Smith v. Fonterra Co-Operative Group Limited - Other

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Smith v. Fonterra Co-Operative Group Limited - opinion

opinion

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Smith v. Fonterra Co-Operative Group Limited - appeal

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Smith v. Fonterra Co-Operative Group Limited - judgment

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Smith v. Fonterra Co-Operative Group Limited - complaint

Filing Year For Action

Michael John Smith (Ngāpuhi, Ngāti Kahu), climate change spokesperson for the Iwi Chairs' Forum, a Māori development platform, filed a case against seven high-emitting New Zealand companies in the agriculture and energy sectors: Fonterra Co-Operative Group Ltd , Genesis Energy Ltd, Dairy Holdings Ltd, New Zealand Steel Ltd, Z Energy Ltd, Channel Infrastructure NZ Ltd and BT Mining Ltd. Mr Smith claimed that the defendants' actions constituted (1) public nuisance, (2) negligence, and (3) breach of a duty to cease contributing to climate change.

On March 6, 2020, the High Court of New Zealand struck out the first two causes of action, but allowed the third to proceed. The court concluded that Mr Smith could not demonstrate public nuisance because the damage claimed was neither particular to him, nor the direct consequence of the defendants' actions. The court further reasoned that showing a public nuisance was difficult given that the defendants are complying with all relevant statutory and regulatory requirements. The court determined that Mr Smith's negligence claim must fail because he had not shown that the defendants owed him a duty of care, concluding that the damage claimed was not reasonably foreseeable or proximately caused by their actions.

The High Court declined to strike the third cause of action, which alleged that the defendants had a duty to cease contributing to climate change. The High Court found that there were "significant hurdles" for Mr Smith in persuading the court that this new duty should be recognised, but determined that the relevant issues should be explored at a trial. For instance, the court said perhaps the special damage rule in public nuisance could be modified, and climate science will result in increased ability to model possible effects of emissions. The High Court warned, however, that it would likely be unable to provide the injunctive relief that Mr Smith seeks, which would require a "bespoke emission reduction scheme."

Following the decision of the lower court, Mr Smith appealed the decision to strike out the first two causes of action, while the defendants cross-appealed the court's decision that the third cause of action should proceed to trial. On October 21 2021, the Court of Appeal dismissed the appeal submitted by Mr Smith and upheld the cross appeal. The Court of Appeal held that tort law was not the appropriate vehicle for dealing with climate change, noting that "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" ([18]). The Court of Appeal held that a determination that the conduct of the respondent companies was unlawful would introduce an "ad hoc way of addressing climate change” and that it “is likely to result in arbitrary outcomes and ongoing litigation that lasts many years” ([27]), with climate change being a “striking example of a polycentric issue that is not amenable to judicial resolution” ([26]). The Court of Appeal did note that the courts have some role in climate action: "in holding the government to account", however “it is not the role of the courts to develop a parallel common law regulatory regime that is ineffective and ineffective, and likely to be socially unjust” ([35]). 

Mr Smith applied for leave to bring an appeal to the New Zealand Supreme Court. On 31 March 2022, the Supreme Court granted leave to appeal, on the question of whether the Court of Appeal was correct to dismiss the appeal and allow the cross-appeal. The appeal was heard in the Supreme Court in August 2022. 

On 7 February 2024, the Supreme Court released its decision. The Supreme Court unanimously allowed Mr Smith’s appeal, and reinstated his statement of claim. The Supreme Court held that the application of orthodox, long-settled principles governing strike out applications meant that Mr Smith’s claim should be allowed to proceed to trial, rather than being struck out preemptively. 

The Supreme Court held that there was no basis to conclude that the law or torts (and in particular, public nuisance) in the realm of climate change in Aotearoa New Zealand had been displaced by statute ([101]). Neither the Climate Change Response Act 2002 nor the Resource Management Act 1991 (New Zealand’s primary environmental legislation) had that effect. Rather, Parliament had left a pathway open for the common law to operate, develop and evolve amid that statutory landscape ([101]). 

Public nuisance claim
Regarding the public nuisance claim, and whether it was bound to fail, the Supreme Court identified four specific questions to better identify whether the claim could reasonably succeed. 

First, the Supreme Court analysed whether Mr Smith had plausibly identified public rights that were being interfered with. The Court observed that the rights pleaded by Mr Smith (rights to public health, public safety, public comfort, public convenience and public peace) fell tenably within or had sufficient relation to the particular rights traditionally identified as providing foundation for a public nuisance pleading ([145]). 

Secondly, the Court affirmed the Court of Appeal’s finding that public nuisance need not involve otherwise illegal activity - it does not require the act or omission complained of to be independently unlawful ([147]). 

Third, the Supreme Court considered the ‘special damage rule’, which requires a private plaintiff to have suffered “special damage” to bring a public nuisance claim. It is a rule of standing. The Supreme Court noted whether this rule should remain part of the law ([151]), however even if it did, Mr Smith had a tenable claim to meeting its present requirements because of damage to coastal land in which he, and others he represents, claim legal and distinct tikanga interests ([152]).

