Smith v Fonterra Co-Operative Group Limited
[2025] NZHC 1605
•17 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001730
[2025] NZHC 1605
BETWEEN MICHAEL JOHN SMITH
Plaintiff
AND
FONTERRA CO-OPERATIVE GROUP LIMITED
First Defendant
GENESIS ENERGY LIMITED
Second DefendantDAIRY HOLDINGS LIMITED
Third Defendantcontinued: …/2
Hearing: 29 April 2025 Appearances:
M Heard, DAC Bullock and R E King for Plaintiff D Kalderimis KC and N K Swan for First Defendant S J P Ladd and S McCluskey for Second Defendant B G Williams for Third Defendant
J E Hodder KC for Fourth Defendant T D Smith for Fifth Defendant
R J Gordon and S C Howard-Brown for Sixth Defendant
Judgment:
17 June 2025
Reissued:
18 June 2025
JUDGMENT OF ANDREW J
This judgment was delivered by me on 17 June 2025 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
SMITH v FONTERRA CO-OPERATIVE GROUP LTD [2025] NZHC 1605 [17 June 2025]
…/2
NEW ZEALAND STEEL LIMITED
Fourth Defendant
Z ENERGY LIMITED
Fifth Defendant
BT MINING LIMITED
Sixth Defendant
Introduction
[1] In the substantive proceedings, Mr Smith advances two causes of action in tort: public nuisance and a proposed new tort involving a duty, cognisable at law, to cease materially contributing to: damage to the climate system; dangerous anthropogenic interference with the climate system; and the adverse effects of climate change.
[2] The background to the proceedings is comprehensively set out in the Supreme Court judgment: Smith v Fonterra Co-operative Group Ltd.1 The two tort causes of action were reinstated having been struck out in the courts below. The Supreme Court held that the rights pleaded by Mr Smith, including the rights to public health, safety, comfort, convenience and peace, fell tenably within the particular rights identified in the past as providing foundation for a public nuisance pleading.2 The Court also held that it could not be said at that stage of the proceeding (addressing only strike out) that the common law was incapable of addressing tortious aspects of climate change.3 Further, the Supreme Court held that whether the respondents’ actions amount to a substantial and unreasonable interference with public rights remains a fundamental issue of fact for trial and is dependent on evidence (including of tikanga), analysis of policy factors, and consideration of human rights obligations.4
[3]In this judgment, I deal with the following further5 interlocutory applications:
(a)Application by the sixth defendant, BT Mining Ltd (BT Mining), for a decision on two questions to be tried separately and before the trial of the main proceedings against the other defendants (r 10.15 of the High Court Rules 2016).
(b)In the alternative, an application by the sixth defendant, BT Mining, for an order for security for costs (r 5.45).
1 Smith v Fonterra Co-operative Group Ltd [2024] NZSC 5, [2024] 1 NZLR 134.
2 At [145].
3 At [154].
4 At [169].
5 In my earlier judgment of 16 April 2025 in Smith v Fonterra Co-operative Group Ltd [2025] NZHC 940, I declined an application by four of the defendants for leave under r 4.8 of the High Court Rules 2016 for an extension of time to issue third party notices. I also declined an application by six of the defendants for a universal representative proceeding order pursuant to r 4.24 of the High Court Rules.
(c)Application by the plaintiff, Mr Smith, for a split trial with a proposed stage one and stage two hearing (r 10.15).
(d)Application by the plaintiff, Mr Smith, for protected costs orders (PCO).
[4]I address each in turn.
Application by BT Mining for a decision on questions to be tried separately
[5]Rule 10.15 of the High Court Rules reads:
10.15 Orders for decision
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a)the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b)the formulation of the question for decision and, if thought necessary, the statement of a case.
[6] BT Mining applies for the following two questions to be heard and determined separately from any other question and before trial in these proceedings:
(a)Question 1: Can BT Mining be held liable to the plaintiff for an alleged public nuisance where the particular greenhouse gas (GHG) emitting activity complained of by the plaintiff (and said by him to amount to a public nuisance) occurs in overseas jurisdictions?
(b)Question 2: Can BT Mining be held liable to the plaintiff for an alleged public nuisance and/or negligence for the alleged effects of GHG emissions, when BT Mining:
(i)is a supplier (of coal) only; and
(ii)has not itself carried out the emitting activity complained of by the plaintiff?
