TO: You FROM: Marama and Suliana (Senior Partners of your law firm) RE: Ngāti Waewae’s ability to sue under Rylands v Fletcher and Donoghue v Stevenson The following facts have been obtained from our client, the iwi Ngāti Waewae, and we seek your legal opinion as to the likely outcome if the iwi took an action to court under the Rylands v Fletcher and Donoghue v Stevenson lines of cases. Pedro Petrol owns a large petrol station. There are underground storage tanks which store large quantities of petrol. The tanks were supplied and installed by Storage Solutions Ltd (SS) in 2022. As part of their contract with Pedro, SS guarantees that any problems with the storage tanks will be repaired for ten years following installation. When Pedro bought the tanks, SS said they were of the highest quality and very safe and strong. They also warned as follows: SS’s tanks are the best in the business. There have not been any leaks from them to date. Just to be safe, we recommend that you perform annual checks on the tanks. If you detect unusually strong smells of petrol from the tanks, please let us know and we can carry out a check and repair of the tanks. In 2023, one year after the tanks were installed, there was a relatively small earthquake (magnitude 5.9) which concerned Pedro as to whether the tanks were still fit for purpose. He immediately asked his employee, Steven Sniffer, to check if there were any unusual smells or fumes coming from the area where the tanks were. Steven thought any checks would not be helpful, as he believed the tanks were meant to be fool- proof. He did not do any check and reported to Pedro that all was fine. However, the earthquake disturbed the ground and caused a small crack along the base of one of the tanks. Petrol began to slowly leak into the ground, but it could not be seen because of how deep the tank was in the ground. Steven was tasked by Pedro to perform annual checks of the tanks. He did do these checks in 2024 and early 2025 but he did them in a very hurried manner. At that time, there was still only a small seepage of petrol which would not have given a strong smell. In late 2025, the crack along the base of the tank ruptured much further. Ten thousand gallons of unleaded petrol escaped from the ruptured tank. The petrol travelled through the subsoil, down into an underground stream that fed a neighbouring watering hole owned by Ngāti Waewae. The watering hole was some 500 metres away from the petrol station. In early 2026, members of Ngāti Waewae noticed that their watering hole was smelling of petrol. The watering hole serviced their commercial orchard which was planted with normal strawberries. They also noticed that their crop of strawberries had all failed. Scientific testing has since confirmed that petrol had destroyed the large strawberry patch. The large strawberry patch has been totally destroyed and will need to be dug up and replaced with new soil. This will cost $2 million. The watering hole will also need to be replaced, which will cost $5 million. 3 The public is also now hesitant to buy the iwi’s strawberries punnets because of an unproven concern that there is petrol in the strawberries. In fact, no strawberries had been harvested from the orchard while there was a leak. The iwi has lost $10 million in revenue as a result. Ngāti Waewae was also thinking of selling the farm. They have been told by a valuer that their farm is now worth $2 million less because of the petrol leak. Ngāti Waewae also had several feijoa trees on the property. They survived the petrol leak and their fruit remains perfectly sellable and healthy. However, the feijoa is worth $1 million less because purchasers are not convinced they are healthy. SS says it should not be liable because it says it gave a clear warning which was ignored. There is evidence that soon after the 2023 earthquake, Pedro opened the manhole for the tanks and did not smell any petrol. The tanks were too far below the ground and the leak was too small at that time for any smell to be detected. However, if a proper check was done after the base of the tank ruptured in 2025, then the leak would have been detected. SS also says the tank was ruptured because of the earthquake and not because it was negligent. Pedro points out that his petrol station is the only one in the rural area. It provides petrol to the local residents and also many farmers in the area. Pedro also says he should not be liable because the earthquake, or his employee, were the culprits. He says his employee should have kept checking the tanks on a more regular basis. Ngāti Waewae has asked your law firm to advise on whether it should bring an action against Pedro Petrol using the Rylands v Fletcher line of cases. Ngāti Waewae also seeks advice on whether it should bring an action against Storage Solutions Ltd (SS) using the Donoghue v Stevenson line of cases. Steven Sniffer has since moved to Iceland and is uncontactable. Write a well-reasoned legal opinion for Marama and Suliana, senior partners of your law firm, that analyses the key issues and comes to justified conclusions as to the likely outcomes. In order to write your legal opinion, you are asked to rely on and only use the following cases that are in your course materials: Rylands v Fletcher CM 73 Donoghue v Stevenson CM 103 Read v Lyons CM 76 Grant v Australian Knitting Mills CM 108 Rickards v Lothian CM 79 Jull v Wilson & Horton Ltd CM 118 Eriksen v Clifton CM 87 Bowen v Paramount Builders Ltd CM 123 Holderness v Goslin CM 87 Cambridge Water Co v Eastern Counties Leathers CM 88 Hamilton v Papakura District Council CM 97 Nottingham Forest Trustee Ltd v Unison Networks Ltd CM 100

LEGAL OPINION

TO: Marama and Suliana, Senior Partners FROM: [Your Name], Legal Assistant DATE: 24 May 2024 RE: Ngāti Waewae: Potential claims against Pedro Petrol and Storage Solutions Ltd

This opinion assesses the legal position of our client, Ngāti Waewae, regarding damage caused by a petrol leak. It considers the likely success of an action against Pedro Petrol under the rule in Rylands v Fletcher and an action against Storage Solutions Ltd (SS) in negligence. This advice is based solely on the provided case materials.

