Australian Bight Infrastructure Pty Ltd v Haagmans - [2010] SASC 6

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules: Civil)
AUSTRALIAN BIGHT INFRASTRUCTURE PTY LTD v HAAGMANS
[2010] SASC 6
Judgment of The Honourable Justice Bleby
22 January 2010
PROCEDURE - COSTS - JURISDICTION - PERSONS NOT PARTIES TO PROCEEDINGS
Application for costs order against non-party – applicant was successful defendant in proceedings commenced by incorporated association – non-party was President and Chairman of plaintiff association – non-party instructed solicitors, provided bank guarantee as security for costs, and contributed funds for court and counsel fees – whether non-party was effectively the “real party” to proceedings – whether non-party had relevant commercial interest in proceedings – whether litigation commenced at instigation of non-party – whether conduct of litigation dependent upon payments made by non-party – application dismissed.
Aquaculture Act 2001 (SA); Development Act 1993 (SA) s 88A, s 88C; Supreme Court Act 1935 (SA) s 40, referred to.
Knight v FP Special Assets Ltd (1992) 174 CLR 178; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, applied.
Vestris v Cashman (1999) 72 SASR 449; Oxer v Astec Paints Australia Pty Ltd (2008) 257 LSJS 142, discussed.
Friends of Elliston – Environment and Conservation Inc v State of South Australia (2007) 96 SASR 246; House v The King (1936) 55 CLR 499; Gore v Justice Corporation Pty Ltd (2002) 189 ALR 712; Tinda Creek Spiritual and Environment Centre v Baulkham Hills Shire Council (1998) 100 LGERA 432; Hamilton v Al Fayed (No 2) [2003] QB 1175, considered.

AUSTRALIAN BIGHT INFRASTRUCTURE PTY LTD v HAAGMANS
[2010] SASC 6
Civil
BLEBY J.
Introduction

The original action in these proceedings was an application for judicial review in which the plaintiff, Friends of Elliston–Environment and Conservation Inc., sought to challenge the validity of certain aquaculture leases and a licence held by the present applicant, Australian Bight Infrastructure Pty Ltd (“ABI”). Those leases and licence were issued in the name of the Minister responsible for the Aquaculture Act 2001 (SA). The plaintiff also sought to challenge the validity of certain regulations made under that Act and other regulations made under the Development Act 1993 (SA). Also at issue was the grant under the Development Act by the Development Assessment Commission of a Development Authorisation given on 28 January 2003 to a proposed aquaculture development to take place in an area of coastal water near Elliston on the west coast of South Australia.
On 19 January 2007 I dismissed the plaintiff’s application.[1] I held that the plaintiff did not have standing in relation to the relief sought concerning the alleged lapse of the Development Authorisation, but that it would have had standing in relation to part of its claim in respect of the validity of regulations made under the Aquaculture Act and in relation to the question of the validity of the regulations under the Development Act. While there had been a number of administrative irregularities, they had effectively been cured, and the plaintiff was not entitled to the relief sought. On 8 February 2007 I made an order that the plaintiff pay the defendants’ costs of the action.
[1] Friends of Elliston-Environment and Conservation Inc. v State of South Australia [2007] SASC 19, (2007) 96 SASR 246.
Sometime later ABI applied for an order that the present respondent, Mr Haagmans, who was not a party to the action, pay ABI’s costs of the action. It is that application which is now before me.
The hearing
The application proceeded on affidavits, with the Chief Executive Officer of ABI, Mr Ferguson, being cross-examined on his affidavit by counsel for the respondent, and with Mr Haagmans being cross-examined by counsel for ABI on his affidavit.
Objections were taken to a reading of some portions of the affidavits, some of which objections were upheld or conceded. There were parts of two affidavits sought to be relied on by ABI to which objection was taken and in respect of which I indicated I would rule in the course of giving judgment.
The first of those objections related to paras 8.3 and 8.4 of the affidavit of Ms Danambasis filed on 23 February 2006. She deposed to certain hearsay statements extracted from an earlier affidavit of Mr Custance, an associate of Mr Haagmans. I uphold the objection. ABI did not seek to tender any affidavits of Mr Custance. Although the respondent tendered an affidavit of Mr Custance, ABI did not require him to be presented for cross-examination. ABI therefore declined the opportunity to seek to prove the primary facts through Mr Custance when that opportunity was available. It was inappropriate to admit the same facts by secondary evidence.