[7] The underlying purpose of r 10.15 is to expedite proceedings by limiting or defining the scope of the trial in advance or obviating the need for a trial altogether.6
[8] The Court has a general discretion under r 10.15 and each case must be considered individually.7 In Haden v Attorney-General,8 Kós J held that one must start with at least a moderate presumption against splitting a trial and that applications under r 10.15, where contested, fail more frequently than they succeed. The burden, which is not an insignificant one, lies on the applicant.9
[9] In Haden v Attorney-General, Kós J further held that there are a number of questions that need to be addressed by a court before granting an application under r 10.15:10
(a)Question 1: Will there be difficult demarcation questions between those issues to be addressed at the first trial and those that would or may be left over for the second?
(b)Question 2: Will the proceedings be brought to an end?
(c)Question 3: What potential time saving does the separate question offer?
(d)Question 4: How will appeals be dealt with?
(e)Question 5: Are there any other practical considerations tending one way or the other?
[10] BT Mining contends that it is in a unique position vis-à-vis the other defendants. It says it is the only defendant being sued for not having carried out any relevant GHG-emitting activity of its own and where the specific GHG-emitting
6 Innes v Ewing (1986) 4 PRNZ 10 (HC) at 18.
7 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1998) 12 PRNZ 333 (HC) at 335.
8 Haden v Attorney-General (2022) 22 PRNZ 1 (HC) at [46].
9 Haden v Attorney-General at [46], citing Clear Communications Ltd v Telecom Corporation of NZ Ltd, above n 7, at 335; and KPMG New Zealand v Gemmell HC Auckland CIV-2008-404- 4288, 27 March 2009 at [20].
10 Haden v Attorney-General at [50].
activity complained of by Mr Smith (i.e. steel making activities by others) occurs in an overseas jurisdiction. BT Mining submits the determination of the preliminary questions sought will not affect Mr Smith’s claims against any of the domestic “emitter” defendants, who are in a very different position from BT Mining.
[11] BT Mining further contends that this interlocutory application is an orthodox request to utilise the procedure set out in r 10.15: why should BT Mining have to endure the enormous time, cost and distraction of the 15-week High Court trial when the straightforward answer to its liability is a much narrower legal question (and notably, one that is different from all the other defendants)?
[12] The critical issue to address is the interaction between issues and, in particular, what evidence is required to dispose of those issues. The interaction between issues in split trials is said to be the single most important question for consideration by a court considering a r 10.15 application.11
[13] There is some merit to BT Mining’s contention that it is uniquely placed as a defendant and that the claims against it are of a different nature. However, given the complexity, the novelty and the range and nature of policy considerations which the Supreme Court anticipated will be necessary to address, I find that no clear and workable demarcation could properly be made between the claims against BT Mining and the claims against the other defendants.
[14] In Haden v Attorney-General,12 Kós J observed that complex cases in particular are ones where a r 10.15 procedure may be inappropriate. Kós J quoted Lord Scarman in Tilling v Whiteman:13
Preliminary points of law are too often treacherous shortcuts. Their price can be, as here, delay, anxiety and expense.
[15] Rather than expedite resolution of issues, a split trial in this case would, in my view, likely cause delay, anxiety and expense. A split trial, particularly one that took
11 Clear Communications Ltd v Telecom Corporation of NZ Ltd, above n 7, at 335; see also Haden v Attorney-General, above n 8, at [50(a)].
12 Haden v Attorney-General, above n 8, at [48].
13 Tilling v Whiteman [1980] AC 1, [1979] 1 All ER 737 (HL) at 25.
place in advance of the main proceedings, would likely become a mini trial of the whole proceeding. It is difficult to see the other defendants would not have a vital interest in participating in an earlier trial and there is likely to be substantial overlap with the range and type of evidence that would be adduced.
[16] I understand the concern of BT Mining having to participate in a lengthy 15-week trial. However, the two questions proposed in the application are not, in my view, sufficiently discrete or separate to justify what would be a somewhat unusual step in a complex case of this kind — to award a separate hearing.
[17] I doubt that there would be any potential time saving from trying the separate questions in advance of the main trial and it is not disputed, of course, that the separate questions will not bring the proceedings to an end. Whatever the outcome, appeals and consequential further delay would be likely.
[18] For all these reasons, I find that the application by BT Mining for a decision on questions to be tried separately should be dismissed.
Application for security for costs by BT Mining
[19] As an alternative application, BT Mining seeks security for costs against Mr Smith in the “modest sum” of $150,000. BT Mining contends it would be unreasonable and contrary to the interests of justice for it to be put to the expense of defending the plaintiff’s claims at a future trial without any security whatsoever for its costs. It notes also the lengthy, 15-week trial proposed.