1. Claim against Pedro Petrol under Rylands v Fletcher

The rule in Rylands v Fletcher holds a person strictly liable for damage caused by the escape of a dangerous thing they have brought onto their land. For Ngāti Waewae to succeed, they must establish several elements.

First, Pedro brought onto his land and stored "large quantities of petrol" for the purpose of his business (Rylands v Fletcher). This element is clearly satisfied. Second, petrol is undoubtedly a substance "likely to do mischief if it escapes".

Third, the storage must be a "non-natural use" of the land (Rickards v Lothian). This means a special use that brings increased danger, not an ordinary use or one for the general benefit of the community. While Pedro can argue his rural petrol station benefits the local community, the storage of "large quantities" of a highly flammable substance is likely to be considered a classic example of non-natural use, similar to the storage of chemicals in Cambridge Water Co v Eastern Counties Leathers. The risk involved probably outweighs the community benefit argument.

Fourth, there was an "escape" of the petrol from Pedro’s land to Ngāti Waewae’s property, which is outside his control (Read v Lyons). This is established on the facts.

Finally, the damage must be a foreseeable consequence of the escape (Cambridge Water). It is foreseeable that if large volumes of petrol escape, they will contaminate surrounding land and water, destroying crops. Therefore, the damage to the strawberry patch and watering hole was a foreseeable type of harm.

Pedro may raise two defences. He might claim the 2023 earthquake was an "Act of God". However, for this to succeed, the event must be so exceptional that it could not have been anticipated. A "relatively small" magnitude 5.9 earthquake in New Zealand is arguably not an unforeseeable event, so this defence is unlikely to succeed (Rickards v Lothian). Pedro may also try to blame his employee, Steven Sniffer. However, the defence of "act of a stranger" does not apply to the acts of one's own employees. Pedro is vicariously liable for Steven’s negligence in failing to conduct proper checks (Holderness v Goslin).

Conclusion on Claim against Pedro: Ngāti Waewae has a strong claim against Pedro under Rylands v Fletcher. They are likely to recover the costs for the physical damage to their land and assets. This includes the $2 million to replace the soil, $5 million to replace the watering hole, and the $2 million diminution in the farm's value directly caused by the contamination. However, the $10 million in lost revenue and the $1 million loss in value for the undamaged feijoas are forms of pure economic loss. These losses, arising from public perception rather than direct physical harm, are generally not recoverable in tort and are likely too remote (Nottingham Forest Trustee Ltd v Unison Networks Ltd).

2. Claim against Storage Solutions Ltd (SS) in Negligence

Ngāti Waewae could also pursue a claim in negligence against SS, the manufacturer of the faulty tank. This requires establishing a duty of care, a breach of that duty, and resulting damage.

The key issue is whether SS owed Ngāti Waewae a duty of care. Under the "neighbour principle" from Donoghue v Stevenson, a manufacturer owes a duty to the ultimate consumer to prevent harm from its products. This duty extends to those who are "so closely and directly affected" by their acts, which would include neighbouring landowners like Ngāti Waewae who could be foreseeably harmed by a defective tank (Bowen v Paramount Builders Ltd).

SS will argue that the duty is negated by the opportunity for intermediate examination. They provided a warning and recommended annual checks. However, a warning does not automatically absolve a defendant of liability. The warning must be sufficient to communicate the risk, and the defendant must have a reasonable expectation it will be heeded (Jull v Wilson & Horton Ltd). SS stated their tanks were the "best in the business" and had "not been any leaks", which may have understated the risk. It is arguable that SS should have foreseen that checks might be done negligently or not at all. Furthermore, the facts state that even a prompt check after the earthquake would not have revealed the initial small leak. This weakens the argument that an examination would have prevented the harm.

If a duty is established, a breach occurred if the tank was not built to a standard capable of withstanding a "relatively small" earthquake. Causation would likely be established, as the defective tank was a direct cause of the loss. SS’s attempt to blame the earthquake would likely fail if the tank's design was inadequate for foreseeable seismic events.

Conclusion on Claim against SS: This claim is less certain than the one against Pedro. SS has a credible defence based on the warning and the opportunity for intermediate examination by Pedro’s employee. However, the insufficiency of the warning and the initial undetectability of the leak provide Ngāti Waewae with an arguable case. If successful, the recoverable damages would be the same as in the claim against Pedro: the costs for physical damage and directly consequential economic loss, but not the pure economic loss from reputational damage.

References

Bowen v Paramount Builders Ltd [1977] 1 NZLR 394 (CA).

Cambridge Water Co v Eastern Counties Leathers 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 [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 & Horton Ltd [1968] NZLR 88 (SC).

Nottingham Forest Trustee Ltd v Unison Networks Ltd [2017] NZSC 80.

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.