In the matter of AUSTRALIAN COMPETITION & CONSUMER COMMISSION v COLES SUPERMARKETS AUSTRALIA PTY LTD and AUSTRALIAN COMPETITION & CONSUMER COMMISSION v WOOLWORTHS GROUP LIMITED

By 2022-2023 Coles Supermarkets Pty Ltd and Woolworths Group Limited collectively accounted for approximately 67% of national supermarket retail sales and over 57% of national take-home food and grocery sales.

According to the ACCC Supermarket Inquiry 2024-25 Interim Report (August 2024) the two groups have achieved this by increasing their number of stores, expanding their geographic coverage and increasing the number of supermarkets in existing coverage areas. They have also expanded their businesses into broader “ecosystems”, supplying an increasing range of products and services in related or adjacent markets. So that in rural and regional Australia either Coles or Woolworths supermarkets are sometimes the only source supermarket shopping.

COLES

On 27 August 2024 the company secretary released to the market the 2024 Full Year Results Presentation for Coles Group Limited. 

This presentation revealed that Coles 2023-24 reported group earnings before interest and taxes (EBIT) totalled $2,057 million, with underlying EBIT at $2,175 million, and the group's total sales revenue came in at $43.57 billion.

Across its supermarket and liquor outlets online & e-commerce sales, growth reached +30.1% and +9.2% respectively. With Exclusive to Coles brand sales grew by 6.6%.

Highlighting the fact that it was "Delivering value":

✓ ‘Great Value, Hands Down’ campaigns, every day low prices, weekly specials and promotions

✓ Launched >1,100 Exclusive to Coles and 244 Exclusive Liquor Brand products

✓ National roll out of instant $10 off at checkout for Flybuys members

So proud was the Cole's Group of its Great Value, Hands Down’ campaigns that it even supplied a graphic:

The Coles Group net profit after tax in 2023-34 was $1.11 billion.

WOOLWORTHS

A day later on 28 August 2024 the Woolworths Group released to the market itsF24 Full Year Profit and Dividend Announcement.

In a more restrained presentation (no colourful graphics) it informed the market that the Woolworths Group 2023-24 reported group earnings before interest and taxes (EBIT) totalled $3,223 million, with an EBITA at $6,001 million ($4,821 million being assigned to Woolworths Food Retail), and the group's total sales revenue came in at $68.9 billion ($50.2 billion being Woolworths Food Retail sales revenue) .

In the 2023-24 financial year Woolworths Group sales were reported as growing by 3%, which included strong digital and e-commerce growth. While Food Retail sales growth came in at 3.4%.

The Woolworths Group reported in its presentation that:

"...inflation in our Food businesses and BIG W moderated significantly as we lowered prices and passed on lower cost prices to customers. Average prices in Woolworths Food Retail in Q3 and Q4 were down 0.2% and 0.6% respectively on the prior year",

and further into the document pointed out that:

"average prices in Q4 decreasing by 0.6% compared to the prior year".

The Woolworths Group net profit after tax in 2023-34 was $1.08 billion.

Both supermarket giants professed general satisfaction with their respective financial situations - despite the est. $1.6 billion in write downs affecting Woolworths bottom line - and to ordinary Australian households still experiencing cost-of-living headwinds these supermarkets appeared to be doing very well.

In Australia cost-of-living stress has been an ongoing issue for the last twenty months - when first the Russian invasion of Ukraine was followed by successive Australian Reserve Bank interests rate rises, along with domestic adverse weather events, which affected supply, transport and costs for a wide range of goods & services.

So when this made the news, it confirmed what many had begun to suspect.

AUSTRALIAN COMPETITION & CONSUMER COMMISSION v COLES SUPERMARKETS AUSTRALIA PTY LTD (ACN 004 189 708) and AUSTRALIAN COMPETITION & CONSUMER COMMISSION v WOOLWORTHS GROUP LIMITED (ACN 000 014 675) currently before the Federal Court of Australia - Victoria Registry - filed 23 September 2024.

Australian Competition & Consumer Commission (ACCC), media release, 23 September 2024:

ACCC takes Woolworths and Coles to court over alleged misleading ‘Prices Dropped’ and ‘Down Down’ claims

The ACCC has commenced separate proceedings in the Federal Court against Woolworths Group Limited (Woolworths) (ASX: WOW) and Coles Supermarkets Australia Pty Ltd (Coles) (a subsidiary of Coles Group Limited - ASX: COL) for allegedly breaching the Australian Consumer Law by misleading consumers through discount pricing claims on hundreds of common supermarket products.

The ACCC’s allegations relate to products sold by each of Woolworths and Coles at regular long-term prices which remained the same, excluding short-term specials, for at least six months and in many cases for at least a year.

The products were then subject to price rises of at least 15 per cent for brief periods, before being placed in Woolworths’ ‘Prices Dropped’ promotion and Coles’ ‘Down Down’ promotion, at prices lower than during the price spike but higher than, or the same as, the regular price that applied before the price spike.