[20] There is no dispute that the threshold of impecuniosity is made out under r 5.45(1)(b). The critical issue to address is whether it would be just in all the circumstances to make an order for security under r 5.45(2). The discretion is a wide one and what is required is a broad overall assessment.14
[21] I find that it would not be just, in all the circumstances of this case, to make an order for security for costs as:
14 Hamilton v Papakura District Council (1997) 11 PRNZ 333 (HC) at 335.
(a)the Supreme Court has already determined that the plaintiff’s claim was brought on a public interest basis. I acknowledge that all the defendants are private defendants but, in my view, the claims are very much of a public interest nature;
(b)the Supreme Court, on the strike out application, decided that costs should not be awarded against the defendants despite Mr Smith’s success. There has thus already been some financial benefit to the defendants;
(c)the intervention of the Human Rights Commission/Te Kāhui Tika Tangata, Te Hunga Rōia Māori o Aotearoa/the Māori Law Society, and Lawyers for Climate Action NZ Inc at the Supreme Court strike out stage, highlights the importance of the issues in the proceedings;
(d)the Supreme Court has already determined that the plaintiff’s claim discloses arguable and legally tenable causes of action; and
(e)Mr Smith is wholly dependent on New Zealand superannuation (his sole source of income) and has no assets. If he is required to pay security for costs then it is extremely unlikely that he will be able to pay security or to continue to advance his claim, denying his access to justice.
[22] There is support for my approach in the following judgments: Ratepayers and Residents Association Inc v Auckland City Council,15 Save Happy Valley Coalition Inc v Minister of Conservation,16 and Mothers Against Genetic Engineering Incorporated v Minister for the Environment.17
[23]The application for security for costs is dismissed.
15 Ratepayers and Residents Association Inc v Auckland City Council [1986] 1 NZLR 746 (CA).
16 Save Happy Valley Coalition Inc v Minister of Conservation HC Wellington, CIV-2006-485-1634, 18 September 2006.
17 Mothers Against Genetic Engineering Incorporated v Minister for the Environment HC Auckland M 22-PL03, 15 April 2003.
Application by Mr Smith for split trial
[24] Mr Smith seeks to have the trial split into two stages, with the following issues to be determined at each stage:
(a)Stage one: Liability of the defendants for causes of action one and two of the plaintiff’s second amended statement of claim dated 16 December 2024 (public nuisance and breach of duty) and declaratory relief if liability is established.
(b)Stage two: If liability is established, the remaining relief sought by Mr Smith, namely injunctive relief and such other relief as the Court determines appropriate.
[25] Mr Smith contends that split trials are commonplace. He submits that the individual circumstances at issue in the present case made it an “ideal candidate” for a split trial, advancing the purpose of r 10.15 of expediting proceedings by limiting the scope of the respective stages and potentially obviating the need for a stage two hearing altogether.
[26] Mr Smith further submits that there is a clear demarcation between the issues to be determined at each stage:
(a)whether the defendants are liable for public nuisance, or a breach of the pleaded novel tort, engages separate issues of fact and law to whether they can or should be enjoined to cease or reduce their emissions;
(b)many issues of fact, including the defendants’ plans to reduce emissions, the reasonableness and fairness of potential emissions reduction pathways, and the effects of injunctions (including on the defendants, third parties and more generally) can be cleanly separated from questions of liability; and
(c)the plaintiff’s removal of the negligence cause of action significantly simplifies the legal and factual issues requiring determination.
[27] I have set out above, in relation to the BT Mining application, the relevant principles to be applied under r 10.15. The operating presumption is that all matters are to be determined in one trial and it is not an insignificant matter to displace that presumption.18 An applicant must show that there are “good, preponderant reasons” in favour of a split trial.19 That is partly because it is wiser to hear everything together unless one can be sure the trial process will work if compartmentalised. The challenge of “uneasy excision” will often be a powerful reason to decline a split trial.20
[28] Although the labels “liability” and “relief” can be separately affixed, the matters on which they turn are usually closely connected.21 Where split trials are ordered, they are usually in the nature of staging discrete issues.22
[29] The critical issue is again (i.e. as in the case of BT Mining) the interaction between the issues and the proposed split trial (the single most important question for consideration by a court considering a r 10.15 application).
[30] There is clear acknowledgement in the Supreme Court’s strike out decision of the very interconnected nature of all issues in the proceeding, including both liability and remedy. The Court held:
[170] Logic and experience suggest the fundamental battleground between the parties lies in this part of the case: causation, substantiality and unreasonableness, and (by association) remedy — to which we now turn.