A similar objection was taken to paras 15.2, 15.3 and 15.4 of the affidavit of Ms Danambasis filed on 13 January 2006 where similar and, in some respects, identical information was sought to be proved based on facts previously deposed to by Mr Custance. I uphold the objection for the same reasons.
The relevant principles
It is now well-established that the power to award costs conferred by s 40 of the Supreme Court Act 1935 (SA) is sufficiently wide to enable the Court to award costs in favour of a successful party to a proceeding against a person who is not a party to the proceeding.[2] In Knight v FP Special Assets Ltd[3] Mason CJ and Deane J, with whom Gaudron J agreed,[4] expressed the relevant principle in the following terms:[5]
Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. …
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
[2] Knight v FP Special Assets Ltd (1992) 174 CLR 178; Vestris v Cashman (1998) 72 SASR 449; Oxer v Astec Paints Australia Pty Ltd [2008] SASC 210, (2008) 257 LSJS 142.
[3] (1992) 174 CLR 178.
[4] Ibid 205.
[5] Ibid 192-193.
Dawson J expressed the principle in the following terms:[6]
The cases therefore establish a long-asserted jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the court. Even if the cases were confined to ejectment proceedings (and clearly they are not), the principle lying behind the ejectment cases is that the real litigant rather than the nominal party may be made liable for costs.
[6] Ibid 202.
In Vestris v Cashman[7] Lander J[8] listed a number of factors relevant to the exercise of the discretion to award costs against a non-party, not all of which will have application in every case, and none of which he considered would necessarily be decisive. His Honour also cited a number of cases where such costs had been awarded, including directors of companies, receivers, and liquidators where the non-parties were managing the litigation, and non-parties in a representative action or group litigation, where the non-party has maintained the litigation or has caused the action.
[7] (1999) 72 SASR 449.
[8] Ibid 468, Doyle CJ agreeing, 450.
In Oxer v Astec Paints Australia Pty Ltd[9] Duggan J, with whom Doyle CJ and Anderson J agreed, referred to the passage quoted above in the joint judgment of Mason CJ and Deane J in Knight’s Case and the considerations referred to by Lander J in Vestris v Cashman. He concluded:[10]
The significance of the absence of a warning that an application for non-party costs will be made is stressed in a number of authorities.
As an order for costs involves an exercise of the court’s discretion, an appeal on costs is determined by reference to the principles enunciated in House v The King.[11]
[9] [2008] SASC 210, (2008) 257 LSJS 142.
[10] Ibid [32]-[33], 149.
[11] (1936) 55 CLR 499.
Knight v FP Special Assets Ltd was the subject of further consideration by the Court of Appeal of the Supreme Court of New South Wales in FPM Constructions Pty Ltd v Council of the City of Blue Mountains.[12] Basten JA, with whom Beazley and Giles JJA agreed, made the following observation:[13]
When the judgments in Knight v FP Special Assets are read in full, it is clear that there is no significant difference between the approach adopted by Dawson J and that expressed by the other Justices in the majority. The authorities upon which the joint judgment drew are replete with references to awards being made against the “real party”. Reference was also made to the judgment of Brooking J in Burns Philp & Co Ltd v Bhagat [1993] 1 VR 203 at 212 referring to the power of the Courts to award costs “against someone who is not a party in the strict sense”.
In the present case, it could not be said that FPM Constructions was merely a nominal party or that Mr Yazbek was the “real party” to the proceedings. No doubt it is true, as his Honour found, that Mr Yazbek was the driving force behind FPM Constructions and was its representative for the purposes of the litigation. That does not mean, however, that the benefit of the proceedings brought by FPM Constructions for progress payments, in law, flowed to anyone other than FPM Constructions, nor that the company was other than the proper defendant in proceedings brought by the Council. Nor is the fact that Mr Yazbek was the sole director and secretary of the company inconsistent with that conclusion. Were it otherwise, the corporate veil would, in effect, be nullified at the very point at which it provides protection against personal liability for the shareholders and directors. The carefully crafted exceptions to the principle would overtake the principle itself were that the case.
