News

Climate change litigation – the new cost of “going green”

27.10.2009

Christopher Hewitt, Solicitor

Two events which took place in courts at opposite ends of the world in September of this year have accelerated the prospects for expensive “climate change litigation” against carbon-emitting companies and government regulators.

In a first for Australian environmental law, Justice Pain of the New South Wales Land and Environment Court has ordered, in the case of Blue Mountains Conservation Society v Delta Electricity,1 that the amount of any costs order against the Blue Mountains Conservation Society in its proceedings against Delta Electricity for allegedly releasing toxic water into a Sydney drinking water catchment would be capped at $20,000. The Court did so on the basis that the Society’s claim was “in the public interest”. Accordingly, Delta Electricity will be unable to claim more than $20,000 against the plaintiffs for its legal costs, even if it wins the case.

Also, later in the month, a US Appeals Court in State of Connecticut et al v American Electric Power Company Inc et al2 overturned a lower court’s dismissal of a case in which eight US States had brought a public nuisance claim against a group of US power companies. The lower court had ruled that the claim, that greenhouse gases emitted by the fossil-fuel power plants were causing serious harm to natural resources and to the health of citizens, was a “political question”, better dealt with by the Federal legislature. However, the Appeals Court rejected that ruling and reinstated the original proceedings.

These two cases come on the heels of the 2007 case of Massachusetts v Environmental Protection Agency.3 In that case, the US Supreme Court decided that twelve States and several municipal cities had standing to bring an action against the US Environmental Protection Agency (“the EPA”) to force it to regulate greenhouse gas emissions under the Clean Air Act. The plaintiffs relied on the statutory duty of the EPA to establish emission standards for “any air pollutant” produced by motor vehicle engines “which cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare”.

The significance of these US cases is that they have opened a new avenue for litigants to undertake litigation against regulators and alleged perpetrators of climate change. This movement may be compared to the way that US courts began accepting litigation against tobacco companies. Australian courts followed suit, and proceedings against tobacco companies in Australia became commonplace. Massachusetts v Environmental Protection Agency has attracted a great deal of interest in the US, as it has been seen by some as a sign that the Supreme Court may be called on to decide whether climate change is “man-made” and to assign blame to parties for the affects of climate change.

What is “climate change litigation”? Are cases like these a warning sign for carbon emitting companies and governments in Australia, or can they be ignored?

New legislation is important, but old law can be just as powerful

Australian industry has been carefully watching the development of carbon pollution reduction scheme legislation in the Australian Parliament. Clearly, industry needs to be prepared for the responsibilities and liabilities that such a scheme will bring, like those involved with an emissions trading scheme.

However, it would be remiss for Australian companies and governments to ignore other potential environmental liabilities, including the growing prospect of future climate change litigation.

Climate change litigation is a term used to describe how established concepts of legal liability can be applied to climate changing activities, and to failures by governments to regulate the impacts of those activities. This type of litigation can be initiated by any person or body which claims to have been adversely affected by climate change, including individuals, environmental groups, companies or governments themselves.

Climate change is a relatively new topic of litigation. The first significant decision emerged from the United States in 1990,4 and Australia followed suit in 1994.5 In recent years climate change itself has become more accepted as a scientific fact. Courts are now more likely to accept that climate change is occurring, and that it is caused or worsened by human activity. However climate change science is still challengeable in the courts, on a number of grounds.

Litigation based on climate change can be based on three “tried and true” heads of legal liability. They are negligence, private nuisance and public nuisance. A number of other less likely legal pathways may potentially exist, under trade practices legislation, through the Australian Constitution, as a “breach of statutory duty”, and even by way of the little-used cause of action of “civil conspiracy”.

Negligence and climate change

To succeed in an action for negligence, a plaintiff must identify a defendant; prove that the defendant owed the plaintiff a legal duty; show that the defendant breached that duty; and demonstrate that some substrative loss was suffered which was caused by the plaintiff’s breach of duty, and was not too remote.

Many observers have dismissed the prospects of negligence as a basis for compensation based on a “climate change”, mainly due to the difficulty of proving proximity and causation. Proximity requires a plaintiff to show that it is so directly impacted by the actions or omissions of the defendant that the defendant should have had the plaintiff in the defendant’s contemplation. Causation requires the plaintiff to show that the defendant’s action or omission was the cause of the plaintiff’s loss and damage. Activities impacting on climate change have generally been regarded as having widespread and non-measurable effects, without directly provable impacts on specific individuals, thus making proximity and causation difficult to establish.