[31] It is important to record some of the key findings of the Supreme Court. They provide clear support for rejecting Mr Smith’s application; no easy excision is available. They are as follows:
18 Karam v Fairfax New Zealand Ltd [2012] NZHC 1331 at [58].
19 At [58].
20 Haden v Attorney-General, above n 8, at [59].21 Fletcher Construction Company v MPM Waterproofing Ltd [2024] NZHC 1122 at [38]–[39], citing Stephen Todd (ed) Todd on Torts (9th ed, Thomson Reuters, Wellington, 2023) at [19.1].
22 Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010 at [11]–[13]; and Karam v Fairfax New Zealand Ltd, above n 18, [58]–[60]. I accept that, in intellectual property cases, separate hearings are more commonplace: Burden v ESR Group (NZ) Ltd [2020] NZCA 560 at [30].
(a)The leading authority on public nuisance was delivered by the Court of Appeal almost 75 years ago (Abraham and Williams Ltd):23
The principles governing public nuisance ought not to stand still in the face of massive environmental challenges attributable to human economic activity.
(b)“The courts must be measured as to the pre-emptive denial of access to justice where it is incontestable that the respondents’ actions form a part of a collective activity causing a plaintiff substantial harm. … In this area, the common law must develop, if at all, in the fertile fields of trial, not on the barren rocks of a strike out application.”24
(c)“Likely evidence at trial will include evidence as to the scientific attribution of climate change to the respondents’ activities, bearing in mind that Mr Smith submits that these contributions collectively represent about one-third of New Zealand’s total reported GHG emissions, but that New Zealand’s GHG emissions are a fractional proportion of the global total and that historic emissions remain substantially contributory. One question that will need to be considered at trial, on the basis of evidence and policy analysis, is whether New Zealand’s law of public nuisance should sanction GHG emissions here, given this state of affairs.”25
(d)“Whether the respondents’ actions amount to a substantial and unreasonable interference with public rights remains a fundamental issue of fact for trial. … it will depend on evidence, including … of tikanga, and also analysis of policy factors and consideration of the human rights obligations.”26
23 Smith v Fonterra Co-operative Group Ltd, above n 1, at [172].
24 At [173].
25 At [167] (footnote omitted).
26 At [169].
[32] As noted above, complex and novel cases are often ones where a r 10.15 procedure may be inappropriate.27 In my view, this is very much one of those cases where real caution is required.
[33] As the defendants submit, the proposed split trial sought here is very different from the liability/remedy split cases on which Mr Smith relies. It is suggested that the formal declaratory order sought would be contained within the proposed stage one.
[34] Declaratory relief, like injunctive relief, is a discretionary (and traditionally equitable) remedy.28 In my view, most, if not all, of the considerations relevant to injunctive relief will also be relevant to the consideration of whether (assuming liability is established) a declaratory order should also be issued.
[35] I reject Mr Smith’s submission that the questions of liability on both claims are “overwhelmingly” questions of law. It would, at the very least, be premature for me to reach that conclusion at this stage. I note that the defendants clearly intend to argue that individual circumstances and policy/regulatory considerations do matter, not only for injunctive or declaratory relief, but also for the imposition of liability in the first instance.
[36] I acknowledge that there is no dispute that emissions have generally caused and will cause global heating for decades to come, with all of the attendant harm. However, “against that background”, and contrary to Mr Smith’s submission, it is not, in my view, a simple or straightforward exercise to conclude that either the defendants’ emissions cause or contribute to a public nuisance or they do not. As the Supreme Court held, whether the defendants’ actions amount to a substantial and unreasonable interference with public rights remains a fundamental issue of fact for trial.29
27 See Haden v Attorney-General, above n 8, at [48].
28 Zavarco plc v Nasir [2021] EWCA Civ 1217, [2022] Ch 105 at [39]; Ngāti Whātua Ōrākei v Attorney-General (No 4) [2022] NZHC 843, [2022] 3 NZLR 601 at [454]. See generally Lord Woolf and Jeremy Woolf Zamir & Woolf: The Declaratory Judgment (4th ed, Sweet & Maxwell, London, 2011) at [1–07].
29 Smith v Fonterra Co-operative Group Ltd, above n 1, at [169].
[37] The other factors referred to by Kós J in Haden v Attorney-General30 generally support a finding that the application for a split trial should be rejected.
[38] I acknowledge that if liability is not established, the two-stage hearing would not be required. However, as just noted, Mr Smith does propose that some aspect of remedy (i.e. the declaratory relief sought) be considered at stage one.