His Honour referred to the findings of the primary Judge that Mr Yazbek had “an important and integral role in [the] proceedings” and that “the litigation was effectively run for his own benefit”. Basten J continued:[14]
The reference to Mr Yazbek’s “role in these proceedings” is a reference to the earlier comment of his Honour that, from his observations of Mr Yazbek’s participation in the proceedings, his Honour inferred that Mr Yazbek “had a specific role in instructing counsel to the extent that I observed”. With respect, that consideration is neutral. Further, the fact that he was mentioned during the proceedings and swore affidavits merely reflects the fact that he was the guiding force behind the company and the individual responsible for its actions. Again, those factors are, on their face, neutral. The inferences sought to be drawn …, that Mr Yazbek had “an interest” in the proceedings and that they were run “for his own benefit” would appear to use language ambiguously, so as to encompass indirect economic interests and benefits. Mr Yazbek was no stranger to FPM Constructions: he was, as already noted, its sole director and a 50% shareholder.
[12] [2005] NSWCA 340.
[13] Ibid [205]-[206].
[14] Ibid [207].
Basten JA later noted that the categories of case which may attract the exercise of the power are not closed but that:[15]
… the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:
(a)     the unsuccessful party to the proceedings was the moving party and not the defendant;
(b)     the source of funds for the litigation was the non-party or its principal;
(c)     the conduct of the litigation was unreasonable or improper;
(d)     the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and
(e)     the unsuccessful party was insolvent or could otherwise be described as a person of straw.
[15] Ibid [210].
Of the second and third criteria identified in Knight v FP Special Assets, his Honour said:[16]
The second criterion was that the non-party have played an active part in the litigation. As the facts of Knight itself show, that role may be legitimate, as in the case of a receiver or manager. Nevertheless, in a proper exercise of discretion, something more should generally be found, although it may be sufficient that the third criterion is satisfied. In Knight itself, the proceedings were in effect abandoned, and in Arundel Chiropractic Centre,[17] Callinan J described the driving force behind the litigation as a company officer acting “stubbornly and totally unreasonably” (at [30]).
Thirdly, the non-party or its principal must have an interest in the subject of the litigation. The term “interest” in this context is of uncertain extent: as suggested by McHugh J in Knight, the real beneficiary of that litigation, if successful, would have been the banks which appointed the receiver and manager. It may have been assumed that they would have indemnified the receiver and manager in any event. In Gore,[18] the Full Court placed some weight upon the fact that the non-party, Justice Corporation, was an entire stranger to the subject matter of the litigation, but had, in effect, purchased an interest in its outcome by contracting to receive 8% of the judgment debt if the claimant had been successful: at [62] and [64]. The interest of Mr Diamond in the litigation involving the Baulkham Hills Shire Council appears to have been of a non-financial kind, but in a practical sense equal to or greater than that of the nominal party.
The criteria identified in Knight v FP Special Assets should not ultimately be treated as separate and independent factors. Each requires an evaluative assessment of factors which will clearly tend to interact. Nor should it be forgotten that the power is only to be exercised in exceptional cases. In many cases involving individuals in the superior courts the parties may lack the resources to meet the costs of the litigation if unsuccessful. Similarly, there will frequently be a non-party, be it a company officer or solicitor, who will be active in the conduct of the litigation and who will obtain some direct or indirect financial benefit from its success. The fact that it is entirely proper for legal practitioners to runs cases on a speculative basis, so long as satisfied that they have reasonable prospects of success, demonstrates that care must be taken not to apply the criteria mechanically. Careful attention is required to the conduct of the party said to be involved in the litigation and the nature of the “interest” in its outcome or subject-matter.
[16] Ibid [212]-[214].
[17] Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406.
[18] Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429.
The facts in this case
At all material times Mr Haagmans was a resident of Elliston and the holder of an abalone licence for an area of the west coast of South Australia which included Anxious Bay and the coast around Elliston. The leases in question granted to ABI and the development authorisation related to a substantial abalone aquaculture project in that area. The plaintiff was an incorporated association whose principal object was to protect, preserve and enhance the natural environment of Elliston. I was satisfied on the trial of the action that the principal impetus for the formation of the plaintiff was the proposal by ABI to establish the abalone aquaculture project. It was formed out of a community concern about the lack of consultation concerning the project, what was considered to be the pristine environment of Anxious Bay, the possible impacts of the development on the existing marine ecology and on sustainable fishing, and the effect of the proposed development on nearby mammal populations, together with the possible degradation of beaches and coastal areas. Mr Haagmans was one of the founding members of the association and at all material times was its President and Chairman.
The relevant events relating to the commencement and financing of the proceedings by the plaintiff are best set out in chronological order.
The decision to form the plaintiff association was made at a meeting of interested people on 20 March 2005 described as a follow-up to a public meeting of 120 persons held at Elliston on 8 March 2005. At that meeting various community members representing a variety of interests had spoken and were questioned, including representatives of the promoters of the aquaculture development. The concerns expressed at that meeting were wide-ranging.
