On 15 March 2022, the Full Federal Court delivered its unanimous judgment in Minister for the Environment v Sharma [2022] FCAFC 35 (Sharma). The appeal overturned the primary judge’s finding that the Commonwealth Minister for the Environment (Minister) owed a novel duty of care at common law to Australian children who might suffer potential harm from the climate change implications of exercising her powers under the Environment Protection and Biodiversity Conservations Act 1999 (Cth) (EPBC Act). 

This article summarises the Full Court’s decision in finding that the duty of care should not be imposed on the Minister and outlines key insights regarding this decision and what it means in the context of the rise in climate change litigation both in Australia and overseas.

Overview of the Sharma judgement 

Key facts

The primary judgment in Sharma concerned a negligence claim brought on behalf of eight Australian children against the Minister.  They successfully sought a declaration that the Minister owed them and other Australian children a duty to take reasonable care to protect them from climate change harm. This was specifically concerning exercising her powers under the EPBC Act in deciding whether to approve an extension to the Vickey coal mine in NSW.

The relevant duty was expressed to require the Minister to take reasonable care to avoid causing personal injury or death to Australian children arising from the emissions of carbon dioxide into the Earth’s atmosphere from the extension of the mine. In making his decision, the primary judge rejected a claim for an injunction on the ground that the children had not established that it was probable that the Minister would breach the duty of care in making her decision as to whether or not to approve the extension.

The Minister appealed the decision arguing that the duty should not be imposed on the Minister. The Full Federal Court comprising Allsop CJ, Beach J and Wheelahan J upheld the Minister’s appeal, unanimously finding that the duty should not be imposed on the Minister. Each judge emphasised different reasons as to why the duty should not be imposed. The key reasoning of each member of the Court is summarised below.

Allsop CJ

The Chief Justice held that the duty should not be imposed for a number of reasons, including that:

• The scope and content of the duty of care concerned ‘core’ policy considerations which were unsuitable for judicial determination. In particular, His Honour noted that the duty of care was framed by reference to contributing carbon dioxide emissions into the atmosphere, and that any asserted breach of that duty would concern the proper policy response to climate change. His Honour determined this consideration was not appropriate to be resolved by the judiciary in private litigation. This echoes the comments made in the New Zealand case, Smith v Fonterra Co-operative Group Ltd [2021] NZCA 552, regarding the inappropriateness of tort law for engendering a change in public policy about climate change.
• The duty of care was inconsistent with the statutory purpose of the EPBC Act. His Honour noted that the Minister’s responsibility in making the approval decision under the EPBC Act was confined to specific matters of national environmental significance, which in this case concerned listed threatened species and communities and water resources.

Having regard to the text, purpose and context of the EPBC Act, Allsop CJ held that the protection of the interests and safety of human beings in the environment was not a primary object of the EPBC Act, nor was human safety an implied mandatory consideration in the exercise of the Minister’s statutory powers.

• The relationship between the Minister and the Australian children was inappropriate to impose a duty of care having regard to various considerations including:
  • that the width of the Minister’s liability was indeterminate in number and nature,
  • there was a lack of special vulnerability of the children who were in the same position as other people exposed to the hazards of climate change, and
  • there was a lack of control of the Minister over the harm arising from climate change.

Allsop CJ concluded that these considerations reflected ‘the essential problem’ with the duty of care, which was that the relationship which underpinned the duty was one between the government and the governed, and that relationship lacked the relevant proximity necessary for the imposition of the duty of care.

Beach J

In agreeing that the duty of care should not be imposed, Beach J similarly emphasised the fact that there was not sufficient closeness or directness between the Minister’s exercise of the statutory power and the likely risk of harm to the respondents.

In addition, His Honour noted that the posited duty would result in indeterminate liability, as:

• the likely number of members of the claimant class with the requisite characteristics was not easily ascertained, and
• the nature of climate change, which is not limited to a single catastrophic event, impacted the nature and extent of prospective liability.

Despite this, His Honour acknowledged the necessity of taking immediate action to limit greenhouse gas emissions and commended the trial judge for planting the seed of a novel duty of care in this area. However, His Honour noted that it was a matter for the High Court to “engineer new seed varieties for sustainable duties of care”, and to modify existing concepts such as “sufficient closeness and directness” and “indeterminacy” to adequately address the accelerating complexity of causal relations.

This is particularly relevant in the realm of climate change where acts or omissions have wide-scale consequences that transcend traditional causal pathways.

Wheelahan J

Wheelahan J found that the duty of care did not arise for three reasons.

First, his Honour held that an examination of the EPBC Act was critical in determining whether a common law duty of care arose regarding the Minister’s decision-making function under the EPBC Act. His Honour held that the Minister’s function under the EPBC Act did not facilitate any relationship between the Minister and the children that would give rise to the duty of care.