[39] Mr Smith has submitted that the time and cost that would be saved (if liability were not established) would likely be significant because large volumes of evidence that might be required in connection to calibrating the level of emissions reductions, and the impact of those reductions on the defendants, would not need to be prepared. Again, I doubt that it would be realistically possible to make the necessary “clear excision” for which Mr Smith contends.
[40] In my view, at this stage, any potential saving in time and financial expense seems marginal and speculative.
[41] The trial is currently scheduled for 15 weeks commencing in April 2027. Mr Smith proposes a stage one trial of six weeks. If that were realistic, I accept that it would obviously free up valuable court time and that of counsel (particularly when Mr Smith is presently represented pro bono). However, in my view, this is all too speculative; it is very difficult to make any meaningful or accurate prediction at this stage.
[42] Mr Smith responsibly acknowledges that a delay to the second stage of trial from appeals in the proposed first stage is a factor against a split trial. That concession is, in my view, rightly made; the likelihood of appeals in a case such as this, involving novel and unsettled issues, must be high.
[43] If Mr Smith, as plaintiff, were to establish liability, any stage two trial would inevitably be delayed by a number of years. There is also the likelihood of there being a further round of appeals from that second trial. In my view, Mr Smith’s response, namely that stage two can be scheduled to enable appeals to be progressed, is no real
30 Haden v Attorney-General, above n 8.
answer. The case relied on by Mr Smith, Turners & Growers v Zespri Group Ltd,31 which contemplated an extremely compressed timetable, is quite a different case. If there were appeals in this case, it is highly likely they would include further appeals to the Supreme Court.
[44]In conclusion, I find that there should be no split trial.
[45] I am, of course, deciding this issue at a relatively early stage in the proceedings. The evidence is yet to be exchanged and discovery is incomplete. Novel and complex proceedings of this kind do not make for easy predictions. The issue of whether there should be a split trial can, if necessary, be re-visited by the trial Judge; the question of remedy obviously only arises if liability is first established.
Application by Mr Smith for protective costs orders
[46] Mr Smith seeks, at this interlocutory stage, the following orders in relation to costs:
(a)No award of costs will be made against Mr Smith in relation to these proceedings;
(b)No award of costs will be made against any third-party funder in relation to these proceedings that does not stand to financially benefit from the proceeding and in no way seeks to control its course; and
(c)No award of costs will be made against any of the defendants in relation to these proceedings.
[47] Mr Smith contends that his claim is of substantive, general and public importance, that his claims are seriously arguable and that he is unable to pay a costs award. He is retired and has no assets; he predominantly relies on New Zealand superannuation for his living expenses. All legal work to date has been carried out on a pro bono basis.
31 Turners & Growers v Zespri Group Ltd, above n 22.
[48] Mr Smith submits that, essentially, he is seeking an order that costs will lie where they fall in all respects. He says there is a stark inequality of arms between the parties and, because he has no ability to meet a costs order (or security for costs order), the defendants will only benefit from the status quo because it limits Mr Smith’s ability to obtain funding and therefore to enable a greater focus on his legal claims and to retain the experts that the issues deserve. He says that that would be an unjust outcome.
[49] This Court has inherent jurisdiction, and jurisdiction under the High Court Rules, to make a PCO. Rule 14.1(1)(a) of the High Court Rules states that:
All matters are at the discretion of the Court if they relate to costs … of a proceeding.
[50] In the minority judgment of the Supreme Court in Environmental Defence Society Inc v New Zealand King Salmon Company Ltd, Elias CJ and William Young J stated that the policy behind PCOs was “not dissimilar to that behind the reluctance to make an order of costs against a public interest litigant” and stemmed from “a view that the risk of costs will otherwise impede access to justice and the representation of the public interest”.32
[51] In Whakatōhea Kotahitanga Waka (Edwards) v Ngāti Ira O Waiōweka (Edwards)33, the Supreme Court granted a prospective costs order (i.e. that the Crown pay the appellant’s costs in advance of the hearing). The Court held that such an order will only be made in “exceptional circumstances” and will depend on “the necessity for such an order being made in the interests of justice”.34 The Court explicitly acknowledged that a slightly lower threshold may apply to a protective rather than prospective costs order.35
32 Environmental Defence Society Inc v New Zealand King Salmon Company Ltd [2014] NZSC 167 at [18].
33 Whakatōhea Kotahitanga Waka (Edwards) v Ngāti Ira O Waiōweka (Prospective Costs Order)
[2024] NZSC 119, [2024] 1 NZLR 418 (Edwards).
