**TO:** Marama and Suliana, Senior Partners
**FROM:** [Your Name], Legal Assistant
**DATE:** 21 May 2024
**RE:** Ngāti Waewae’s ability to sue under *Rylands v Fletcher* and *Donoghue v Stevenson*
1. Introduction
This opinion provides an analysis of the legal position of our client, Ngāti Waewae, in relation to damage caused by a petrol leak from a neighbouring property. Specifically, it assesses the prospects of a successful claim against Pedro Petrol (Pedro) under the rule in *Rylands v Fletcher* and a claim against Storage Solutions Ltd (SS) in negligence, following the principles in *Donoghue v Stevenson*. This advice is based solely on the provided facts and list of authorities.
2. Claim against Pedro Petrol under Rylands v Fletcher
The rule in *Rylands v Fletcher* (CM 73) imposes strict liability on a person who, for their own purposes, brings on their land and collects and keeps there anything likely to do mischief if it escapes. Should it escape, they are prima facie answerable for all the damage which is the natural consequence of its escape. For Ngāti Waewae to succeed, several elements must be established.
2.1. Accumulation of a Dangerous Thing
Pedro accumulated large quantities of petrol in underground tanks on his property. Petrol is undoubtedly a substance “likely to do mischief if it escapes” due to its flammable and toxic nature. This element is clearly satisfied.
2.2. Non-Natural Use of Land
The key question is whether storing large quantities of petrol for a commercial petrol station constitutes a “non-natural use” of the land. In *Rickards v Lothian* (CM 79), the provision of a domestic water supply was considered a natural use. However, the House of Lords in *Cambridge Water Co v Eastern Counties Leathers* (CM 88) held that the storage of substantial quantities of chemicals on industrial premises was a “classic case of non-natural use”.
Pedro may argue that his petrol station provides an essential service to a rural community, making its use ordinary or natural. However, the scale of the operation is critical. The storage of “large quantities” of petrol, specifically 10,000 gallons escaping from one tank, suggests an industrial-level accumulation rather than a simple domestic or ordinary use. On balance, drawing from the reasoning in *Cambridge Water*, a court would likely find that this constitutes a non-natural use of the land.
2.3. Escape
There must be an escape of the substance from a place the defendant occupies or controls to a place outside their occupation or control (*Read v Lyons* CM 76). The petrol leaked from Pedro’s underground tanks, travelled through the subsoil, and contaminated Ngāti Waewae’s watering hole 500 metres away. This is a clear escape.
2.4. Foreseeability of Damage
Following *Cambridge Water*, liability under *Rylands v Fletcher* is only for damage that is a foreseeable consequence of the escape. It is entirely foreseeable that an escape of large quantities of petrol could contaminate adjacent land and water sources, leading to the destruction of crops and property. The damage suffered by Ngāti Waewae—the destruction of the strawberry patch and poisoning of the watering hole—is of a type that was reasonably foreseeable. This is distinguishable from *Hamilton v Papakura District Council* (CM 97), where the damage to unusually sensitive crops was not foreseeable. Ngāti Waewae’s strawberries were “normal”, so this foreseeability requirement appears to be met.
2.5. Potential Defences
Pedro may raise two potential defences.
First, **Act of God**. This defence requires an event of nature so powerful that its consequences could not have been prevented by reasonable care (*Nottingham Forest Trustee Ltd v Unison Networks Ltd* CM 100). The 5.9 magnitude earthquake was described as “relatively small”. Earthquakes are a known and foreseeable risk in New Zealand. A defendant is expected to take reasonable precautions against such foreseeable events. It is unlikely a court would consider this earthquake to be an Act of God sufficient to negate liability.
Second, **Act of a Stranger**. Pedro might blame his employee, Steven Sniffer, for the failure to conduct proper checks. However, this defence applies to the unforeseeable acts of a third party over whom the defendant has no control (*Rickards v Lothian*). An employee is not a “stranger” for these purposes. Steven’s negligence in failing to perform his duties would likely be attributed to his employer, Pedro, under the principles of vicarious liability. Therefore, this defence would fail.
2.6. Conclusion on the Claim against Pedro
Ngāti Waewae has a strong claim against Pedro under the rule in *Rylands v Fletcher*. The core elements of the tort appear to be satisfied, and Pedro’s potential defences are unlikely to succeed.
3. Claim against Storage Solutions Ltd (SS) in Negligence
Ngāti Waewae may also consider a claim in negligence against SS, the manufacturer and installer of the faulty tank, based on the “neighbour principle” established in *Donoghue v Stevenson* (CM 103).
3.1. Duty of Care
SS, as a manufacturer, owes a duty of care to the ultimate consumers of its products. The neighbour principle requires a duty to persons “so closely and directly affected” by one’s act that they should be in reasonable contemplation. This principle was extended in *Grant v Australian Knitting Mills* (CM 108) and applied in New Zealand to builders in *Bowen v Paramount Builders Ltd* (CM 123), establishing a duty to subsequent owners for defects causing physical damage.
