To: Instructing Solicitor From: Trainee Solicitor Date: 24 May 2024 Re: Potential claims by Ngāti Waewae against Pedro Petrol and Storage Solutions Ltd
1. Introduction
This opinion provides advice on the likely success of legal action by Ngāti Waewae (“the iwi”) following the contamination of its land. It considers two potential claims: an action against Pedro Petrol (“Pedro”) under the rule in Rylands v Fletcher, and an action in negligence against Storage Solutions Ltd (“SS”) based on the principles from Donoghue v Stevenson.
2. Claim against Pedro Petrol under Rylands v Fletcher
The rule in Rylands v Fletcher (1868) imposes strict liability for damage caused by the escape of dangerous things from a person's land. Although absorbed into negligence in Australia, the rule remains a distinct cause of action in New Zealand (see Easton Agriculture Ltd v Manawatu-Wanganui Regional Council [2012]). For the iwi to succeed, it must establish several elements.
2.1 Application of the Rule
- Bringing onto land and accumulation: Pedro brought and stored large quantities of petrol on his land for his business. This element is non-contentious.
- Likely to do mischief if it escapes: Petrol is inherently dangerous and highly likely to cause damage if it escapes. This is also non-contentious.
- Escape: The petrol leaked from Pedro’s land and travelled to the iwi’s land. This is a clear escape and is non-contentious.
- Non-natural use of land: This is a contentious issue. The modern test considers whether the use carries an exceptional risk of danger, going beyond a common or ordinary use of the land (Cambridge Water Co v Eastern Counties Leather plc [1994]). Pedro would argue that operating a rural petrol station is a normal and socially useful activity. However, the iwi can argue that storing such large quantities of a highly flammable and toxic substance creates a special hazard. Given the scale of the operation, a court would likely find this to be a non-natural use, similar to the storage of industrial chemicals in Cambridge Water.
- Foreseeability of damage: The defendant must have been able to foresee the type of damage that occurred as a result of the escape (Cambridge Water). It is clearly foreseeable that an escape of petrol could contaminate nearby land and water, destroying crops. This element should be easily satisfied.
2.2 Potential Defences
Pedro may try to argue the defence of Act of God, citing the 2023 earthquake. This defence requires a natural event of such magnitude that it could not have been reasonably foreseen or guarded against. A magnitude 5.9 earthquake in New Zealand, a country with known seismic activity, is unlikely to meet this high standard. Furthermore, the main rupture occurred much later, weakening this defence. Pedro cannot blame his employee, Steven, as an employer is vicariously liable for an employee’s negligence during their employment.
2.3 Conclusion on Rylands v Fletcher
The iwi has a strong claim against Pedro. The most contentious issue is "non-natural use", but on balance, it is likely to be established. The potential defences appear weak.
3. Claim against Storage Solutions Ltd (SS) in Negligence
The iwi could also sue the tank manufacturer, SS, in negligence, based on the principles established in Donoghue v Stevenson [1932]. This requires proving a duty of care, a breach of that duty, and that the breach caused foreseeable damage.
3.1 Application of Negligence Principles
- Duty of Care: SS, as the manufacturer of a product, owes a duty of care to those who could foreseeably be harmed if the product is defective. This includes neighbouring landowners like the iwi. It is foreseeable that a faulty petrol tank could cause harm to adjacent properties, establishing the necessary proximity for a duty to arise (North Shore City Council v Attorney-General [2012]). This is non-contentious.
- Breach of Duty: This is a contentious issue. SS advertised its tanks as being of the "highest quality". The tank failed after a "relatively small" earthquake. The iwi would argue that a tank sold in New Zealand should be built to withstand such an event and its failure proves it was defective. SS will argue the earthquake was the cause, not its negligence. It will also rely on its warning to Pedro to conduct annual checks. However, a warning does not necessarily absolve a manufacturer from liability for a defective product, especially if the defect created a significant risk of harm.
- Causation and Remoteness: The failure of the tank directly caused the iwi’s losses. The type of harm—property damage from contamination—is a foreseeable consequence of a petrol tank failing. These elements are non-contentious.
3.2 Contentious Issues
SS’s strongest argument is that Pedro’s failure to heed the warning and Steven’s subsequent negligence in performing checks broke the chain of causation (novus actus interveniens). However, the facts state that an early check would have been ineffective. A court might find that the primary cause was the tank's failure and that subsequent negligence by the user is a foreseeable possibility that a manufacturer should account for. A court could decide to apportion liability between SS and Pedro.
3.3 Conclusion on Negligence
The iwi has a good, but not certain, claim against SS. Success will depend on expert evidence about the tank’s quality and whether the warning was sufficient to discharge SS's duty.
4. Potential Remedies
The iwi can claim for the costs of remediation. The $2 million for soil replacement and $5 million for the watering hole are direct physical losses and are likely to be fully recoverable.
The other claimed losses are for pure economic loss. The $10 million in lost revenue and $1 million loss in value for the feijoa trees are due to reputational damage ("unproven concern"), not direct physical harm. Courts are generally reluctant to award damages for this type of loss, as it can be seen as too remote. Similarly, the $2 million diminution in the farm's value may be hard to claim in addition to the full cost of reinstatement. The iwi should be advised that recovery of these economic losses is contentious and less likely.
5. Overall Advice
Ngāti Waewae has viable, though not guaranteed, legal actions against both Pedro Petrol and Storage Solutions Ltd. The claim against Pedro under Rylands v Fletcher appears stronger as it is a strict liability tort, avoiding difficulties in proving fault. The negligence claim against SS is also arguable but faces challenges regarding breach and causation.
A sensible strategy would be to issue proceedings against both parties and let the court determine the apportionment of liability between them. The iwi has a high chance of recovering its direct costs of clean-up, but should be warned that claims for economic loss due to reputational damage are more speculative.
References
Autex Industries Ltd v Auckland City Council [2000] 2 NZLR 257 (CA)
Cambridge Water Co v Eastern Counties Leather plc [1994] 2 AC 264 (HL)
Donoghue v Stevenson [1932] AC 562 (HL)
Easton Agriculture Ltd v Manawatu-Wanganui Regional Council [2012] NZHC 3371
North Shore City Council v Attorney-General [2012] 3 NZLR 341 (SC)
Rylands v Fletcher (1868) LR 3 HL 330