34 At [44].
35 At fn 56.
[52] The Supreme Court outlined five considerations “likely to determine the necessity” of a prospective costs order. They include:36
(a)whether an issue of significant general or public importance is raised;
(b)whether the applicant’s stance is seriously arguable;
(c)whether the applicant is genuinely impecunious;
(d)the position of the respondent, including “any unjust advantage likely to accrue to it absent the order”; and
(e)any reasonable alternatives to making the order.
[53] I acknowledge, as Mr Ladd for the defendants submitted, that these are tort claims against private defendants. It appears that a PCO has never previously been made in a case such as this. In the exceptional and very limited cases where a PCO has been made, they have involved proceedings brought against the Crown or a public institution in relation to the exercise of public power. Despite the lack of precedent, I will address the considerations set out in Edwards insofar as they are applicable.
[54] First, it is apparent from the Supreme Court’s strike out judgment that the issues raised by Mr Smith’s claim are of substantial and general public importance and resolution of them very much in the public interest. The Supreme Court did, of course, grant leave to hear Mr Smith’s appeal against his strike out claim. It further held that costs would not be awarded “because the proceeding [was] brought on a public interest basis and has wider implications beyond the case at hand.”37
[55] A number of the other factors identified in Edwards support the making of a PCO, at least in relation to Mr Smith personally. His claims must be regarded as seriously arguable, in light of the Supreme Court strike out decision. There is also no real challenge to his contention that he is impecunious. I accept that he is genuinely
36 At [49].
37 At [191].
so. I also accept that Mr Smith is a bona fide plaintiff acting in the public interest. While Mr Smith does technically have a particular interest in his environment and land (according to his tikanga Māori), this case, and the reasons for bringing it, has wider implications well beyond Mr Smith’s own personal interests. Palmer J, in Gordon v Attorney-General (No 2), observed that a court is likely to be more sceptical of an application for a PCO for litigation in which a plaintiff stands to benefit personally, particularly financially.38 That concern does not arise here. Mr Smith seeks to prevent unlawful harm; he does not seek damages and nor does he seek costs.
[56] Mr Smith acknowledges that he is likely to continue with his claim even if the PCOs sought are not granted. I return to that important acknowledgment in my findings below. Mr Smith notes that he brings the claim as kaitiaki of his whenua and to uphold the mana of his tīpuna and future generations. While acknowledging that the issues raised by his claim are likely to still be ventilated in the absence of a PCO, his ability to advance his claim is, he submits, likely to be severely impacted without the PCOs sought.
Material prejudice to the defendants
[57] Mr Smith submits that the defendants are generally large commercial entities with significant resources, and well-resourced legal teams. He contrasts this with his very modest income and asset position (no assets and limited savings).
[58] He submits that the defendants would face no material prejudice if the orders sought were granted. He says that the defendants are unlikely to recover their costs in litigation either way. He could never meet a costs award, particularly on the scale that a case like this might produce. He further says that while charitable funders would be willing to fund his costs and disbursements, they will likely be reluctant to fund the costs awarded to the defendants (especially where he is not seeking costs himself) and funders may well be unlikely to step in while a potential costs exposure remains.
[59] Mr Smith also submits as follows: the only advantage to the defendants in opposing a PCO is that, if he, Mr Smith, cannot obtain funding, then they will be able
38 Gordon v Attorney-General (No 2) [2022] NZHC 2801 at [17].
to take advantage of a significant inequality of arms in the proceeding, and the likelihood that Mr Smith will not be able to access the legal representation and expert witnesses that he otherwise might. He says that this is an “unjust advantage likely to accrue” to the defendants in the absence of an order — and precisely that warned against by the Supreme Court in Edwards. That is not in the interests of justice, or in the interests of access to justice.
[60] Before addressing this particular question, I will discuss the issue of PCOs in favour of third-party funders. The issues are clearly related.
Protective costs orders in favour of third-party funders
[61] I apprehend that Mr Smith’s principal concern in seeking the PCOs is his said inability to obtain third-party funding. He says that he is presently hampered in his ability to do so by the prospect of any funder being faced with a costs order — something the defendants have made clear they are contemplating.
[62] In New Zealand, a costs award would generally not be made against a “pure funder”; that is:39
… those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course.
