Litigating for Change

This article was originally published in the “Law Institute Journal” and is reproduced with permission from the publisher.

Snapshot:

• Australians are increasingly resorting to climate change litigation to agitate climate change issues.
• They may seek to prevent activities that increase greenhouse gas emissions, or to improve government or industry performance on addressing or reporting climate change and environmental related issues.
• Companies, directors, governments and professional services firms face an increasing risk of climate change litigation over their climate change disclosures and emissions reductions policies.

Introduction

“Climate change litigation” is an umbrella term that covers various types of legal action. Australia has the second largest number of climate cases globally.¹ Australian climate change litigation has tended to be predominantly judicial review targeting government decisions to approve projects that contribute to global warming, eg, approval of coal mines or grants to fracking companies.² However, recent cases against Ministers and agencies have focused on statutory duty and duties of care.

Increasingly, such litigation has not been aimed at government or government agencies but against companies, particularly actions to increase their accountability in respect of climate change through activist shareholder resolutions and targeting of companies’ disclosures through misleading and deceptive conduct.³ I have previously discussed the potential for directors’ statutory duties to require them to take climate change into account⁴ and this is also likely to be a future source of climate change litigation.

Statutory duty – Bushfire Survivors

For some, the devastating bushfires suffered by eastern Australia in 2019-2020 have proved a tipping point resulting in commencement of climate change litigation. In Bushfire Survivors for Climate Action Incorporated v Environment Protection Agency (Bushfire Survivors)⁵ Bushfire Survivors (whose members include survivors of the 2019-20 bushfires and earlier fires) sought mandamus against the New South Wales Environment Protection Authority (EPA). This was to compel it to perform its statutory duty to “develop environmental quality objectives, guidelines and policies to ensure environment protection” (s9(1)(a) of the Protection of the Environment Administration Act 1991 (NSW)). In a landmark judgment, the EPA was ordered to develop environmental quality objectives, guidelines and policies to ensure environment protection from climate change. Effectively, the Court found that the EPA had failed to protect the environment from climate change but how to fulfil that duty was left to the EPA to determine.

At hearing, Bushfire Survivors argued that the EPA’s duty required policies addressing and mitigating against greenhouse gas emissions and climate change. Such policies were reasonably necessary for achieving the purpose of environment protection.

The EPA counterargued that numerous instruments it developed incidentally regulated climate change and its regulatory strategy had “considered” climate change and the role the EPA would play in its challenges. By doing this, the EPA argued that it had satisfied that statutory duty. In any event, the EPA argued the court could not prescribe the particular content of instruments that the EPA would need to develop to satisfy the duty.

Preston CJ found that the EPA was indeed under a duty to develop instruments “to ensure the protection of the environment in New South Wales from climate change”:

“What is required to perform the duty in s9(1)(a), therefore, will evolve over time and place in response to the changes in the threats to the environment. This may make it difficult to describe definitively what the duty requires at any particular time or place, because it requires identification of the current threats to the environment. Nevertheless, it should always be possible to identify the current threats that are of greater magnitude and greater impact. This means that, at a minimum, the duty under s9(1)(a) will require the development of environmental quality objectives, guidelines and policies to ensure the protection of the environment from threats of greater magnitude and greater impact.

“. . . [the] threat to the environment of climate change is of sufficiently great magnitude and sufficiently great impact as to be one against which the environment needs to be protected . . .”⁶

In climate change litigation overseas, the Paris Agreement and its goal of reduction of CO2 to reduce global temperatures is often a cornerstone of the arguments, or used as evidence, in proceedings. Bushfire Survivors had produced evidence of greenhouse gas emissions as a key cause of climate change and argued that, based on that evidence and consistent with the Paris Agreement, the EPA should produce policies that target a reduction “consistent with a global average temperature rise of 1.5°C above pre-industrial levels”.⁷ In response, the EPA submitted that there were legitimate policy choices to be made in formulating regulatory and other actions that should be pursued to protect the environment from climate change.