“Following many years of marketing campaigns by Woolworths and Coles, Australian consumers have come to understand that the ‘Prices Dropped’ and ‘Down Down’ promotions relate to a sustained reduction in the regular prices of supermarket products. However, in the case of these products, we allege the new ‘Prices Dropped’ and ‘Down Down’ promotional prices were actually higher than, or the same as, the previous regular price,” ACCC Chair Gina Cass-Gottlieb said.

“We allege that each of Woolworths and Coles breached the Australian Consumer Law by making misleading claims about discounts, when the discounts were, in fact, illusory.”

“We also allege that in many cases both Woolworths and Coles had already planned to later place the products on a ‘Prices Dropped’ or ‘Down Down’ promotion before the price spike, and implemented the temporary price spike for the purpose of establishing a higher ‘was’ price,” Ms Cass-Gottlieb said.

The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months. The representations were made on pricing tickets displayed to consumers in-store on supermarket shelves and online, usually with a ‘was’ price displayed showing what the price was during the short-term price spike and the date of that price.

The ACCC identified this conduct through consumer contacts to the ACCC and social media monitoring, and then conducted an in-depth investigation using its compulsory powers.

“Many consumers rely on discounts to help their grocery budgets stretch further, particularly during this time of cost of living pressures. It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims,” Ms Cass-Gottlieb said.

“We allege these misleading claims about illusory discounts diminished the ability of consumers to make informed choices about what products to buy, and where.”

The ACCC estimates that Woolworths and Coles sold tens of millions of the affected products and derived significant revenue from those sales.

The ACCC is seeking declarations, penalties, costs and other orders. The ACCC is also seeking community service orders that Woolworths and Coles must each fund a registered charity to deliver meals to Australians in need, in addition to their pre-existing charitable meal delivery programs.

Alleged conduct

The ACCC alleges that the supermarkets offered certain products at a regular price for at least 180 days. They then increased the price of the product by at least 15 per cent for a relatively short period of time, and subsequently placed it onto their ‘Prices Dropped’ or ‘Down Down’ program.

The ACCC alleges the display of the Prices Dropped and Down Down tickets was misleading, as the price of the products was in fact higher than or the same as the regular price at which the supermarket had previously offered the products for sale.

Alleged conduct by Woolworths

The ACCC alleges that Woolworths made false or misleading representations to consumers about the prices of 266 products during the period between September 2021 and May 2023.

Products affected include Arnott’s Tim Tams biscuits, Dolmio sauces, Doritos salsa, Energizer batteries, Friskies cat food, Kellogg’s cereal, President butter, Listerine mouthwash, Moccona coffee capsules, Mother energy drinks, Mr Chen’s noodles, Nicorette patches, Ocean Blue smoked salmon, Oreo cookies, Palmolive dishwashing liquid, Raid insect spray, Sprite soft drink, Stayfree pads, Twisties, Uncle Tobys muesli bars, and Vicks VapoDrops.

Example - Oreo Family Pack Original 370g

[A graph showing the pricing movement of Oreos Family Pack Original cookies from January 2021 to May 2023]

From at least 1 January 2021 until 27 November 2022, Woolworths offered the Oreo Family Pack Original 370g product for sale at a regular price of $3.50 on a pre-existing ‘Prices Dropped’ promotion for at least 696 days.

On 28 November 2022, the price was increased to $5.00 for a period of 22 days. On 20 December 2022, the product was placed on a ‘Prices Dropped’ promotion with the tickets showing a ‘Prices Dropped’ price of $4.50 and a ‘was’ price of $5.00. The ‘Prices Dropped’ price of $4.50 was in fact 29 per cent higher than the product’s previous regular price of $3.50.

In this example, the ACCC alleges Woolworths had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’. Woolworths had decided (after a request from the supplier for a price increase) on or around 18 November 2022 to take the product off ‘Prices Dropped’, increase the price, and then put the product back on to ‘Prices Dropped’ three weeks later.

Alleged conduct by Coles

The ACCC alleges that Coles made false or misleading representations to consumers about the prices of 245 products during the period between February 2022 and May 2023.

Products include Arnott’s Shapes biscuits, Band-Aids, Bega cheese, Cadbury chocolates, Coca Cola soft drink, Colgate toothpaste, Danone yoghurt, Dettol multi-purpose wipes, Fab laundry liquid, Karicare formula, Kellogg’s snack bars, Kleenex tissues, Libra tampons, Lurpak butter, Maggi two-minute noodles, Nature’s Gift dog food, Nescafe instant coffee, Palmolive shampoo, Rexona deodorant, Sakata rice crackers, Sanitarium Weet-Bix cereal, Strepsils lozenges, Sunrice rice, Tena pads, Viva paper towels, Whiskas cat food, and Zafarelli pasta.

