Clifford Chance

The Supreme Court of New Zealand has unanimously held that claims in tort relating to damage caused by climate change can proceed to a full trial, overturning the Court of Appeal's decision to strike out the claim.

Key takeaways

• The first step on a long road: The decision is an important development in climate litigation in common law jurisdictions, but the merits of the underlying claim remain untested. The Court emphasised that while the plaintiff "will now get his day in Court" its decision to decline to strike out the claim is "not a commentary on whether or not the claim ultimately will succeed."
• The Court searches for a balance between a 'flawed' and 'inspired' development of the law in response to climate change: The Court recognised in principle the potential for the common law - in particular the tort of public nuisance - to evolve in response to environmental challenges such as climate change. In doing so, the Court drew parallels with the evolution of English common law in response to the impacts of the industrial revolution, describing the common law's response as a mixture of the "flawed" and the "inspired" while characterising climate change as engaging "comparable complexities" to some of those which arose in England in the industrial revolution "albeit at a quantum leap scale enlargement."
• The Court focuses attention on the tort of public nuisance: While the plaintiff's claim involved three alleged torts (negligence, public nuisance, and a novel tort of breach of duty), the Court's substantive analysis focused almost exclusively on the tort of public nuisance. The Court emphasised that "courts in New Zealand have barely touched (let alone grappled with) the law of public nuisance in the last century" and in this context it was appropriate that "the common law must develop, if at all, in the fertile fields of trial, not on the barren rocks of a strike out application."
• The common law is not incapable of addressing "tortious aspects of climate change": In response to the Court of Appeal's conclusion that "climate change simply cannot be appropriately or adequately addressed by common law tort claims", the Court held that while "it may indeed be beyond the capacity of the common law to resolve climate change in fact, but we are not presently convinced that the common law is incapable of addressing tortious aspects of climate change." The Court therefore found that common law tort may have a role in addressing climate change harm and that this was not necessarily to be left to Parliament and Government.
• Crucial factual and legal questions - including issues of causation and loss/damage - remain to be tested at trial: The Court assumed for the purpose of the strike-out application that the factual question of whether the emissions allegedly attributable to the defendant's activities did in fact harm Mr Smith. However, the Court recognised that this question of causation will be one of the "fundamental battleground[s]" when the parties go to trial. Demonstrating loss or damage has been a hurdle in other climate change cases internationally, most notably Luciano Lliuya v RWE AG in Germany and Minister for the Environment v Sharma & Ors in Australia. The Court also recognised that Smith "may face obstacles" obtaining cessation of emissions by way of injunction, but observed that the equitable nature of the remedy allowed for a "substantial measure of calibration of remedial impact".

Background:
Mr Smith, an elder of Ngāti Kahu and climate change spokesperson for the Iwi Chairs Forum brought a claim against seven New Zealand companies (operating in sectors including agriculture, oil and gas, coal, steel, and mining) for their alleged contributions to climate change. Smith alleged that the companies' activities and the associated risks and losses arising from climate change, caused or will cause him loss through their activities.

Smith sought two remedies from the court: first, a declaration that the respondents unlawfully caused or contributed to the effects of climate change or breached duties to him; and second, injunctions mandating them to reduce emissions by specific levels in 2030 and 2040, and ultimately to net zero by 2050.

The defendants each applied to strike out the claim on the basis that the claim gave rise to no reasonably arguable cause of action.

In its October 2021 decision, the Court of Appeal of New Zealand rejected the three causes of action in tort set out by Smith and held that "…the issue of climate change cannot be effectively addressed through tort law. Rather, this pressing issue calls for sophisticated regulatory response at a national level, supported by international co-ordination."

Mr Smith successfully appealed to the Supreme Court, which published its long-awaited decision on 7 February.

Mr Smith's Claim:

Mr Smith's case involved three claims in tort:

1. Public Nuisance: Mr Smith claims that he will suffer harm from the effects of dangerous anthropogenic interference with the climate system, including by Green House Gas emissions associated by the defendants' business operations, and that this harm would constitute a public nuisance.
2. Negligence: The second claim is that the seven defendants owe to Mr Smith, and persons like him, a duty to take reasonable care not to undertake business operations in such a way so as to cause him loss by contributing to climate change.
3. Proposed climate system damage tort: The final alternative cause of action is a novel, proposed tort regarding a legal duty to stop materially contributing to damage to the environment and the effects of climate change.