Preston CJ held that the EPA had a discretion or choice as to the specific content needed to fulfill the duty.⁸ That is, it was up to the EPA to decide how to best determine the actions needed to fill the duty. The duty did not “demand that such instruments contain the level of specificity contended for by [Bushfire Survivors] such as regulating sources of greenhouse gas emissions in a way consistent with limiting global temperature rise to 1.5°C above pre-industrial levels”.⁹

Behind this reasoning is a rationale that arises in many different contexts – namely, the courts fear that they cannot determine, let alone supervise, how certain duties are to be fulfilled when these duties are prescriptive or involve choices in strategy.¹⁰ Courts can identify when the duty is being breached or when a test of unreasonableness¹¹ is satisfied but, absent a set of statutory criteria being imposed on the decision-maker, the courts do not wish to have to choose between A or B when both A and B can be said to potentially achieve the relevant outcome.¹²

Duty of care cases

Sharma v Minster for the Environment

The existence of a duty of care and the actions that duty requires was a key feature in Sharma v Minister for the Environment (Sharma).¹³ Unusually, it involved a pre-emptive action to prevent approval of a coalmine extension project under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). It also involved a novel duty of care – to prevent physical harm from extreme weather events brought about by climate change. The plaintiff’s goal was to run the case on its merits rather than take action after the fact on a narrower judicial review application, which had previously failed in the Wildlife Whitsunday and Anvil Hill cases.¹⁴

In Sharma, certain children sought an injunction to prevent the Minister approving the project. Their key argument was that the Minister had a duty to exercise powers under the EPBC Act with reasonable care so as not cause harm to them. The harm included physical or mental injury and economic and property loss which would arise because of global warming driven by increased CO2 emissions. Effectively, the Minister had a duty to protect children from the effects of climate change. Sharma alleged children were vulnerable to a known, foreseeable risk of serious harm, which the Minister could control but they could not. Sharma alleged the Minister would fail to discharge this duty by approving the project.

Bloomberg J did indeed recognise this novel duty of care. In establishing the duty of care, the usual elements were argued. In particular, there was emphasis on the children’s vulnerability to harm.¹⁵

As would be expected, while not disputing that climate change presents serious threats and challenges to the environment, the Minister argued that no duty existed, and that the approval of the extension project would not cause the harm alleged. Further, the Minister argued that the alleged duty of care was incoherent and inconsistent with the EPBC Act and public law principles and that this lack of “coherence” was fatal to the existence of the duty.¹⁶

The Minister relied on the discretions granted under the Act and the need to balance competing considerations as evidence that no duty could arise, rather than those matters going to how the duty might be fulfilled:

“The Minister submitted that the scheme of the EPBC Act provides her with a broad discretion and contemplates that the statutory exercise required to approve, or not approve, a particular controlled action involves the striking of a balance between competing considerations. She contended that there was inconsistency between the statutory scheme and the posited duty because the duty would, in practicable terms, impose a mandatory obligation on the Minister to consider the potential for the controlled action to cause harm to the children, when that consideration is not a mandatory consideration under the EPBC Act. That was said to be a species of distortion and, therefore, incoherence.”¹⁷

While Bloomberg J did not recognise that such incoherence prevented a duty arising, it did play a part in rejecting the grant of an injunction. Bloomberg J recognised the duty required the Minister to make a reasonable response to the foreseeable harm, and held that the applicants had not established that the additional restraint of an injunction was justified:

“. . . the imposition of liability in negligence justifies that the Minister makes a reasonable response to the foreseeable harm to the Children. No more than a reasonable response and any resultant impairment upon the statutory discretion is justified. A restraint imposed by an injunction which travels beyond any impairment that is justified by the imposition of liability in negligence raises incoherence. It is imperative therefore that any restraint which is imposed is carefully calibrated to avoid incoherence. An over-reach in a restraint imposed by the Court would not only be unjustified but also irremediable. It was necessary for the applicants to have satisfied the Court that the restraint it seeks is justified including because it would not create incoherence. The applicants have not done that”.¹⁸

Also, in rejecting the injunction, Bloomberg J considered that the Minister would behave differently given the outcome of the case and now had to take into account the avoidance of personal injury to people from climate change and that the Minister had “the benefit of understanding that an unconditional approval of the extension project is not necessarily the only means available . . . as a reasonable response to the foreseeable harm to the Children”.¹⁹ Nonetheless, the Minister has appealed the case and, despite the judgment, on 15 September 2021 approved the project after taking into account “the impacts of the proposed action on the lives and safety of Australian children and my duty to take reasonable care, in the exercise of my powers . . . to avoid causing personal injury or death to persons under 18 years of age . . .”²⁰

In the appeal hearing the incoherence argument was reiterated. Counsel argued that a duty of care would inhibit the Minister’s decision-making under the EPBC Act and the courts should not be involved in climate change policy-making.²¹ Further, it was emphasised that judicial review for a breach of the EPBC Act would be a proper forum for any claims and no duty of care is needed to protect relevant interests.

An interesting point to note is that the prospective contribution to global warming from the extension project could be described as “tiny”. However, Bloomberg J considered that harm was reasonably foreseeable and the project’s contribution was “not so insignificant as to deny a real risk of harm”.²² In the appeal the Commonwealth has also emphasised this “tiny” contribution to greenhouse gases as not justifying a duty of care.