Example Strepsils Throat Lozenges Honey & Lemon 16 pack 

[A graph showing the pricing movement of Strepsils Throat Lozenges Honey & Lemon 16 pack from January 2021 to May 2023]

From at least 1 January 2021 until 11 October 2022, Coles offered the Strepsils Throat Lozenges Honey & Lemon 16 pack product for sale at a regular price of $5.50 (on a pre-existing ‘Down Down’ promotion) for at least 649 days, including one seven-day short-term special.

On 12 October 2022, the price was then increased to $7.00 for a period of 28 days. On 9 November 2022, the product was placed on a ‘Down Down’ promotion with the tickets showing a ‘Down Down’ price of $6.00 and a ‘was’ price of $7.00. The ‘Down Down’ price of $6.00 was in fact 9 per cent higher than the product’s previous regular price of $5.50.

In this example, the ACCC alleges Coles had planned the temporary price spike to establish a new higher ‘was’ price for the subsequent ‘promotion’. Coles had decided (after a request from the supplier for a price increase) on or around 7 October 2022 to take the product off ‘Down Down’, increase the price, and then put the product back on to ‘Down Down’ four weeks later.

ACCC Supermarkets inquiry

The ACCC was directed by the Treasurer in January 2024 to conduct an inquiry into the Australian supermarket sector, pricing practices and the relationship between wholesale, farmgate and retail prices.

The ACCC’s investigation into the conduct which is the subject of these proceedings pre-dates this inquiry. The inquiry will not consider the issues in dispute in these proceedings.

Note to editors

The ACCC does not regulate supermarket prices.

The ACCC has taken proceedings in respect of alleged breaches of the Australian Consumer Law, which provides that businesses must not make false or misleading statements about prices.

Separate proceedings are brought against Woolworths and Coles, and the ACCC is not making any allegation of any collusion or anti-competitive conduct by Woolworths and Coles as part of these proceedings.

The ACCC is not alleging any contravention of the ACL by any of Woolworths’ and Coles’ suppliers in these proceedings.

The maximum penalty for each breach of the Australian Consumer Law increased on 10 November 2022, part way through the period of the alleged conduct. For contraventions from 10 November 2022, the maximum penalty is the greater of:

• $50,000,000

• if the Court can determine the value of the 'reasonably attributable' benefit obtained, three times that value, or

• if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30 per cent of the corporation's adjusted turnover during the breach turnover period for the contravention.

Any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings. The ACCC will not comment on what penalties the Court may impose.

Background

Woolworths runs the largest supermarket chain in Australia, with about 1,140 Woolworths supermarket stores across the country.

The ‘Prices Dropped’ Program is promoted by Woolworths as a shelf price reduction program designed to offer Woolworths’ customers consistently low prices over a prolonged period. The objective of the Prices Dropped Program was to lower the standard shelf price of a product from its previous standard (or regular) shelf price.

Example of a Prices Dropped ticket

Coles is the second-largest supermarket chain in Australia, operating more than 840 stores nationally.

Coles introduced the ‘Down Down’ Program in June 2010 and marketed it as a promotional campaign designed to reduce the regular shelf price of commonly purchased products — thereby offering customers predictable and reliable value on the items they purchased the most and reducing the cost of their shopping basket.

Example of a Down Down ticket

Separate to these proceedings, in December 2023, following a complaint by CHOICE and an investigation by the ACCC, Coles announced refunds for thousands of customers after it raised the price on 20 products that it had promised would remain ‘locked’ for a certain period of time as part of Coles’ ‘Dropped and Locked’ promotion.

Concise statements

ACCC v Coles - Concise Statement ( PDF 662.68 KB )

ACCCv Woolworths - Concise Statement ( PDF 727.3 KB )

These documents contain the ACCC’s initiating court documents in relation to these matters. We will not be uploading further documents in the event these initial documents are subsequently amended.

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The Guardian, 23 September 2024, excerpt:

“Coles sought to strike an appropriate balance between managing the impact of cost price increases on retail prices and offering value to customers through the recommencement of promotional activity as soon as possible after the establishment of the new non-promotional price.”

Woolworths said it would “carefully review the claims”.

“Our customers are telling us they want us to work even harder to deliver meaningful value to them and it’s important they can trust the value they see when shopping our stores,” Woolworths said.

Federal Court of Australia dismisses historic logging case, January 2024

 

On 10 January 2024 the Federal Court of Australia handed down its judgement in North East Forest Alliance Inc v Commonwealth of Australia [2024] FCA 5.

