O’Donnell v Commonwealth

COURT OR TRIBUNAL

Federal Court of Australia

DATE FILED (OR FIRST HEARING DATE)

22/07/2020

LITIGATION TYPE

Constitutional and Human Rights / State Accountability

SUBJECT MATTER

Transparency and disclosure

REVIEW TYPE

Judicial review

SUMMARY

The class action was filed in the Federal Court of Australia on 22 July 2020. It alleges that climate change and its associated risks will have, or are likely to have, a material impact on Australia’s standing as an issuer of sovereign bonds and the market value of bonds. It alleges that risks arising from climate change should be disclosed to retail investors like Ms O’Donnell. A strike out application was heard and dismissed. On 21 March 2023, the Court made orders referring the matter to mediation. The mediation took place in May 2023. On 7 August 2023, the parties informed the court that they had reached a confidential settlement in the matter and on 23 August 2023, orders were made with the proposed settlement annexed.

The settlement was approved at hearing on 11 October 2023. In obiter, Murphy J made the following remarks:

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.

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.

CASE DOCUMENTS

VID482/2020 O’Donnell v Commonwealth
O’Donnell v Commonwealth of Australia [2021] FCA 1223
Court file
Orders from 7 August 2023
Orders from 23 August 2023 (with proposed settlement)
News article
O’Donnell v Commonwealth of Australia [2023] FCA 1227