At the meeting of 20 March Mr Haagmans was elected President and Chair of the association.
In April and May 2005 Mr Custance, a business associate and employee of Mr Haagmans, began consulting a solicitor on behalf of the association both in relation to an application by ABI to the Development Assessment Commission and in respect of the proposed Rules of the association.
On 1 May 2005 Mr Haagmans contributed by way of membership subscription the sum of $25 to the new association. Mr Haagmans and his son also made a joint donation of $1,000 towards the costs of the proposed submission of the association to the Development Assessment Commission.
The inaugural meeting of the incorporated association was held on 15 June 2005.
At a general meeting on 21 June 2005 the association resolved to establish a “fighting fund” to fund the organisation’s representation on the forthcoming Development Assessment Commission application.
At a meeting of the management committee of the association on 28 July 2005 the association’s solicitor advised that there were grounds to challenge the proposed development in the Supreme Court and that the costs were anticipated to be approximately $10,000. Based on that advice the Committee resolved to commence the action.
On 12 August 2005 the proceedings in this Court were commenced.
On 10 October 2005 at a directions hearing orders were made for discovery of documents and the filing of affidavits.
At a general meeting of the association held on 13 November 2005 the association resolved to “establish a fighting fund to finance current Supreme Court action and future DAC submission”.
On 7 December 2005 Mr Haagmans contributed $100 to what as then called the association’s legal fund. It was the same as the fighting fund referred to above.
On 8 December 2005 there was a further directions hearing and orders were made for various matters including the filing of further affidavits.
On 21 December 2005 there was a further directions hearing at which the matter was set down for trial. An application by ABI for security for costs had been foreshadowed, and it was directed to file such an application by 14 January 2006.
On 13 January 2006 ABI filed an application for security for costs.
On 14 January ABI’s solicitors wrote to Mr Haagmans and informed him that they took the view that he had a commercial competitive interest in the outcome of the proceedings. The letter continued:
We are instructed to put you on notice that our client will pursue you personally for any economic loss and any other loss or damage suffered by it arising from or in connection with these proceedings pursuant to Section 88C of the [Development] Act. Such amounts are likely to be significant.

On 31 January 2006 there was a further directions hearing at which the plaintiff was given leave to amend the summons, and at which ABI’s application for security for costs was discussed and adjourned until 3 February.
At the hearing on 3 February 2006 Debelle J ordered that the plaintiff provide security for costs within 14 days by the provision of a bank guarantee in the amount of $10,000. ABI had sought security in respect of costs then incurred by ABI in the order of $50,000, with a further $30,000 estimated to the end of the first day of trial. Apart from expressing concern at the amount of costs allegedly incurred and at the general level of solicitors’ costs, Debelle J gave no reasons for suggesting the figure of $10,000 which, on that day, the plaintiff agreed to provide.
On 15 February 2006 Mr Haagmans, of his own volition, arranged a bank guarantee on his own account in the sum of $10,000 on behalf of the plaintiff.
On 22 February 2006 at a management committee meeting of the plaintiff the following motion was passed:
Pursuant to order of the Supreme Court dated 3 February 2006 requiring FOE to provide a security for costs to the sum of $10,000, the Association acknowledge that Chairperson, John Haagmans in order to comply with time limits on the order (14 days) provided a personal guarantee through his bank for the amount. If this guarantee is called upon the Association will repay any amount drawn down on the guarantee and remunerate (sic) John Haagmans.
On 22 February at a pre-trial directions hearing, orders were made about the exchange of outlines of argument and filing of further affidavits.
The trial commenced on 27 February and continued for another four days, ending on 8 March 2006, when judgment was reserved.
On 10 April 2006 Mr Haagmans paid court fees of $4,144 to the Courts Administration Authority. On or about 26 June 2006 Mr Haagmans paid $10,000 into the trust account of the plaintiff’s solicitors on account of counsel fees.
On or about 20 October 2006 Mr Haagmans paid a further sum of $18,165 to the plaintiff’s solicitors’ trust account in respect of counsel fees.
In his evidence Mr Haagmans asserted that the records of the plaintiff showed that 41 members of the plaintiff made donations, other than membership subscriptions, to support the plaintiff’s proposed submission to the Development Assessment Commission and in respect of the legal fund. The association’s records themselves showed that 32 people, including Mr Haagmans, made donations to the legal fund between 13 November 2005 and 18 March 2006. That is not inconsistent with the evidence of Mr Haagmans which does not cover the same period.