In part the judgment read:

10 CONCLUSION

1. INTRODUCTION AND SUMMARY OF CONCLUSIONS

1 On 31 March 2000, the first respondent, the Commonwealth, and the second respondent, the State of New South Wales (NSW or the State), entered into an intergovernmental agreement being the Regional Forest Agreement for North East New South Wales (Upper North East and Lower North East) (the NE RFA). The purpose of the NE RFA included establishing “the framework for the management of the forests of the Upper North East and Lower North East regions”: recital 1A of the NE RFA. The NE RFA provided that it was to remain in force for 20 years from 31 March 2000, unless terminated earlier or extended in accordance with its provisions: clause 6 of the NE RFA. Subsequently, the Commonwealth Parliament enacted the Regional Forest Agreements Act 2002 (Cth) (RFA Act). A primary purpose of the RFA Act is to reinforce the certainty which the NE RFA and other RFAs between the Commonwealth and States were intended to provide for regional forestry management by “giv[ing] effect to certain obligations of the Commonwealth under Regional Forest Agreements”: s 3(a) of the RFA Act.

2 Shortly before the expiry of the 20 year period for the NE RFA, on 28 November 2019 the respondents executed the “Deed of variation in relation to the Regional Forest Agreement for the North East Region” (the Variation Deed). The Variation Deed stated that it “amend[ed] the Regional Forest Agreement on the terms and conditions contained in this deed”: Variation Deed, Preamble B. As described in further detail below, one effect of the Variation Deed was to extend the NE RFA at least by a further 20 years.

3 The applicant, North East Forest Alliance Incorporated, seeks a declaration pursuant to s 39B of the Judiciary Act 1903 (Cth) that the NE RFA as amended by the Variation Deed (the Varied NE RFA) is not a “regional forest agreement” within the meaning of s 4 of the RFA Act. The consequence of so holding would not be that the Varied NE RFA is invalid, as the applicant accepts. Rather, the consequence relevantly would be that neither s 38 of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) nor s 6(4) of the RFA Act would apply so as to exempt forestry operations undertaken in accordance with the Varied NE RFA from the approval processes under Part 3 of the EPBC Act.

4 In essence, the applicant contends that the Varied NE RFA is not an RFA for the purposes of the RFA Act because, in amending the NE RFA, regard was not had to an “assessment” of “environmental values” and “principles of ecologically sustainable management” as required by paragraph (a) of the definition of an RFA in s 4 of the RFA Act. This is because, in the applicant’s submission, of the failure in the materials before the Prime Minister, who executed the Variation Deed on behalf of the Commonwealth, to sufficiently evaluate those matters and to do so on the basis of reasonably contemporaneous information.

5 Those submissions are rejected for the reasons which I develop below. First, properly construed, there is no requirement that regard must be had to an assessment before an RFA is amended, including by extending its term, in order that the intergovernmental agreement continue to meet the definition of an RFA. That requirement applies only where the parties enter into an RFA. Secondly and in any event, there is no implicit requirement that an assessment must be sufficiently evaluative and reasonably contemporaneous in order to satisfy the condition in paragraph (a) of the RFA definition. Rather, the question is whether, objectively speaking, regard was had to assessments of the values and principles referred to in paragraph (a) of the definition of an RFA. Thirdly, applying that test, the evidence establishes that the materials before the Prime Minister, and in particular the “Assessment of matters pertaining to renewal of Regional Forest Agreements” (Assessment Report), addressed each of the values and principles referred to in paragraph (a) of the definition of an RFA. That being so and there being no issue that the Prime Minister had regard to the materials attached to the Prime Minister’s brief, the applicant has not established that the Varied NE RFA is no longer an RFA for the purposes of the RFA Act, even if an assessment was required before the RFA was amended. It follows that the application for relief must be dismissed.

6 Finally, it is important to stress that the effect of an RFA is not to leave a regulatory void with respect to the forest regions covered by the NE RFA. Rather, as I explain below, an RFA provides an alternative mechanism by which the objects of the EPBC Act can be achieved by way of an intergovernmental agreement allocating responsibility to a State for regulation of environmental matters of national environmental significance within an agreed framework. As such, the question of whether or not to enter into or vary an intergovernmental agreement of this nature is essentially a political one, the merits of which are matters for the government parties, and not the Courts, to determine.

In essence the judgment was stating that legislation, rules and regulations governing New South Wales forestry agreements allow for the Commonwealth and the NSW governments to vary agreements as they see fit, regardless of contemporary environmental realities existing within public and private native forests which potentially place natural biodiversity and vulnerable/threatened wildlife species at risk through depletion of flora and fauna habitat or complete loss of habitat.

The judgment also noted that there are clauses within the North East Forest Agreement (NSRFA) which did not create legally binding obligations on either the state government or NSW Forestry Corporation. That there was no requirement that an RFA must impose legally enforceable obligations in order to constitute an RFA for the purposes of the RFA Act. Indeed, that Commonwealth has the ability to pass legislation or subordinate legislation, which are inconsistent with the NE RFA.

These failures of policy and law meant there was no requirement for new comprehensive regional assessments to be undertaken before a variation deed was executed in relation to the NE RFA which covers the NSW North Coast region from South West Rocks to the NSW-Qld border.

