Will ‘huge’ court decision spur Fonterra, Genesis and Z Energy to go green?

Thursday, 8 February 2024

ANALYSIS: Seven of our biggest polluters will have to defend their continued use of fossil fuels and methane-belching livestock in court, after the Supreme Court unanimously sided with an activist.

It’s a “hugely significant win”, Greenpeace says.

For the years lawyers will battle it out in the lower and upper courts, the polluters will have the prospect of a declaration that their activities are unlawful hanging over them.

It took nearly five years from the time Mike Smith (Ngāpuhi and Ngāti Kahu) filed his claim against the polluters in 2019 to reach a decision that the case would proceed to a full hearing, with expert evidence and witnesses.

In that time, the defendants – coalminer BT Mining, Channel Infrastructure (which stores imported oil), farming company Dairy Holdings, dairy giant Fonterra (which burns coal to dry milk), energy company Genesis (which burns coal and gas to create electricity), NZ Steel (which also burns coal) and petrol and diesel retailer Z Energy – attempted to have the case struck out.

The High Court partially agreed with the defendants. The Court of Appeal fully agreed, striking out the case in full.

However, the Supreme Court did the opposite - with the highest court in the land ruling to allow the case to proceed to trial, and, allowing Smith to make arguments on multiple grounds.

At the full hearing, the Māori and climate rights campaigner will argue that, by contributing to climate change, the seven companies with some of the country’s largest carbon footprints are in breach of two well-established common law principles, plus a novel duty.

Wednesday’s ruling is likely to have frustrated the defendants – Genesis Energy, for example, confirmed its disappointment in a statement.

The Supreme Court envisions the case “may yet return to us”. As the highest court, the justices will have ultimate say if Smith and the companies are prepared to fight to the end.

Presenting the ruling, Justice Stephen Kós stressed it “is not an assessment that the claim is bound to succeed at trial”. Simply, the justices weren’t convinced the case was destined to fail.

Commenting on the ruling, DLA Piper partner Daniel Street said traditionally the courts were “slow” to strike out cases where the law might evolve.

The trial will put a spotlight on the seven companies’ plans to use fossil fuels and methane-burping livestock in the coming years and decades, compared to the action that scientists model is required to avoid the worst impacts of climate change.

The eventual hearing could take “many weeks”, Street said.

Before it, Smith’s lawyers will be able to request access to a range of internal company documentation.

Any disclosed documents won’t be available to the media or members of the public attending the trial, Street said. But the witnesses and experts who will appear as part of the hearing might reference the internal information in their statements.

Smith’s lawyers will be able to cross-examine any company executives that appear as witnesses, Street said.

The new ruling highlights the legal issues that have caught the Supreme Court justices’ attention.

They were open to the idea that the courts – and the common law that allows one person or business to sue another – have a role to play in dealing with the emissions causing climate change. That was a big departure from the Court of Appeal, which declared the contrary.

The ruling said a company could be complying with all laws and a court could still find it was breaching public rights.

The case will have consequences for any Kiwi company whose carbon footprint could be classed as “substantial and unreasonable”. The Supreme Court justices challenged the argument that the large number of big emitters in the world meant that Kiwi polluters have no responsibility for their contributions.

In the pre-trial session and the judgement, the Supreme Court justices also expressed interest in the type of remedy they might ultimately provide.

Smith is seeking a court order, or injunction, for the companies to stop polluting activities or to rapidly transition to green energy and lower-impact agriculture. That might require the court to monitor companies’ progress.

Yet the justices were more open to Smith’s other request for court declaration that the seven emitters were acting unlawfully.

It’s rare for a declaration to be the sole remedy in a claim against a private company, Street said. It’s more common in cases against the Government, he added.

Do companies care about the prospect of such a public shaming? “You’d have to ask the businesses involved,” Street said.

A statement that Fonterra or Z Energy’s business is unlawful would do no more than send a message, a lawyer for the defendants argued last year.

Genesis doused the idea that the court proceedings would spur a quicker transition, stating: “We do not believe this action will accelerate the measures or commitments being taken by the defendants”.

But Smith hoped the court action – in addition to public pressure and the overwhelming evidence that climate change is already hurting people and planet – would push the companies to act.

“It’s got to be real action… We shouldn’t be nervous about that, we should lean in,” Smith said.

Although he was convinced about the need for immediate climate action, Smith said he “wasn’t overly confident” the court would side with him.

He thanked his legal team – who are voluntarily representing him – and is bracing for many more years of court battles. “We’ve been working on these issues since 1992 and the first Earth Summit… But we don’t have a lot of time.”

Greenpeace activist Russel Norman also hopes the “hugely significant win” would encourage industries to clean up their act.

“Every country, industry, and government must do all that it can to reduce emissions right now. This ruling should be a strong signal that there are no exceptions.”