The total amount contributed to the plaintiff’s legal fund was $5,730, of which Mr Haagmans donated $100. $1,245 in membership fees was received and $2,000 in other donations, including the $1,000 that Mr Haagmans and his son paid on 1 May 2005.
The records indicate that Mr Haagmans paid to the plaintiff or provided by way of bank guarantee for the security for costs a total sum of $43,434. Of that amount $1,025 was paid on 1 May by way of membership subscription for the Haagmans and the joint donation, $10,000 was provided by way of bank guarantee on 15 February 2006 and $100 was paid by way of contribution to the legal fund on 7 December 2005. The balance of $32,309 was paid well after the trial was concluded, and as to most of it, some months after it was concluded.
The $32,309 paid after the trial was asserted to be by way of loan to the plaintiff which has never been repaid. That characterisation of the payments was not challenged. It is also clear that a sum totalling $8,493.20 was paid out of the plaintiff’s funds to its solicitors between 15 September 2005 and 21 April 2006. There remains unpaid by the plaintiff the sum of $66,820.39 owed to the solicitors. There has been no attempt to recover that from Mr Haagmans or from any other member of the plaintiff.
Mr Haagmans’ involvement in the affairs of the plaintiff
The plaintiff association was formed of people with wide-ranging interests in the Elliston community, and after a well-attended public meeting at which a variety of differing concerns were expressed about the proposed aquaculture development. It is also clear that other community and political groups were concerned about the development for a variety of different reasons.
Mr Haagmans had been actively involved in community affairs in and around the Elliston area and the west coast region of South Australia for the whole of his life. He enjoyed a reputation in the area as a community-minded person with acknowledged organising and management skills, and with a keen interest in environmental issues and sustainable development. He has had and has other business interests in the area besides the holding of an abalone licence. He did not oppose a similar development by ABI in the Ceduna area where his abalone licence also extends. I am satisfied that at all material times he has had a genuine interest in the Elliston community and is concerned for the preservation of its environment for the purposes of commercial and recreational fishing, for its natural beauty and for the preservation and safety of nearby colonies of sea lions and penguins.
He was one of a number who spoke at the public meeting held on 8 March 2005. The principal concerns he expressed were for environmental matters and for the possible introduction of water-borne disease as a result of the development, such outbreaks having been well documented in respect of abalone colonies in North America, Taiwan, Tasmania and in his own failed land-based abalone aquaculture project at nearby Louth Bay. Although he was not aware of it at the time, his concerns were subsequently vindicated by a serious outbreak of disease in the abalone population in coastal Victoria. Such outbreaks would obviously affect Mr Haagmans and any other abalone fisher, but not in any competitive sense with ABI. Any such outbreak of disease would be disastrous not only for local abalone fishers but also for ABI itself.
Mr Haagmans was elected President and Chair of the plaintiff association upon its formation and was re-elected to that position early in 2006. I am satisfied that that was because he was regarded as a forceful community leader by those who elected him.
As might be expected, he took an active part in preparation for and in giving instructions for the conduct of the proceedings by the plaintiff. However, I am satisfied that, as chair of all relevant meetings, Mr Haagmans did not put forward or vote on any proposal at a general meeting or at meetings of the committee of management when any relevant decisions about the litigation were made. The mere fact that he took an active role in giving instructions for the application is neutral.[19]
[19] FPM Construction Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, [207].
I am also satisfied that decisions about the commencement and conduct of the proceedings were made on the best advice available at the time, even though, in some respects, this may have been inaccurate. At the meeting of the committee of management on 28 July 2005 the plaintiff received legal advice that it had good grounds on which to challenge the proposed development in the Supreme Court. It was then advised that the estimated cost of the proceedings would be of the order $10,000. In the absence of the lawyer who gave the advice, the question was discussed by the committee. It was decided that that was an achievable amount for the plaintiff to raise by way of donations. I accept Mr Haagmans’ evidence that, had the committee then been aware that the actual costs would be considerably more, the plaintiff probably would not have instituted the proceedings. I also accept that there was no expectation at that or any other meeting that Mr Haagmans would finance the litigation by way of loan or otherwise. The committee believed that it could finance the action from its own resources. As it happened, the committee was misguided both as to its understanding of the likely costs of the litigation and as to the community’s response to fund raising activities.
Following the decision to institute the proceedings there were in fact various community fund raising efforts promoted by the plaintiff. The results can be inferred from the financial information set forth above.