Pabai v Commonwealth of Australia

The duty of care concept is also central to Pabai v Commonwealth of Australia (Pabai), which is the first climate change case by Indigenous Australians.²³ Torres Strait Island elders from low lying islands liable to be flooded by rising sea levels have sued the Commonwealth alleging it owes a duty of care to Torres Strait peoples. The alleged duty is to take reasonable steps to protect them, their cultures and their environment from harm caused by climate change. It is alleged to arise from negligence, the Torres Strait Treaty between Australia and New Guinea, and native title law.

Litigation against companies

While Bushfire Survivors, Sharma and Pabai focus on duties of care as the source of liability, the approach in Australia to actions against companies has had a different focus, being litigation for misleading and deceptive conduct about a company’s environmental activities or environmental credentials including its credentials in relation to climate change (ie, greenwashing). It could also extend to misleading disclosures of the business risks associated with climate change and for related breach of directors’ duties from failure to manage these risks,²⁴ which was the substance of the claims in McVeigh v Retail Employees Superannuation Pty Ltd NSD 1333/2018.²⁵ Various potential sources exist for cases of action: e.g. s18 Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)), Corporations Act s1041H and Australian Securities and Investment Commission Act s12DA.

Increasingly, companies are publicising their environment or climate change activities and commitments. Regulators, such as ASIC and APRA, are also requiring entities to report on climate change impacts. A sign of things to come is that the Australasian Centre for Corporate Responsibility, unusually active in seeking shareholder resolutions about climate change and social issues, is now taking a misleading deceptive conduct action against Santos about its annual report. It argues that Santos:

• “makes false claims about the company’s approach to addressing climate change . . .”, and
• “fails to disclose that the extraction, processing and significant use of natural gas releases significant quantities of carbon dioxide and methane into the atmosphere, gases which are key contributors to climate change and global warming”.²⁶

Further, it alleges Santos “failed to disclose its plans to increase greenhouse gas emissions” and that “this calls into question whether Santos had reasonable grounds to assert it has a clear and credible plan to reach net zero emissions by 2040”.²⁷ This type of action is likely to be a key method for activist shareholders seeking to hold companies to account for their climate change commitments.

Notably, in another case pushing the boundaries of climate change litigation, a shareholder in CBA is seeking to gain access to documents about CBA’s financing of oil and gas projects for the purpose of complying with CBA’s environmental and social framework. This could be a forerunner to a claim for misleading and deceptive conduct or a breach of directors’ duty claim based on whatever is discovered. So far disclosures made in the case been pursuant to consent orders. However, to be successful the court will need to be convinced that the access to documents is a genuine exercise of shareholder rights and not for an improper purpose, such as the development of a class action claim.²⁸

Royal Dutch Shell case

In contrast to Australian approaches to date, in a recent landmark case in the Netherlands a court imposed a duty of care on a corporation in Friends of the Earth v Royal Dutch Shell (Royal Dutch Shell).²⁹ This class action involved Friends of the Earth, other interested organisations and more than 17,000 individuals. Essentially, the applicants argued that Shell had a duty of care based on the “unwritten standard of care” inherent in the Netherlands Civil Code. This was a duty that required Shell to reduce greenhouse gas emissions in conformity with the goals of the Paris Agreement. In recognising this “unwritten standard of care” the Court referenced the United Nations Guiding Principles on Business and Human Rights and considered they were applicable as being “universally endorsed”. Further, it recognised that the goals of the Paris Agreement represented a universally endorsed and accepted standard against climate change. Consequently, the Court agreed with the applicants that Shell was required to reduce its CO2 emissions by at least 45 per cent by 2030.

This is an important decision, not only because it applies to a corporation but because it ties the corporation’s activities to the goals of the Paris Agreement and is based in a human rights dialogue. Australia has not developed a human rights-based approach which is a feature of some overseas climate change litigation.³⁰ This is not surprising given the absence of embedded human rights in our Commonwealth and state constitutions and that international treaties require legislation to be implemented into our domestic law. It is hard to see how an equivalent outcome to Royal Dutch Shell could arise under Australian law, given our case law requirements to establish a duty of care and a need for a specific relationship between the company and the plaintiffs. Such a duty of care was recently rejected in New Zealand.³¹ but, nonetheless, it may not be long before such a case is attempted here.

