Emergent Challenges to Private Sector Enterprise and Public Policy: Smith v Fonterra

The Supreme Court has allowed claims of ‘climate system damage’ to proceed to trial, in a decision highlighting the ongoing role of common law in regulatory frameworks. Whatever the outcome of this particular claim, the Court’s reasoning suggests proceedings of this type may now become a tool to challenge alleged systemic harms resulting from not only private sector enterprise but public policy.

The plaintiff, Michael Smith, alleges that the seven defendant companies are each responsible for significant greenhouse gas emissions that damage his whenua and moana to the prejudice of him and his whānau, in a manner inconsistent with tikanga Māori.

In reversing the lower courts’ decisions and allowing Mr Smiths’ claims in negligence, public nuisance, and a novel ‘climate system damage’ tort to go to trial, the Supreme Court has found it is possible Mr Smith will be able to substantiate that claim. As such, applying long-standing common law principles, the Court held it is appropriate a trial be held to allow the evidence to come out.

Similarly, the Supreme Court confirmed the well-established principle that tort claims are not prohibited in areas regulated by statute unless the statute expressly or by “necessary implication” bars the claim.  The Court’s reasoning suggests that will seldom be the case, even where the statute in question – such as the Climate Change Response Act 2002 – details a comprehensive regulatory framework dealing with polycentric policy considerations.

If nothing else, the decision in Smith v Fonterra & Ors reinforces that compliance with a statutory scheme does not necessarily preclude activities injuring individual rights being challenged in tort, confirming the need to consider common law rights and interests as well as statutory obligations in analysing legal risk.

Even more potentially significant is the Court’s observation that it may be the trial court in Mr Smith’s case may now go on to find – subject to appropriate evidence being led at trial – that “tikanga [Māori] conceptions of loss that are neither physical nor economic” can give rise to actionable losses underpinning tort claims.

Should that result, it would significantly increase the scope for claimants like Mr Smith to pursue private law injunctive relief as a means of seeking to restraint private sector enterprise they believe perpetuates systemic harm to tikanga (and other intangible cultural) interests.

Public sector agencies could similarly find themselves facing claims that they have breached duties to avoid causing harm to tikanga interests. That may permit challenges requiring courts to consider the substance of public policy in a way not usually permitted in judicial review proceedings. The High Court’s deferential approach to reviewing the reasonableness of the Climate Change Commission’s recommendations to government in the 2022 Lawyers for Climate Action NZ Inc case demonstrates the limitations those looking to use judicial review to challenge policy face.

Any such negligence claims would likely face a strike-out application under current case law on Crown immunity; most notably the Court of Appeal’s 2020 Strathboss decision.  The High Court has in fact struck out a separate claim by Mr Smith (Smith v Attorney-General) in which he makes precisely that type of allegation regarding the government’s climate policy.  Mr Smith’s appeal of that decision is currently before the Court of Appeal.

The Strathboss decision, in large part, rested on the Court of Appeal’s accepting concerns that imposing tort duties on public bodies would give rise to unacceptably indeterminate liability. In Mr Smith’s case, the Supreme Court appeared less convinced by arguments of that type.  

Given that, and the High Court’s decision in Smith v Attorney-General being based in large part on the Court of Appeal’s now-reversed reasoning in Smith v Fonterra & Ors, there is a reasonable likelihood of Mr Smith’s appeal against the strike-out of his claim against the government succeeding. That would doubtlessly encourage those looking to use private law tort actions to influence public policy, potentially significantly increasing the scope for challenges to local and central government decisions.

Article written by Sebastian Hartley, Richard Belcher and Tim Bain.

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