[63] That can be distinguished from funders whose “primary motivation is to turn a profit” or who seek to substantially control the course of the litigation.40 Ultimately, whether to grant a costs award against a third party is a discretionary question, and the jurisdiction is a fact-specific one.41
[64] Mr Smith says he seeks a PCO only in respect of pure funders. This is said to give potential funders — who would most likely be charities with an environmental
39 Bligh v Earthquake Commission [2019] NZHC 2236 at [53], citing Hamilton v Al Fayed (No 2)
[2002] EWCA CIV 665, [2003] QB 1175 at [40].
40 Bligh v Earthquake Commission at [54]–[55], citing Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145.
41 Bligh v Earthquake Commission at [57]. See also Dymocks Franchise Systems (NSW) Pty Ltd v Todd at [25(3)].
protection purpose — sufficient comfort that they will not be embroiled in litigation, facing potential costs exposure should Mr Smith’s claim fail.
[65] Mr Smith submits that this issue of a potential costs exposure has become a particular concern for supporters of climate litigation following efforts in Australia to pursue charitable funders of climate litigation for costs orders. He relies upon the Federal Court of Australia decision, Munkara v Santos NA Barossa Pty Ltd (No 4) (Munkara (No 4)).42
[66] In Munkara, Tiwi Islanders, represented by lawyers employed by the Environmental Defence Office (EDO), sought an injunction against an oil company, Santos, preventing it from constructing a pipeline. The claim was unsuccessful. Santos obtained a costs order against the impecunious plaintiff. Santos then successfully sought disclosure of documents between EDO and third-party campaign groups to enable it to consider whether to apply for third-party costs orders. The Court stated:43
It is at least arguable that a non-party’s support of litigation to pursue a political or ideological objective of the non-party’s own could, in an appropriate case, weigh in favour of a costs order. That is particularly so when a reason for the non-party’s existence is to achieve one or more of the outcomes sought in the proceeding.
[67] The Federal Court subsequently ordered EDO to pay costs to Santos on an indemnity basis. Mr Smith submits that this case is having a significant and chilling effect on the willingness of non-party funders to support his case.
[68] On the face of the obiter comment made by Charlesworth J in Munkara (No 4), the concerns of Mr Smith about a “chilling effect” are understandable. However, a close analysis of that case leads me to the conclusion that Mr Smith has overstated its potential chilling effect. As Mr Ladd submitted, the particular facts of Munkara, and in particular the improper conduct by the EDO, solicitors for the applicants, is the key to understanding the Judge’s orders on costs. In that case, Charlesworth J found that EDO, as solicitors, had coached witnesses, manipulated information presented to the
42 Munkara v Santos NA Barossa Pty Ltd (No 4) [2024] FCA 414.
43 At [47].
Court by an expert report and confected or constructed evidence. In those circumstances it is not surprising that costs, namely indemnity costs, were awarded against the EDO, a non-party. However, Munkara (No 4) was not a case of costs awards being made against a third-party funder. Furthermore, I note that in a further Munkara judgment, namely Munkara v Santos NA Barossa Pty Ltd (No 5),44 Charlesworth J referred to her previous obiter comments quoted above, and as follows:
As to the reasons in Munkara 4, nothing said in that judgment stands for the proposition that to obtain an award of costs against a non-party it would be sufficient to show that the non-party provided moral support for litigation having an objective that aligned with the non-party’s personal views. The Court refused to grant leave to issue a subpoena addressed to Market Forces for that very reason. Leave was granted to the remaining addressees [including EDO] because there was evidence that each of them may have had some other relevant connection with the proceedings, including because they had made public statements aligning success in litigation relating to the pipeline as though it were their own success.
[69] If there were a third-party funder in this case and it was a “pure funder” in the sense that it did not seek to benefit financially from the litigation or to control its course, then it seems to me highly unlikely that a costs award would be made against it. That would be the case even if the third-party funder was motivated by an ideological or philosophical environmental position that aligned closely with that of Mr Smith. As the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) held,45 in the case of a pure funder, the Court’s usual approach is to give priority to the public interest in the funded party getting access to justice over that of the unsuccessful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights.
[70] The rationale behind the general practice of not making costs orders against “pure funders” was explained in Hamilton v Al Fayed (No 2):46
… the pure funding of litigation (whether of claims or defences) ought generally to be regarded as being in the public interest providing only and always that its essential motivation is to enable the party funded to litigate what the funders perceive to be a genuine case. This approach ought not to be confined merely to relatives moved by natural affection but rather should extend to anyone — not least those responding to a fund-raising campaign — whose contribution (whether described as charitable, philanthropic, altruistic
44 Munkara v Santos NA Barossa Pty Ltd (No 5) [2024] FCA 717 at [40].
45 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 41, at [25(2)].