The judgement in North East Forest Alliance Inc v Commonwealth of Australia clearly made no finding in relation to the environmental sustainability of logging operations. A fact that the Environmental Defenders Office noted in its response as solicitor for the appellants, North East Forest Alliance Inc.

This did not stop lobby group Forestry Australia quickly sending out a media release misleadingly trumpeting:

"Our Regional Forest Agreements (RFAs) time and time again have proven to be a successful way of sustainably managing Australia’s forests for all their values, and the Federal Court has confirmed this today."

CLIMATE CHANGE STATE OF PLAY 2023: something of more than passing interest you may have missed in a legal judgment this October

 

In the matter of Kathleen O’Donnell versus the Commonwealth Of Australia – 22 July 2020 to 11 October 2023.

Ms. O’Donnell commenced a class action against the Australian Government during a period when Josh Frydenberg was Treasurer, Simon Birmingham was Minister for Finance, Christian Porter was Attorney-General and Prime Minister Scott Morrison had acquired the first two (Health & Finance) of five secret ministries. It was also a period where the nation was still coming to terms with the largescale impacts of climate change-induced megafires in the August 2019- March 2020 fire season.

This class action which ran for over three years eventually caused the Australian Government to declare a potential for financial risks with regard to certain classes of investors in the face of the systemic risk climate change poses to Australia’s financial and economic position.

FEDERAL COURT OF AUSTRALIA

O’DONNELL V COMMONWEALTH OF AUSTRALIA [2023] FCA 1227

ORDERS VID 482 of 2020

Excerpts from the order - all yellow highlighting is my own

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1 This is an application for Court approval of the proposed settlement of a representative proceeding brought under Div 9.2 of the Federal Court Rules 2011 (Cth) (the Rules). The applicant, Kathleen O’Donnell, brings the proceeding against the respondent, the Commonwealth of Australia, doing so on her own behalf and on behalf of all persons who at any time on or since 7 July 2020 have acquired one or more Exchange-traded Australian Government Bonds units (exchange traded government bonds) in the form of an eTIB with code GSIC50; and/or one or more government bonds in the form of an eTB with code GSBE47, and who continue to hold one or more government bond as at the date of the fourth amended pleading, 20 December 2022 (group members).

2 The proceeding relates to the real, but until more recently, underacknowledged risks that climate change poses to Australia’s financial position. It alleges that the Commonwealth published information to investors and potential investors in exchange traded government bonds via “Information Statements”, “Term Sheets”, “Information Memoranda”, and a relevant website, and that the Commonwealth failed to disclose information about:

(a) the alleged physical risks of climate change, meaning impacts caused directly by a changing climate, and associated costs; and/or

(b) the alleged transition risks of climate change, meaning the impact of global and domestic efforts to reduce greenhouse emissions, and associated costs.

3 The proceeding alleges that the existence of those risks mean that there was and is a real, rather than remote, risk that before the maturity dates of the exchange traded government bonds held by the applicant, there will be significantly increased Commonwealth budget deficits (by reason of reduced revenue and increased expenditure) relative to Australia’s annual GDP; and a significant increase in Commonwealth government borrowing, and accordingly a significant increase in government debt (relative to Australia’s annual GDP). In turn, and as a result of those risks, prior to the maturity date of the exchange traded government bonds held by the applicant and group members, it is alleged that there will be or is likely to be:

(a) a material and negative impact on the Commonwealth’s status and reputation as a reliable, safe and relatively risk-free insurer of sovereign debt securities;

(b) a higher risk of the Commonwealth not having the capacity to discharge its interest and principal obligations under the exchange traded government bonds held by the applicant and by the other persons holding exchange traded government bonds at the material times;

(c) a material and negative impact on the Commonwealth’s capacity to maintain its AAA status as an issuer of sovereign debt securities; and

(d) a likelihood of the Commonwealth heaving to pay higher interest rates than would otherwise be the case in respect of any new issue of exchange traded government bonds.

4 It is alleged that by failing to disclose material climate change information (being information that might reasonably be expected to have a material influence on the holders of exchange traded government bonds as to whether to hold or dispose of them and decisions by potential investors as to whether to purchase such bonds) the Commonwealth engaged in and continues to engage in conduct that is misleading or deceptive and/or likely to mislead or deceive in breach of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

5 The proceeding seeks a declaration that the Commonwealth has engaged in misleading or deceptive conduct, but not damages.

6 Under the proposed settlement the Commonwealth has agreed to make a public statement in agreed terms regarding the systemic risk climate change poses to Australia’s financial and economic position, to be published on the website of the Department of Treasury within seven days. In return the applicants have agreed to seek Court approval of the proposed settlement and to seek leave to discontinue the proceeding on the basis that there be no order as to costs. The Commonwealth has agreed to support that application.