In addition, His Honour was of the view that there was an incoherence between the duty and the discharge of the Minister’s functions, which involves consideration of political matters uniquely suited to elected representatives and the executive government responsible for policy-making.

Finally, His Honour was not persuaded that it was reasonably foreseeable that the approval of the extension would cause personal injury to the children as the concept of causation is understood for the common law of negligence. While His Honour noted a submission raised by senior counsel for the respondents that just because it may be difficult to prove now, did not mean that the risk of injuries from CO2 emissions resulting from the extension was not reasonably foreseeable at the duty stage, ultimately he held that this emphasised the ‘dangers of assessing fragmented liability issues decades before any cause of action accrues.’

Climate science accepted

One particularly interesting aspect of the Sharma case is that the scientific evidence led at first instance by the applicants (about the impacts of climate change under different global warming scenarios and the impact of the mine’s approval on the global “carbon budget”), was not challenged by the Minister.

On appeal, the Minister raised a number of grounds that went to factual errors or mischaracterisations purportedly made by the primary judge in his findings as to the climate science. All three appeal judges resoundingly rejected these grounds of appeal making it clear that, on the evidence presented by Professor Steffen on behalf of the children, it was open for the primary judge to construe the risks as he did.

This treatment of the evidence on climate change is consistent with the recent claim against the NSW Environmental Protection Authority (EPA) by the Bushfire Survivors for Climate Action which allowed evidence to be presented from former Australian Chief Scientist, Penny Sackett, on climate change impacts. That evidence was ultimately not challenged by the EPA. In that case, the Chief Judge of the Land and Environment Court held that the EPA had failed to develop environmental quality objectives, guidelines and policies to ensure environment protection from climate change and ordered the EPA to develop those instruments (Bushfire Survivors for Climate Action Inc v Environmental Protection Authority [2021] NSWLEC 92). 

Insights

How does the Sharma decision fit in with the increasing body of climate change litigation both in Australia and overseas?

• While the Full Federal Court denied that a duty of care existed in the context of the EPBC Act, climate change litigation remains a key trend in Australia, and companies should be aware that stakeholders have other legal avenues to pursue climate change actions. There are currently numerous climate change cases currently on foot in Australia spanning a wide variety of areas.
  
  Two relevant examples include:
  • a class action commenced in 2021 by two indigenous leaders from the Torres Strait Islands against the Australian government, alleging the government owes a duty of care to all Torres Strait Islanders to take reasonable steps to protect them, their culture, and their environment from harms caused by climate change (Pabai & Kabai v Commonwealth, VID 622/2021), 
  • in August 2021, the Australian Centre for Corporate Responsibility commenced proceedings against gas company Santos Limited, alleging that Santos engaged in misleading or deceptive conduct regarding its claims that natural gas provides clean energy and that it has a plan for ‘net-zero’ emissions by 2040 (Australasian Centre for Corporate Responsibility v Santos Ltd, NSD 858/2021). 
• We expect that Australian governments and companies – particularly those in energy and consumer-facing industries – will increasingly be a target for litigants including class action litigants bringing novel climate-related claims.
• Similarly, climate change litigation is also heating up overseas. In 2021, the Hague District Court of the Netherlands ordered gas company Shell to reduce its emissions by 45% by 2030, relative to 2019 to discharge its duty of care under the Dutch Civil Code. In contrast to the EPBC Act, the Dutch Civil Code contains express human rights provisions which allowed for a duty of care to be found.
• Shareholder litigation has also recently been commenced against Shell in the United Kingdom. In this action, ClientEarth has notified Shell of a claim against its board of directors alleging a breach of directors duties. The claim alleges that, by failing to implement a Paris Agreement aligned strategy to limit global warming, the Shell board is breaching its duties under the UK Companies Act to act in a way that promotes the company’s success, and to exercise reasonable care, skill and diligence.

What can Australian companies do to mitigate the risk of climate litigation? 

Climate litigation is a real risk, not only for companies that undertake activities that generate significant scope 1, 2 and 3 GHG emissions, but also those that finance and provide services to high emitters and those that make claims about their GHG emission reduction strategies and targets.

Below are some steps companies can implement to mitigate the risk of climate litigation:

• identify areas within the organisation that may be at a greater risk of potential climate litigation claims, for example, particular activities that contribute to climate change directly or indirectly;
• ensure that the company’s climate-related claims and statements are accurate and can be substantiated to avoid claims of green-washing;
• establish governance structures to facilitate the discussion and oversight of climate-related risks and opportunities at the board and executive level, and ensure that the board is aware of its responsibilities regarding climate-related disclosures; and
• develop an action plan to engage proactively with stakeholders and manage risk in case a climate dispute is commenced. 

Authors: Ilona Millar, Philippa Hofbrucker, Elizabeth Jones, Nina Pearse and Shanae Streeter.