However, recent movement in the United States may be a sign of trouble ahead for Australian defendants. An unsuccessful litigation in the United States in 2007, which centered around the causes of Hurricane Katrina, provides some insight into the types of cases that may be brought in the future against Australian industry. In Comer v Murphy Oil USA, Inc,6 14 individuals who suffered harm from Hurricane Katrina brought action in negligence against 31 coal companies, 9 oil companies and 4 chemical companies.

The plaintiffs alleged that the defendants each had a duty to:

…conduct their business in such a way as to avoid unreasonably endangering the environment, public health, and public and private property, as well as the citizens of Mississippi

and that the defendants had each breached that duty by:

…emitting substantial quantities of greenhouse gases, knowing such emissions would unreasonably endanger the environment, public health, and public and private property interests.

This litigation was dismissed by the court on the basis that it was non-justiciable because of the US doctrine of “political question” (essentially, that the issue was one that should be determined by the US Congress). However, as we have already mentioned, the US Appeals Court has now signaled its willingness to take on responsibility for the climate change question.

Nuisance and climate change

The tort of nuisance can simply be described as interference with either a public or private interest. In the environmental context, an activity or state of affairs that results in damage to land or unreasonably interferes with enjoyment of the land can be attacked as being a nuisance. Public nuisance may also be established where an activity or state of affairs interferes with the health, comfort, safety or convenience of the public at large.

State of Connecticut et al v American Electric Power Company Inc et al, which has already been mentioned in this newsletter, is a public nuisance case. The Appeals Court decision that the claim is not barred as a “political question” clears the way for the plaintiffs to seek court orders that would require the power company defendants to cap and reduce the level of their greenhouse gas emissions.

Limiting cost orders in Australian public interest litigation

The decision by the NSW Land and Environment Court to protect the plaintiff organisation from any obligation to pay costs in excess of $20,000 in Blue Mountains Conservation Society v Delta Electricity, which has also been mentioned in this newsletter, is a sign of things to come. Similar proposals, which will encourage “environmental defenders”, including climate change litigants, are being considered by the Federal and Victorian Attorney-General’s Departments. Under the proposed changes a company that successfully defends itself against litigation may be unable to recover its costs from the plaintiff if the court is convinced that the plaintiff was acting in the public interest by bringing the litigation.

At the Federal level on 23 September 2009 the Access to Justice Taskforce within the Attorney-General’s Department released a report, A Strategic Framework for Access to Justice in the Federal Civil Justice System, in which they propose that the Federal Court be given the discretion to:

…make a public interest costs order, at any stage of the proceeding, where the court is satisfied that the proceedings concerned will be of benefit to the public because the proceedings will determine, enforce or clarify an important right or obligation affecting the community or a significant section of the community…

It is likely that non-vexatious climate change litigation would fit within the boundaries of any “public interest” definition. The Access to Justice Taskforce report is open for public submissions until Friday 13 November 2009.

Increased prospect for climate change litigation to emerge in Australia

The fact that many of these “climate change” cases have taken place in the US may lead Australian companies and governments to dismiss them as being a product of American litigiousness, and that no real danger is presented here in Australia. However, this would be unwise, for a number of reasons.

Undoubtedly, “litigation breeds litigation”. The history of negligence and nuisance shows us that potential litigants are inspired to bring proceedings by hearing of similar cases in other jurisdictions. The US Appeals Court in State of Connecticut et al v American Electric Power Company Inc et al noted similarities between that case and the water pollution judgments of the 1960s, which lead to a wave of litigation against US companies.

The Australian Government’s climate change rhetoric, and the community expectations that will create, may lead the courts to the view that the time is right to attribute legal liability for climate change on certain greenhouse gas emitters. Also, the proposed changes to cost order legislation will encourage climate change litigation.

In summary, climate change litigation is likely to emerge in Australia as a new threat to the balance sheets of greenhouse gas-emitting companies, and to the public revenue of governments that do not respond to the threat of climate change in an appropriate way.

For more information, please contact Christopher Hewitt on +61 2 6163 1000 or christopher.hewitt@moulislegal.com.

1) Blue Mountains Conservation Society Inc v Delta Electricity [2009] NSWLEC 150

2) State of Connecticut et al v American Electric Power Company Inc et al 406 F. Supp. 2d 265, 374 (2005)

3) Massachusetts v Environmental Protection Agency 549 U.S. 497 (2007)

4) City of Los Angeles v National Highway Traffic Safety Administration 286 U.S.App.D.C.78

5) Greenpeace Australia v Redbank Power Company (1994) 86 LGERA 143

6) Comer v Murphy Oil USA, Inc  No. 1:05-CV-436-LG-RHW

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.