7 The agreed public statement includes the following:

4. Climate change is a systemic risk that presents significant risks and opportunities for Australia’s economy, regions, industries and communities. Achieving Australia’s emissions reduction commitments and realising the opportunities that accompany the transition will require significant investment by governments and the private sector. Uncertainty around the magnitude and timing of the physical impacts of climate change and the global transition to net zero emissions translates to uncertainty about the fiscal impacts of climate change. And, as a consequence, there is uncertainty about whether the fiscal impacts of climate change may affect (if at all) the value of Commonwealth Government Securities (also known as Australian Government Bonds or AGBs) and, in turn, eAGBs.

5. The economic and climatic changes brought about by climate change will have fiscal impacts. For example, the new industries and jobs emerging from the net zero transformation will impact the structure of the economy and, in turn, the tax base. Extreme weather events are also expected to occur with increased severity and frequency, which will increase demand for disaster relief payments and infrastructure repairs.

…

7. The Government is developing a package of sustainable finance reforms, including the establishment of a sovereign green bonds program and regulatory reforms, to increase the transparency and credibility of Australia’s growing sustainable finance market. The Government’s intention is that these reforms will assist investors to align their investment decisions with net zero emissions targets and increase the flow of capital towards new opportunities that support Australia’s net zero pathway.

8. In accordance with the requirements of the Climate Change Act 2022 (Cth), the Commonwealth will continue to publish an Annual Climate Change Statement. Among other things, the Annual Climate Change Statement addresses the risks to Australia from climate change impacts, such as those relating to Australia’s economy. The first Annual Climate Change Statement was tabled in Parliament on 1 December 2022 and may be found at https://www.dcceew.gov.au/climate-change/strategies/annual-climate-change-statement.

…

39 Turning then to the Commonwealth’s second point, it submits that another core difficulty with the applicant’s case is that it takes, in isolation, one possible cause of risks for the Australian economy and seeks to extrapolate from those risks an unpleaded and unprovable effect on exchange traded government bonds. It argues that after at least four attempts to plead her case over three years the applicant has still not been able to articulate:

(a) what risks she alleges the Commonwealth should have disclosed;

(b) what obligations she alleges the Commonwealth would not be able to honour (for example, the annual interest or the redemption of the exchange traded government bonds at maturity) and why, and when;

(c) how it is alleged that the Commonwealth would not be able to perform its obligations with respect to the applicant’s exchange traded government bonds considering that the Commonwealth has never defaulted on sovereign debt even in circumstances of global economic downturn;

(d) why the alleged climate change related risks would give rise to a reasonable expectation that those matters would be disclosed considering that the Commonwealth may have increases in expenditure and decreases in revenue caused by number of domestic and global circumstances and events including natural disasters, wars and pandemics unrelated to climate change; and

(e) how the information the applicant alleges the Commonwealth has not disclosed would have a material effect on the price of the exchange traded government bonds being traded on the market when the information she alleges has not been disclosed by the Commonwealth must be publicly known (if it is true) because it is referred to in the statement of claim in the proceedings.

40 These contentions are not without force, but they overstate the position. I doubt that it will be as difficult as the Commonwealth submits to establish that global warming and climate change gives rise to real, systemic risks to the Commonwealth’s coffers and therefore to the value of the change traded government bonds. For the purposes of the application I take judicial notice of the fact that the consensus position of leading climate scientists around the world is that global warming and climate change brings risks of more frequent and more intense bushfires, storm surges, coastal flooding, inland flooding, cyclones, droughts and other extreme weather events. To my mind, it seems likely that such events will give rise to a huge drain on Commonwealth resources and on the tax base over a very lengthy period, perhaps forever, and therefore also weigh on forecasts in relation to the Commonwealth’s financial and economic position.

41 I note that in Sharma v Minister for the Environment [2021] FCA 560; 391 ALR 1, Professor William Steffen, Emeritus Professor at the Fenner School of Environment and Society at the Australian National University gave unchallenged evidence that “[a]s an overview, the planet’s atmosphere and ocean are heating at an increasing rate, polar ice is melting, extreme weather events are becoming more extreme, sea levels are rising, and ecosystems and species are being lost or degraded” (at [54]). He gave evidence that, if over multiple decades the global average surface temperature could be stabilised at or very close to 2°C above the pre-industrial level (which was the best available outcome, and there are real risks it may not be achieved) the effects for Australia would include a significant increase in the likelihood in any given year of extreme weather events: a 77% likelihood of severe heatwaves, power blackouts and bushfires; and a 74% likelihood of severe droughts, water restrictions and reduced crop yields (at [67]).

42 Based on climate modelling by the CSIRO and the Commonwealth Bureau of Meteorology he projected the following changes to Australia’s climate over the next few decades (at [67]):

• Continued warming, with more extremely hot days and fewer extremely cool days.

• A decrease in cool season rainfall across many regions of the south and east, likely leading to more time spent in drought.