The financial contributions of Mr Haagmans
Prior to the making of the order for security for costs, the donations made by or in association with Mr Haagmans were no more than one would expect of an enthusiastic community-minded member of the plaintiff association and a recognised leader of the community. There was no question of those voluntary contributions being sufficient in themselves to carry out the objects of the association.
ABI’s application for security for costs was made relatively late and after the application had been set down for trial. Although the plaintiff’s counsel offered a bank guarantee of $10,000, the time limit of 14 days was imposed by the Court. There was little time for the plaintiff to be able to raise the balance of the cash needed if it were to provide a guarantee on its own account. I accept that Mr Haagmans provided the guarantee as being the only feasible way that security could be provided in the time available. That was a voluntary act on his part in order to keep the plaintiff’s action alive. The resolution of the committee of management passed on 22 February 2006 was an ex post facto recognition of his generosity in providing the guarantee. Based on the advice that the plaintiff then had, I am satisfied that the committee, including Mr Haagmans, then believed that there was little likelihood that the guarantee would be called upon. I am also satisfied on Mr Haagmans’ evidence that, if the amount of security required had been greater, it is unlikely that it could or would have been provided.
That is the sum of the financial commitment provided by Mr Haagmans until well after the trial was concluded and when judgment had been reserved. There was no expectation on the part of the plaintiff that Mr Haagmans would make any further financial contribution. There was no decision or expectation on the part of the plaintiff or its members that the action would proceed based on any understanding that Mr Haagmans would finance the action. The payments later made by Mr Haagmans in respect of court fees and counsel fees were made by him out of a sense of moral obligation and by way of loan to the plaintiff, with his continued belief in a reasonable prospect that they would be repaid. It cannot be said that those payments caused or financed the proceedings against ABI or that they caused ABI to incur costs of the proceedings. There was no causal connection between the payment of those sums by Mr Haagmans and the costs incurred by ABI.[20] ABI’s costs had already been incurred by that time.
[20] See Gore v Justice Corporation Pty Ltd [2002] FCA 354, [53], (2002) 189 ALR 712, 731.
Mr Haagmans’ commercial interests
ABI led substantial evidence as to the economics of abalone industry in Australia, the nature of its export market and the proportion of farmed abalone to wild abalone. Despite that evidence it is impossible to make any findings at all as to whether Mr Haagmans’ commercial interest as an abalone diver or the value of his licence would be affected by the development of ABI’s aquaculture project. There was certainly no recent evidence as to the effect of the establishment of the project after some years. There is no evidence on which I could find that the plaintiff was a mere front for Mr Haagmans’ commercial interests.
He never sought to conceal the fact that he held an abalone licence. Nor is there any evidence that he attempted to manipulate the plaintiff or that the plaintiff allowed itself to be manipulated in any way by what might be said to be Mr Haagmans’ commercial interests. Mr Haagmans was well-known in the community. I doubt that the plaintiff would have agreed to open a fighting fund or to undertake other fund raising efforts if there was any perception in the community that Mr Haagmans was intended to be the principal beneficiary of the litigation.
I found that the plaintiff had no standing to bring the action by way of challenge to the consent of the Development Assessment Commission to ABI’s Development Application. That was according to the tests laid down by the High Court for standing to bring an application for judicial review. The effect of those cases was discussed at some length in my original judgment.[21] That does not mean, however, that the plaintiff was formed for purposes other than the objects stated in its Constitution, that the actions it took were other than strictly in accordance with its own Constitution or that it did not have a genuine concern for the immediate environment in which the proposed development was to take place. Those concerns were insufficient in themselves to grant the plaintiff standing in respect of that part of the application. I held that it would have had standing in respect of the claimed invalidity of some of the regulations had the relief sought been tailored accordingly. The fact that the plaintiff may not, in some respects, have met the tests for standing to bring an application for judicial review does not mean that it became a front for Mr Haagmans’ commercial interests. There was no suggestion from the way that the plaintiff’s affairs were conducted that that was the case. Mr Haagmans was one of a number of citizens of the Elliston area with concerns about different aspects of the proposed development which found their expression in the formation of the plaintiff and the conduct of the litigation.
[21] See Friends of Elliston-Environment and Conservation Inc v State of South Australia [2007] SASC 19, [62]-[96], (2007) 96 SASR 246, 261-271.