By analogy, SS, as the manufacturer of a large tank designed to hold a dangerous substance, should reasonably foresee that a defect in that tank could cause property damage to neighbouring landowners like Ngāti Waewae. Therefore, it is likely a court would find that SS owed Ngāti Waewae a duty of care.
3.2. Breach of Duty
The issue here is whether SS breached its duty by supplying a defective tank and whether its warning was sufficient to discharge its duty. SS claimed its tanks were of the “highest quality”, which sets a high standard. A tank of such quality should arguably withstand a “relatively small” and foreseeable seismic event. The fact it developed a crack suggests a potential manufacturing or installation defect.
However, SS will argue that its warning to conduct annual checks and report smells, coupled with the opportunity for intermediate examination, absolves it of liability. In *Jull v Wilson & Horton Ltd* (CM 118), a warning about a product’s potential defects was held to be a relevant factor that could limit or negate the duty of care. SS provided a warning.
The effectiveness of this warning is debatable. It was general in nature (“Just to be safe…”). Crucially, the facts state that even if an initial check was done after the earthquake, the leak was too small to be detected by smell, the very method SS advised. This suggests that the opportunity for “intermediate examination” as contemplated in *Donoghue* was not realistic or effective in this case, as the defect was latent and not discoverable by the means suggested. SS might have needed to provide a more specific warning about the limits of seismic resistance or recommend more sophisticated checks than a simple “sniff test”.
3.3. Causation
SS will argue that the chain of causation was broken by two intervening events: the earthquake and Steven’s negligence. The earthquake argument is weak, as it was a foreseeable event that arguably exposed a pre-existing defect. Steven’s failure to conduct proper checks in 2024 and 2025 is more problematic for Ngāti Waewae’s claim. However, had the tank not been defective in the first place, Steven’s negligence would not have resulted in any damage. A court may find that both SS’s initial breach and Steven’s subsequent negligence were contributing causes of the damage, and could apportion liability accordingly. The causal link between SS’s potential breach and the damage is therefore arguable.
3.4. Conclusion on the Claim against SS
This claim is less straightforward than the one against Pedro. While a duty of care is likely owed, SS has a credible defence based on its warning and the intervening negligence of Pedro’s employee. The success of the claim may depend on whether the court finds the tank was inherently defective and whether the warning given by SS was sufficient in the circumstances.
4. Recoverable Damages
If successful, Ngāti Waewae would likely recover the costs of the physical damage to its property. This includes:
* Cost to replace the strawberry patch: $2 million.
* Cost to replace the watering hole: $5 million.
Recovery for the other losses, which are forms of pure economic loss, is more uncertain:
* Lost revenue due to public hesitancy: $10 million.
* Diminution in farm value: $2 million.
* Loss of value of feijoas due to market perception: $1 million.
Courts are traditionally reluctant to award damages for pure economic loss in tort. While the claim for diminution in value is connected to the physical damage, the losses from public perception are more remote and may not be recoverable.
5. Overall Recommendation
1. Ngāti Waewae has a **strong** prospect of succeeding in a claim against Pedro under *Rylands v Fletcher*. The elements are well-established on the facts, and his defences appear weak.
2. The claim against SS in negligence is **arguable but more challenging**. Success will depend on proving the tank was defective and overcoming SS’s argument that its warning and the opportunity for intermediate examination negate its liability.
3. We should advise Ngāti Waewae that recovery for the $7 million in direct physical damage is likely. Recovery for the $13 million in economic losses is significantly less certain.
Proceeding against Pedro offers the most direct path to compensation for the core physical damage.
References
- Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA).
- Cambridge Water Co Ltd v Eastern Counties Leather plc [1994] 2 AC 264 (HL).
- Donoghue v Stevenson [1932] AC 562 (HL).
- Eriksen v Clifton [1963] NZLR 705 (SC).
- Grant v Australian Knitting Mills Ltd [1936] AC 85 (PC).
- Hamilton v Papakura District Council [2002] 3 NZLR 308 (PC).
- Holderness v Goslin [1975] 2 NZLR 46 (SC).
- Jull v Wilson and Horton Ltd [2005] 3 NZLR 21 (CA). (Note: This citation appears to have an incorrect year in standard databases; it is more commonly cited as a 1968 case, but I will use the prompt’s apparent context). *Assuming prompt’s CM pack refers to a specific printing or casebook version*.
- Nottingham Forest Trustee Ltd v Unison Networks Ltd [2017] NZHC 1600.
- Read v J Lyons & Co Ltd [1947] AC 156 (HL).
- Rickards v Lothian [1913] AC 263 (PC).
- Rylands v Fletcher (1868) LR 3 HL 330.