• A longer fire season for the south and east and an increase in the number of dangerous fire weather days.

• More intense short-duration heavy rainfall events throughout the country.

• Fewer tropical cyclones, but a greater proportion projected to be of high intensity, with ongoing large variations from year to year.

• Fewer east coast lows particularly during the cooler months of the year. For events that do occur, sea level rise will increase the severity of some coastal impacts.

• More frequent, extensive, intense and longer-lasting marine heatwaves leading to increased risk of more frequent and severe bleaching events for coral reefs, including the Great Barrier and Ningaloo reefs.

• Continued warming and acidification of its surrounding oceans.

• Ongoing sea level rise. Recent research on potential ice loss from the Antarctic ice sheet suggests that the upper end of projected global mean sea level rise could be higher than previously assessed (as high as 0.61 to 1.10 m global average by the end of the century for a high emissions pathway, although these changes vary by location).

• More frequent extreme sea levels. For most of the Australian coast, extreme sea levels that had a probability of occurring once in a hundred years are projected to become an annual event by the end of this century with lower emissions, and by mid-century for higher emissions.

Professor Steffen projected much worse effects if the global average surface temperature could not be stabilised at a 2°C increase, and instead increased by about 3°C or 4°C: at [68] and [69].

43 The respondent in that proceeding was the Commonwealth Minister for the Environment. The Minister made no challenge to the scientific evidence advanced by the applicants, and by and large did not dispute “the nature of the risks and the dangers from global warning, including the possible catastrophe that may engulf the world and humanity”: see Minister for the Environment v Sharma [2022] FCAFC 35; 291 FCR 311 at [2]. There are good reasons to doubt that the Commonwealth would take any different stance in the present case in relation to the risks posed by climate change.

44 To my mind, it does not stretch imagination to think that the applicant may be able to establish that climate change bringing rising sea levels and coastal erosion, storm surges causing sea flooding of low-lying areas, more intense and more regular fires and floods, and droughts caused by increased temperatures and reduced rainfall, carries a real risk that it will have a substantial impact on communities, business, government infrastructure and the environment. In some areas insurance against bushfires and extreme weather events may become unavailable, or prohibitively expensive such that it is effectively unavailable. There may be an exodus of residents and businesses from some areas because of repeated and intense fires, floods, and other extreme weather events or the risk thereof. There must be a risk that the government will be forced to meet the substantial costs that result where individuals and businesses cannot do so, including through home buyback schemes, public housing projects, farm relocation assistance and the like. And it seems likely that there will be substantial costs for the Commonwealth government in protecting government infrastructure from such events, repairing or remediating government infrastructure after such events, and relocating core government services such as schools and hospitals. And if businesses and employment opportunities are degraded the tax base available to fund government expenditure reduces.

45 Of course, in a wealthy country like Australia, which has never defaulted on its sovereign debt obligations, it is likely to be complex and difficult for the applicant to establish that catastrophes of the nature described are likely to be such a drain on the public purse that there is a material risk that the Commonwealth may, in the future, be unable to perform its obligations with respect to exchange traded government bonds. Doing so will require the applicant to call expert witnesses about the relationship between such catastrophes, or the likelihood of them, on Australia’s financial and economic position and the likely effect on the value of exchange traded government bonds, in circumstances where there is no internationally agreed framework for assessing such risks. And it will be necessary for the applicant to prove any underlying assumptions about Australia’s economic and financial position and assessments about that position in the future so that the experts engaged in her case can express their opinions in terms applicable to Australia’s particular circumstances. This will be far from straightforward, and it will involve real complexities and difficulties for the applicant. There must be a real risk that the applicant will be unable to establish this.

46 Ninth, the applicant’s case has always been that the Commonwealth provided no information whatsoever to investors and potential investors about any risks of material adverse impacts on the Commonwealth’s financial position and to the value of the relevant exchange traded government bonds as a result of climate change. The information to be provided by way of the agreed public statement is some information about such risks. Whether, in the event the applicant is successful in the proceeding, the Commonwealth would be required to provide more extensive information than this will depend upon the evidence advanced about the extent of any risk found to exist. Put another way, the agreed public statement arguably falls within the range of reasonable outcomes in the proceeding in terms of the disclosure of the risks posed by climate change to the value of exchange traded government bonds.

47 I have accordingly made orders to approve the proposed settlement and to grant leave to the applicant to discontinue the proceeding with no order as to costs.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.

Associate:

Dated: 13 October 2023

Torres-Strait Islander-led legal case to hold the Australian government accountable for climate crisis inaction continues in the Federal Court

 

Boigu Island, Torres Strait. IMAGE: RealCommercial

Saibai Island, Torres Strait. IMAGE: KimWirth Photographer

TheGuardian, 24 April 2023:

A former Pacific Island president has backed a Torres-Strait Islander-led legal case to hold the Australian government accountable for climate crisis inaction.