46 Hamilton v Al Fayed (No 2) 2 EWCA Civ 665, [2003] KB 1175 at [47].
or merely sympathetic) is animated by a wish to ensure that a genuine dispute is not lost by default (or … inadequately contested).
[71] In his affidavit sworn 13 December 2024 and filed in support of his PCO application, Mr Smith says that he understands that while a number of non-profit groups have shown interest in potentially providing some amount of funding for his claim (in order to assist in meeting costs associated with expert evidence and legal representation), there have been a number of difficulties in securing funding. He says this has included concerns about the risk of adverse costs orders being sought and made directly against those groups.
[72] I do not doubt that statement is an accurate recording of Mr Smith’s understanding. However, little detail has been provided and there are of course no references to the name of any non-profit groups.
[73] That affidavit, and indeed Mr Smith’s application, is notable for the fact that there is no named or specific third-party funder proposed and no detail given beyond the mere reference to a class of who the funder might be. In my view, this is a fundamental problem with the present application and fatal to my determining it, at least at this stage, in Mr Smith’s favour. Absent a named entity/individual and some detail about it, the Court is in no position to make an assessment as to whether the proposed funder is a “pure funder” or someone with a specific financial interest in the outcome. That might perhaps be unlikely given the subject matter of the proceedings, but for the Court to exercise an exceptional jurisdiction it is essential that there be a sound factual basis for it, and, importantly, transparency, so that the defendants can have an informed understanding of the scale and nature of the case they are likely to face. Until such time as the plaintiff proposes a specific third-party funder and provides some specific and essential detail about it, I do not see how I could safely and properly conclude that the very high threshold for granting a PCO might somehow be made out.
[74] I am sympathetic in principle to the plaintiff’s reasons and concerns to obtain some third-party funding. There is a fundamental issue of access to justice and, in my view, the plaintiff’s complaint is not merely about inequality of arms. If this proceeding is to continue, as the Supreme Court held it should, then it is essential, and
very much in the public interest and in the interests of all concerned, that the plaintiff, as he submits, be able to access the legal representation and expert witnesses that a complex and novel case, with all its implications, requires. That would be, as Mr Smith submits, in the interests of justice. In a case such as this, were Mr Smith to be unable to access adequate representation and competent expert witnesses, the material advantage to the defendants would likely be extreme and possibly fatal to Mr Smith’s overall claim.
[75] Mr Smith’s legal representatives are currently acting on a pro bono basis. The trial is scheduled to last for 15 weeks. That would obviously be a significant imposition and likely result in significant financial disadvantage to the legal representatives involved, assuming they continue on a pro bono basis. There is a clear need for a solution to the funding issues on which the present applications are based. However, in their present form, the PCO applications do not provide for that solution.
Conclusion on PCO applications
[76]Against the above analysis, I conclude as follows:
(a)There is some obvious merit to the PCO application as it relates to Mr Smith personally. As analysed above, a number of the relevant criteria are made out. However, and critically, he has acknowledged that absent the PCO he will still continue with the proceedings. I find that the high threshold of “necessity” and “exceptional circumstances” is not made out. Furthermore, there is no precedent of which I am aware where a PCO order has been made in relation to private defendants. I do not exclude that possibility, but the basis for it is not made out here. The application for a PCO in relation to Mr Smith personally is declined.
(b)I also decline the remainder of the PCO application, including that aspect of it that relates to an unidentified third-party funder. As discussed above, in the absence of a named third-party funder and any detail about it, the Court cannot properly or adequately address the
application. For the avoidance of doubt, I also decline the PCO application as it relates to orders in favour of the defendants.
[77] My decision to decline the PCO applications is without prejudice to Mr Smith making a further application in relation to an identified third-party funder. In deciding how to proceed further, the plaintiff, Mr Smith, might also wish to consider whether, even if a third-party funder is engaged, it would be necessary for a PCO to be obtained. As analysed above, in the case of a pure third-party funder, it seems unlikely that any costs would be ordered against it.
Result
[78] The application by BT Mining Ltd, the sixth defendant, for a decision on questions to be tried separately (r 10.15) is declined.
[79] The application (in the alternative) by BT Mining Ltd, the sixth defendant, for an order for security for costs (r 5.45) is declined.
[80]The application by the plaintiff, Mr Smith, for a split trial (r 10.15) is declined.
[81] The applications for protective costs orders by the plaintiff, Mr Smith, are declined.
[82] As to costs, I find that there is to be no order as to costs in relation to the applications (all of which are declined). Costs are to lie where they fall.
Andrew J
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