climate damage
• Urgenda v State of Netherlands (20 December 2019) duty of state to cut emissions in line with Paris Agreement and right to life
• Neubauer v Germany (24 March 2021) 1 BvR 2656/18, duty on state to reduce carbon emissions faster than government required in Act to protect right to life and environment
• Milieudefensie v Royal Dutch Shell (26 May 2021) duty of oil company in tort to cut emissions in line with Paris Agreement and right to life
• McGaughey and Davies v Universities Superannuation Scheme Ltd [2022] EWHC 1233 (Ch), directors' duties to plan to divest fossil fuels in light of Paris Agreement and right to life

See also

• Climate change litigation

Further reading

• McGaughey, E, Principles of Enterprise Law: the Economic Constitution and Human Rights (Cambridge UP 2022) ch 11, 413
• UNEP. Global Climate Litigation Report: 2020 Status Review (PDF). Nairobi, Kenya: UN Environment Programme. ISBN 978-92-807-3835-3. Retrieved 2024-03-06. Job no: DEL/2333/NA. See pages 22, 38, 42, 44. Note document misspells "Fronterra".