Judgment:

The Court overturned the Court of Appeal and the case will now proceed to a full trial in the High Court. The Court emphasised that its decision concerned only whether the Court of Appeal erred in striking out the case brought forward by Mr Smith on the basis that it was so untenable that it had no prospects of succeeding.

The judgment focused primarily on Mr Smith's claim in nuisance, and specifically on four questions:

1. Are actionable public rights tenably pleaded? The Court agreed with the Court of Appeal that the rights pleaded by Mr Smith all reasonably aligned with or were sufficiently related to the particular rights conventionally identified as necessary for a public nuisance pleading.
2. Is independent illegality a requisite of the tort of nuisance? The Court concluded that public nuisance in New Zealand does not require that an act or omission complained of be independently unlawful, agreeing with the Court of Appeal.
3. How should the 'special damage rule' be applied, and is it satisfied? The 'special damage rule' requires the plaintiff in a public nuisance claim to demonstrate that the damage they have suffered is different from that suffered by other members of the public more generally. In this sense, the Court characterised the rule as one of standing, and noted that the New Zealand courts have in other contexts (such as public law) taken a liberal approach to questions of standing in cases involving the public interest. In that context, the Court considered that the application of the special damage rule itself requires reconsideration in a 21st century context - and so was appropriate for review in the context of full evidence and associated argument. In any event, the Court found that Mr Smith had a tenable claim for trial on the basis that the pleaded impacts on coastal lands, fishing and cultural interests set out in Mr Smith's claim are different from the "distributed and different" effects of climate change on humanity generally.
4. Is there a “sufficient connection” or causation between the pleaded harm and the defendants’ activities? The Supreme Court, again departing from the Court of Appeal's conclusion, cited several early English authorities suggesting that, in instances of public nuisance, a defendant could be held accountable for its role in a shared interference with public rights. On this theory, liability would not be contingent on 'but for' causation - if the nuisance has arisen cumulatively, then each individual may be liable for its contribution. Importantly, in the context of a strike out application, the Court was to assume that the emissions resulting from the defendants’ activities caused harm to the land and other interests claimed by Mr Smith.

A further element of the decision - which is specific to the New Zealand context of the case - is the relevance of tikanga Māori (a concept which - in broad terms - encompasses Māori customary practices and behaviours). The plaintiff asserts that tikanga is relevant to several aspects of the claim, including through influencing the relevant legal tests to be applied, and in the assessment of the alleged damage suffered. While the substantive implications of tikanga for the case will be matters to be determined at trial, the Court concluded that "addressing and assessing matters of tikanga simply cannot be avoided."

Having allowed the claim to proceed to trial on the basis of public nuisance, the Court also allowed Mr Smith's claims on negligence and the novel "climate system damage tort" to proceed, on the basis that striking out such claims was unlikely to produce a material saving in hearing time or other court resources.

What happens now?

The case will now go back to the High Court for trial, where the claimant will be able to present all three causes of action substantively. It is likely that the case will centre around the issues of causation, substantiality and unreasonableness of the alleged interference and remedy.

While aspects of the judgment are specific to the New Zealand context, much of the analysis is likely to be viewed with interest in other parts of the common law world. This is particularly the case given the parallels drawn by the Court to early English cases on public nuisance. In this regard, we observe:

• Australia: The tort of public nuisance is a criminal offence and a civil tort. In a civil claim, the act complained of need not be an unlawful act, rather the tort is concerned with the effect of the act. A private person may bring an action and is required to prove an interference with public rights that is sufficiently widespread to constitute a 'public' nuisance and that 'particular damage' has been suffered. Cases in Australia have dealt with public nuisances in the form of pollution and obstructing a waterway but not climate change. It is a cause of action that may be amenable to class action proceedings.
• USA: Public nuisance in the United States is a matter of individual state law, which is subject to pre-emption by federal statute. This entails complex and case-specific analysis. Several state climate-related cases involving public nuisance claims are currently pending.
• UK: Although there is significant convergence between New Zealand and English common law, differences do exist, some of which were highlighted in this judgment. However, given the nature of claims being brought by climate activists in the English High Court in recent years, the decision - and the substantive proceeding which will now follow in the New Zealand courts - will be viewed with significant interest by groups seeking to test the boundaries of English law in relation to climate change.