Conclusion

Our increasing awareness of the seriousness of climate will result in continued action by activists and shareholders in order to attempt to call agencies, ministers, companies and their directors to account for what they say, do or potentially fail to do to about climate change. Activists are increasingly looking at different ways to institute climate change litigation and we are likely to see more litigation alleging misleading and deceptive conduct about climate-related commitments and the “green credentials” of financial products. Governments, agencies and industry need to be aware of this in their conduct, and be accurate in their communications on climate change initiatives. In particular, boards need to consider whether their climate-related disclosures accurately reflect their products and practices.

¹ The Melbourne Climate Future Centre: Australian Climate Change Litigation Database: https://law.app.unimelb.edu.au/climate-change/index.php https://law.app.unimelb.edu.au/climate-change/index.php#litigation.
² L Schuijers & MA Young "Climate Change Litigation in Australia: Law and Practice in the Sunburnt Country” in I Alogne (et al) Climate Change Litigation: Global Perspectives (2021) 47 at 48-49; Environment Centre of NT v Pitt, see https://www.ecnt.org.au/media_release _federal_court_challenge_to_government_s_21m_beetaloo_drilling_grant
³ Government is not immune from such claims: O’Donnell v Commonwealth & Others FCA VID482/2020 alleging the Commonwealth has breached a duty of disclosure by failing to disclose climate change risks to bond investors.
⁴ G Bean, “At your peril” (2021) July LIJ 24, p26.
⁵ [2021] NSWLEC 92 (26 August 2021).
⁶ Note 5 above, at [68]-[69]. see also Gloucester Resources Limited v Minister for Planning [2019] NSWLEC 7 ( Rocky Hill case).
⁷ Note 5 above, at [79].
⁸ Note 5 above, at [79].
⁹ Note 5 above, at [16], see also [96].
¹⁰ Eg, in the context of fiduciary decision making and the director’s duty to act in the best interest of the company giving rise to the “business judgment” rule.
¹¹ Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.
¹² G Bean, Fiduciary Obligations and Joint Ventures, Clarendon Press, 1995, pp171-173.
¹³ Sharma by her litigation representative Sister Marie Brigid Arthur v Minister for the Environment (Commonwealth) [2021] FCA 560 (27 May 2021).
¹⁴ see www.envlaw.com.au\Sharma\; Wildlife Preservation Society Queensland Prosperine/Whitsunday Branch Inc v Environment Heritage and Others [2006] FCA 736 and Gray v Minister for Planning [2006] NSWLEC 720..
¹⁵ In particular the children relied on the parens patriae doctrine in support of their case but Bloomberg J considered it was not necessary to determine whether legal obligations were imposed on the Minister by reason of this doctrine: at [311].
¹⁶ Note 13 above, at [146].
¹⁷ Note 13 above, at [339].
¹⁸ Note 13 above, at [502].
¹⁹ Note 13 above, at [503].
²⁰ Statement of Reasons for Approval under the Environment Protection and Biodiversity Conservation Act 1999 dated 16/9/2021 at [163].
²¹ J Albrechtsen “Judges have no place in deciding climate policy” The Australian, 18 September 2021 p20.
²² Note 13 above, at [253].
²³ Federal Court Vid 622/2021. They seek injunctions, declarations and remedial relief. M Perkins “Strait Islanders sue on climate change” The Age, 27 October 2021 .
²⁴ See also Corporations Act s769C (no reasonable basis for future representation); J Peel et al “Next Generation Climate Change Litigation in Australia” in J Lin and DA Kysar Climate Change Litigation in the Asia Pacific (2021) 175 at p199.
²⁵ Note 4 above.
²⁶ “Santos hit by climate lawsuit” The Age, 27 August 2021, p11: Federal Court NSD 858/2021. Basing the action on Australian Consumer Law s18 and Corporations Act s1041H:https://www.accr.org.au/news/australasian-centre-for-corporate-responsibility-files-landmark-case-against-santos-in-federal-court/
²⁷ Note 33 above.
²⁸ Federal Court: NSD 864/2021; H Wootton “CBA sued in climate first” The AFR, 1 September 2021.
²⁹ C/09/571932/HA ZA 19-379: The Hague District Court.
³⁰ Although Youth Verdict Ltd v Waratah Coal Pty Ltd uses the Human Rights Act 2019 (Qld) as a basis for taking action arguing the Galilee coal project is an unlawful breach of certain human rights under the Human Rights Act (Qld).Eg, Vanuatu has announced it will seek an advisory opinion from the International Court of Justice on the right to be protected from adverse effects of climate change. https://www.jurist.org/news/2021/09/vanuatu-seeks-advisory-opinion-from-icj-on-climate-rights/. See also the famous case of Urgenda Foundation v The Netherlands ECLI;NL;GHDHA;2018;2610.
³¹ Smith v Fonterra Co-operative Group Ltd [2021] NZCA 552.