The fact that a non-party in public interest litigation is an environmental activist may, in some circumstances, be sufficient to conclude that the non-party had a substantial and relevant interest in the subject matter of the litigation.[22] However, it does not follow that merely because a concern for the environment is expressed by the non-party, he necessarily falls into that category. From my perusal of the minutes of the public meeting held in March 2005 and other meetings of the plaintiff, Mr Haagmans was but one of a number of concerned citizens who expressed differing reservations about the environmental effect of the proposed development. It cannot be said that he was the driving force such as to have a substantial and relevant interest in the subject of the litigation. It cannot be said that he was the real party, in effect making the substantive decisions on behalf of the plaintiff in the litigation, as was found to have been the case of the non-party involved in the Tinda Creek Case.[23]
[22] Tinda Creek Spiritual and Environment Centre v Baulkham Hills Shire Council [1998] NSWLEC 296, [73]-[75], (1998) 100 LGERA 432, 442-443.
[23] Ibid [93]-[95], 448-449.
Mr Ferguson gave evidence of a conversation he had with Mr Haagmans at the Elliston Hotel in December 2005. By way of background to that conversation, ABI’s parent company had approached another company of which Mr Haagmans was the Director which was involved in the processing and marketing of onshore cultured abalone at the time when ABI was about to commence its operations at Elliston. An offer was made to purchase that company’s juvenile abalone for use in the aquaculture venture. In the course of the conversation at the Elliston Hotel Mr Ferguson asked Mr Haagmans if he and his fellow directors had come to a decision whether ABI could buy the abalone, to which Mr Haagmans replied: “I would rather bury it than sell it to you guys”. Mr Ferguson asked why, to which Mr Haagmans is alleged to have replied: “It is not in my interests for you to succeed”.
Mr Haagmans admitted to having the conversation with Mr Ferguson and to saying that he would rather bury the abalone than sell it to Mr Ferguson’s company. He denied that he said that it was not in his interests for ABI to succeed. I accept Mr Haagmans’ evidence in preference to that of Mr Ferguson. However, even if the conversation occurred as deposed to by Mr Ferguson, it is typical of the sort of conversation which might have occurred between parties already then immersed in bitterly fought litigation, even if Mr Haagmans had no commercial interest whatever in abalone. The interest he had as a member of the plaintiff alone would have been sufficient to justify his lack of willingness to see ABI’s commercial venture succeed.
Notice to Mr Haagmans
At no stage did the ABI give notice to Mr Haagmans that, if successful, it would seek an order for payment of its costs against Mr Haagmans. The making of the application for security for costs was an independent and separate exercise. Although ABI, by its application, regarded the security as inadequate to meet its costs, there was no appeal against that decision nor any further application for security beyond the first day of trial. In any event, it did not constitute notice to Mr Haagmans that ABI would seek reimbursement of its costs against Mr Haagmans personally.
I have already referred to the fact that ABI’s solicitors, on 14 January 2006, purported to give him notice of a possible claim under s 88C of the Development Act. That section provides:
88C—Right of action in certain circumstances
(1)     If—
(a)    a person—
(i)who is a party to the relevant proceedings related to a development; or
(ii)who provides direct or indirect financial assistance to a party to any relevant proceedings related to a development, has a commercial competitive interest in the proceedings, or has an associate who has a commercial competitive interest in the proceedings; and
(b)the outcome of the proceedings (including after taking into account any appeal) is that the development, or a development in substantially the same form, may proceed, then the proponent of the development is entitled to recover from the person (the "defendant") and, if relevant, from any associate of the defendant, as a debt in a court of competent jurisdiction, an amount equal to the amount of any loss (including economic loss) that can be reasonably assessed as having been suffered by the proponent as a result of delays to the development on account of the proceedings if the court is satisfied that the defendant's sole or predominant purpose in pursuing the proceedings, or for providing financial assistance (as the case may be) was to delay or prevent the development in order to obtain commercial benefit for the defendant or an associate of the defendant.
(2)     A court before which proceedings are brought under subsection (1) may, if it considers that it is appropriate to do so, reduce any amount that would otherwise be recoverable under that subsection to take into account—
(a)any delay in the relevant proceedings reasonably attributable to the actions of the proponent of the development or of some other party (other than the defendant, an associate of the defendant or a person who has received direct or indirect financial assistance from the defendant in connection with those proceedings); or
(b)any other matter that it considers relevant in the circumstances of the particular case.