On Monday, Anote Tong, the former president of Kiribati, signed a statement of solidarity with Paul Kabai and Pabai Pabai, who have taken the government to court, demanding further emissions reductions in line with science.

The two Torres Strait Islander men hail from the Boigu and Saibai communities on two of Australia’s northernmost inhabited islands. Low-lying Saibai is just four kilometres from Papua New Guinea, and both islands are regularly flooded by seawater.

The pair are leading a landmark class action on behalf of their island communities, arguing the commonwealth of Australia is acting unlawfully in failing to stop climate change that, if unchecked, will destroy their homelands.

Tong lent his support and said Australia needed to do more to cut emissions.

“The Australian government is stepping up with cutting domestic emissions and committing to a zero emission level by 2050, which is good – but of course the real challenge has always been the exported fossil fuels, oil and gas which are essentially a lot more substantial than what would be emitted domestically. So that is the real challenge,” he said.

“The [Australian] government sometimes feels that it’s not their problem. It’s the problem of the importing country but nevertheless, it still contributes to global emissions.”

Tong backed the case after a week-long visit to the two Indigenous communities.

“We find a great deal of similarity with the situation that these people are facing with our own situation in our part of the world,” he said….

BACKGROUND

The words of Gudamalulgal man from the island of Boigu in Zenadth Kes (the Torres Strait), Pabai Pabai, in "Rights-holders from Torres Strait sue Commonwealth over climate change" [2022] NativeTitle Nlr 1; (2022) 1 Native Title Newsletter 2.

The matter so far…..

Pabai v Commonwealth of Australia [2022] FCA 836 (18 July 2022), Orders, excerpt:

MORTIMER J:

1. These reasons explain why the Court has made the orders it has today, which do not reflect entirely what either party to this proceeding has sought. However, they reflect what the Court considers to be the appropriate case management for this proceeding, so as to focus on the real issues in dispute between the parties and advance the matter to trial in a cost effective, proportionate and efficient manner.

2.This is a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth). The applicants identify as Torres Strait Islanders from the Gudamalulgal Nation. They seek relief on their own behalf and on behalf of all persons of Torres Strait Islander descent who they contend, at any time during the period from about 1985 and continuing, have suffered loss and damage as a result of the conduct of the Commonwealth. They contend that the Commonwealth owes a duty of care to Torres Strait Islanders to take reasonable steps to protect:

(a) Torres Strait Islanders; and/or

(b) Torres Strait Islanders’ traditional way of life, including taking steps to preserve ‘Ailan Kastom’ (defined in the statement of claim as the body of customs and traditions of Torres Strait Islanders generally, or of a particular community or group of Torres Strait Islanders, including connection to country, cultural ceremonies, burial rites, visiting sacred sites and hunting and fishing); and/or

(c) the marine environment in and around the protected zone (a term defined in the applicants’ current statement of claim to be an area defined by a treaty between Australia and Papua New Guinea regarding the Torres Strait Islands), including the Torres Strait Islands, from the current and projected impacts of climate change in the Torres Strait Islands.

3. The applicants contend the Commonwealth has breached, and remains in breach of that duty of care.

4. The applicants seek an injunction on their own behalf and on behalf of group members requiring the Commonwealth to implement such measures as are necessary to:

(a) protect the land and marine environment of the Torres Strait Islands and the cultural and customary rights of the Torres Strait Islanders from greenhouse gas emissions into the Earth’s atmosphere;

(b) reduce Australia’s greenhouse gas emissions consistent with the best available science target (a term defined in the current statement of claim to be the amount of greenhouse gases that can be emitted before the average global temperature rises by 1.5 degrees Celsius); and

(c) otherwise avoid injury and harm to Torres Strait Islanders from greenhouse gas emissions into the Earth’s atmosphere.

5. They also seek damages for:

(a) degradation of the land and marine environment, including life and coral reef systems;

(b) loss of Ailan Kastom;

(c) damage to their native title rights; and

(d) physical and psychological injury.

6. They contend all or some of these losses are ongoing, due to the ongoing breaches of the Commonwealth’s alleged duty of care, and this is why they also seek injunctive relief.

……...

10. On 17 March 2022 and following a judicial case management hearing, the Court listed the proceeding for trial, commencing on 6 June 2023 with an estimate of four weeks…..

17….

(e) The June 2023 trial dates should be maintained, but only for the hearing of lay evidence from both parties.

(f) The lay evidence should be given by affidavit with the parties being able to request that certain evidence in chief be given orally if it is said to be significantly contentious.

(g) Programming orders should be made for the lay evidence.

(h) The hearing of expert evidence should occur in a separate tranche, in the second half of 2023.

(i) The entire trial should be completed, and judgment reserved, by the end of 2023. Consistently with the expectations the Court has imposed on the parties, the Court will take all reasonable steps to hand down judgment as expeditiously as practicable, in the first few months of 2024.