Finally, the Court considered whether causation is required for public nuisance. While the Court of Appeal considered that “climate change simply cannot be appropriately or adequately addressed by common law tort claims”, the Supreme 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, at this stage of the proceeding, addressing only strike out, that the common law is incapable of addressing tortious aspects of climate change” (154]).  The Supreme Court referred to a number of authorities which suggested it was arguable that, in the case of public nuisance, a defendant must take responsibility for its contribution to a common interference with public rights, and that its responsibility should not be contingent on the absence of co-contribution or be in effect discharged by the equivalent acts of others ([164]). The Supreme Court noted that the causation problems presented by Mr Smith’s claims were fundamentally similar to other public nuisances involving multiple contributors, such as industrial revolution air and water pollution cases, stating that “climate change engages comparable complexities, albeit at a quantum leap scale of enlargement” (at [157]). 

Having found that Mr Smith had shown enough to show a reasonable public nuisance case, the Court permitted the two remaining causes of action - negligence and the proposed novel climate duty, to also proceed to trial. On the potential role of tikanga, the Court held that whatever the cause of action, addressing and assessing matters of tikanga at trial could not be avoided ([188]). 

The case was referred back to the High Court to proceed to trial. 

On 16 April 2025, the High Court released a decision regarding interlocutory applications. The first, by the first to third defendants, sought that the Court determine whether, as a matter of principle, if it is properly arguable that the applicants are entitled to join to the proceeding as third parties, overseas entities falling within any of the following three categories: overseas commercial emitters, overseas government emitters, and overseas non-profit emitters (“Third Party Application”).

Further, the first to fifth defendants sought orders that the proceedings be declared a “universal representative proceeding”, with all defendants being sued on behalf of all persons with the same interest in the subject matter - namely, all New Zealand entities which, “as part of commercial profit-making enterprises”, produce GHG emissions, or supply or produce products that, when used, produce GHG emissions, and whose emissions “are significantly greater than the emissions of an ordinary New Zealand citizen” (“Universal Representative Application”). 

Regarding the Third Party Application, in declining the application, the High Court found that granting the application would be inconsistent with the objective of the High Court Rules - the just, speedy and inexpensive determination of any proceeding - as well as the fundamental principle of access to justice ([49]). The inevitable consequence of joinder third parties would be complexity, expense, and delay - and a very high likelihood that the trial scheduled for April 2027 would not proceed.

Turning to the Universal Representative Application, the High Court found that the Supreme Court’s decision had clearly anticipated and proceeded on the assumption that Mr Smith was proceeding against particular defendants ([60]), with the clear effect of the Supreme Court’s judgment being that Mr Smith is able to bring a claim against only the named defendants. Instead, the Universal Representative Application effectively sought to relitigate the same issue ([61]). Further, the principle of access to justice would not be enhanced by making a representative order ([74]). 

On 17 June 2025, a further decision was released on further interlocutory applications by BT Mining (sixth defendant) and Mr Smith. 

The High Court declined an application by the sixth defendant, BT Mining, seeking to hear two questions before the substantive trial. BT Mining contended that it is in a unique position, as it is the only defendant sued for not having carried out any relevant GHG-emitting activity of its own, and whether the specific GHG-emitting activity complained of occurs in an overseas jurisdiction. While the Court noted there may be some merit in this, there was ultimately no clear demarcation between the claims against BT Mining and the other defendants ([13]). The Court also declined an application from BT Mining for security of costs against Mr Smith of $150,000 ([21]). 

The Court also declined Mr Smith's application to split the trial into two phases (the first focusing on liability, the second on relief) but noted that it may be appropriate to revisit at a later stage ([45]). 

Finally, the Court declined protective costs orders sought by Mr Smith that costs lie would lie where they fall within parties - including protection for any third-party funder about the proceedings that does not stand to financially benefit nor control the proceeding in any way (“Pure Funder”, for example, charities with an environmental protection purpose). This application was made particularly in light of the Australian decision, Munkara v Santos NA Barossa Pty Ltd (No 4). 

In relation to third-party funders, Andrew J differentiated from Munkara, as in that case there was a focus on the improper conduct by the solicitors for the applicants, and it was notably not against third-party funders ([68]). Importantly, Andrew J noted that it would be highly unlikely for a costs award to be made against a Pure Funder in New Zealand, even if they were ideologically motivated ([69]). The Court acknowledged that there is a fundamental issue of access to justice. The complaint is not merely about inequality of arms - it is essential that the plaintiff be able to access the legal representation and expert witnesses that a complex and novel case, with all its implications requires, especially in light of the 15 week hearing scheduled ([74]). However absent any named entity/individual and some detail about the funder, the Court was not in a position to assess that they are “pure”, which was fatal to present application. 

In terms of an order as it related to Mr Smith personally, the Court found that the threshold of necessity and exceptional circumstances was not made out, as Mr Smith had made it clear that he would continue absent the order ([76]). The Court did note that the decision to decline the PCO applications was without prejudice to Mr Smith's making a further application about an identified third-party funder ([77]). 

The substantive hearing has been scheduled for 15 weeks commencing in April 2027.

Smith v. Fonterra Co-Operative Group Limited