(3)     Without in any way limiting the manner in which the purpose of a person may be established for the purposes of subsection (1), a person may be taken to have pursued proceedings, or to have provided financial assistance to a party to proceedings (as the case may be) for a purpose referred to in subsection (1) notwithstanding that, after all the evidence has been considered, the existence of that purpose is ascertainable only by inference from the conduct of the person or of any other person or from other relevant circumstances.

In order to make out a cause of action against Mr Haagmans under s 88C, ABI would need to establish:
·That these were “relevant proceedings”. By virtue of s 88A(1) relevant proceedings means “any proceedings before a court arising under or in connection with the operation of this Act including proceedings for judicial review, but not including criminal proceedings”;
·That Mr Haagmans provided direct or indirect financial assistance to the plaintiff;
·That ABI was the proponent of the development;
·That Mr Haagmans had a commercial competitive interest in the proceedings. Section 88A(2) provides:
88A—Preliminary
(2) For the purposes of this Division, if the business of a person, or the business of an associate of a person (other than the proponent of the development), might be adversely affected by a particular development on account of competition in the same market, then the person will be taken to have a commercial competitive interest in any relevant proceedings that are related to that development.
·That the loss claimed by ABI was incurred as a result of delays in the development as a result of the proceedings; and
·That Mr Haagmans’ sole or predominant purpose in providing financial assistance was to delay or prevent the development in order to gain a commercial benefit.
Section 88C of the Development Act does not affect the question of costs of any such proceedings. The only loss recoverable under that section by ABI would be loss “suffered … as a result of delays to the development on account of the proceedings”. Notice under that Act is not and cannot amount to notice of an intention to claim against Mr Haagmans as a non-party the cost of the litigation of a successful defendant.
Conclusion
I return to the tests stated by the majority of the High Court in Knight v FP Special Assets Ltd.[24] It would appear that the plaintiff was not insolvent at the time when the proceedings were commenced. Prior to 16 February 2006 the plaintiff had been invoiced for a total sum of $2,440 by its solicitors. No other debts have been disclosed. It had ample funds to meet that liability. It received an invoice dated 16 February 2006 for $55,000, but at that stage the action had been set down for trial, an order for security for costs had been made and the security had been given. The trial was due to commence 11 days later. Whether or not the plaintiff was technically insolvent at some point, and if so when, after 16 February I am not in a position to say on the evidence presently before me.
[24] (1992) 174 CLR 178, 192-193.
Mr Haagmans played an active part in the conduct of the litigation. He did so on behalf of the plaintiff. However, as the authorities show, that is insufficient in itself.[25] He has not been shown to have had an interest in the subject of the litigation beyond that of a concerned and interested member of the plaintiff. The litigation was not commenced at his instigation, nor was it commenced on any undertaking from him that he would underwrite the cost of doing so. The financial contribution that he had made prior to judgment being reserved was no more than that of the legitimate interest of a concerned member of the association. That directly attributable to the litigation was a donation of $100. The balance was a membership subscription and an undisclosed share in a donation towards the costs of a submission for the Development Commission.
[25] FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340.
The voluntary contributions which followed, all by way of loan, were not responsible in any causative sense for ABI incurring the costs that it did. The conduct of the litigation was in no way dependent upon the payment by Mr Haagmans of the amounts that he paid after trial and which he was under no legal obligation to pay. The provision of the bank guarantee by way of security before the trial was on the clear understanding of an obligation on the part of the plaintiff to repay any amount to Mr Haagmans that he might be called upon to pay under the guarantee and in the genuine belief that there was every likelihood that such guarantee would not be called upon. Ex post facto unconditional generosity for no apparent commercial gain to the provider is not to be discouraged.[26] Mr Haagmans did not have a relevant interest in the subject of the litigation. He was not “the effective litigant standing behind an actual party”.[27] It was an interest that was in no sense equal to or greater than that of the plaintiff. It was no more than that of a concerned member of the plaintiff. There was no impropriety on the part of Mr Haagmans in making the contributions he did.
[26] See Hamilton v Al Fayed (No 2) [2002] EWCA Civ 665, [2003] QB 1175.
[27] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 202, Dawson J.
Although it is not determinative of the present situation, there was no relevant notice given by ABI to Mr Haagmans of the intention to attempt to hold him liable for costs. That might have become relevant if there were some other ground on which it might have been possible to exercise the discretion against Mr Haagmans.
In all the circumstances this not one of those “rare and exceptional”[28] cases where the discretion should be exercised against a non-party. Accordingly, the application is dismissed.
[28] Vestris v Cashman (1998) 72 SASR 449, 467.