Friends of Elliston - Environment & Conservation Inc v State of South Australia (No 2) - [2007] SASC 325

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division: Application)
FRIENDS OF ELLISTON - ENVIRONMENT & CONSERVATION INC v STATE OF SOUTH AUSTRALIA & ORS (No 2)
[2007] SASC 325
Judgment of The Honourable Justice Bleby
6 September 2007
PROCEDURE - COSTS - JURISDICTION - PERSONS NOT PARTIES TO PROCEEDINGS
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS - AT WHAT STAGE OF PROCEEDINGS
Application for discovery – Applicant successful party in main action – Costs order made in favour of applicant – Respondent a mere nominal plaintiff in main action – Order for security for costs made against respondent satisfied by non-party to main action – Application for discovery of documents tending to reveal the identity of any persons who may have provided funds for the prosecution or maintenance of the litigation the subject of the main action – Application made with a view to seeking a costs order against non-parties – Power of Court to make orders sought – Principles governing the exercise of the power – Held: Application for discovery granted.
Associations Incorporation Act 1985 (SA) s 18; Supreme Court Act 1935 (SA) s 40; Supreme Court Rules 1987 (SA) r 60, r 100; Supreme Court Civil rules 2006 (SA) r 8, r 32, r 265, chapter 12; Development Act 1993 (SA), referred to.
Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965; Vestris v Cashman (1998) 72 SASR 449; NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8; Singh v Observer Ltd [1998] 2 All ER 751, applied.
Modbury Hosptial & Ors v O'Loughlin (1988) 49 SASR 452, discussed.
Gerard Industries v Wee (1986) 43 SASR 562; Dunning v United Liverpool Hospital Board of Governors [1973] 2 All ER 454; Shaw v Vauxhall Motors [1974] 2 All ER 1185, considered.

FRIENDS OF ELLISTON - ENVIRONMENT & CONSERVATION INC v STATE OF SOUTH AUSTRALIA & ORS (No 2)
[2007] SASC 325
BLEBY J:
Background

On 19 January 2007 I dismissed the plaintiff’s action and adjourned argument on the question of costs to 8 February 2007. On that day I ordered the plaintiff to pay the costs of the defendants to be taxed.
The plaintiff is an association incorporated under the Associations Incorporation Act 1985 (SA). It was incorporated on 2 May 2005. It commenced these proceedings on 12 August 2005.
The third defendant, Australian Bight Infrastructure Pty Ltd (“ABI”) and its associated companies are engaged in abalone aquaculture near Elliston. If successful, the plaintiff’s action would have prevented ABI from continuing pursuit of its abalone aquaculture venture or at least would have substantially delayed its possible implementation.
The application now before me is an application filed on 28 June 2007 by ABI, being one of the defendants in whose favour the costs order was made. It seeks the following orders:
1.That the plaintiff and its solicitors disclose in writing to the third defendant’s solicitors the identity of any person or body who directly or indirectly provided funds for the prosecution or maintenance of the litigation in the proceedings;
2.That the plaintiff and its solicitors provide discovery of documents specified in the affidavit of Vasiliki Victoria Danambasis affirmed on 28 June 2007.
The affidavit of Mrs Danambasis specifies the following further order:
That the plaintiff give discovery of the following documents:
1.All accounting records required to be kept under clause 10.2 of the plaintiff’s Constitution together with bank statements evidencing financial transactions from the incorporation of the plaintiff until the present day;
2.Documents evidencing details of the Gift Fund maintained under clause 12 of the plaintiff’s Constitution, including details of payments into and out of the fund, and the identity of any contributor or recipient of funds;
3.All financial records including balance sheets and profit and loss statements of the plaintiff;
4.A copy of the register of members required to be kept under clause 5.6 of the plaintiff’s Constitution;
5.Details of current and past members and office bearers of the plaintiff’s Management Committee;
6.All invoices issued to the plaintiff or any other person or body for legal services in relation to the conduct of the proceedings, and documents evidencing the identity of persons or bodies who have paid such invoices.
Those documents are sought for the purpose of ascertaining the financial position of the plaintiff and, along with the orders sought in this summons, of identifying those persons or bodies who have directly or indirectly financed or funded the plaintiff’s legal costs in relation to these proceedings.
The orders are sought with a view to filing an application for a non-party costs order against specific members of the plaintiff.
The application was opposed by the plaintiff. That might seem surprising unless the plaintiff was seeking to defend others who might be affected by an order for payment of costs. It seems surprising because there was nothing in ABI’s application to suggest that any further orders relating to costs were being sought against the plaintiff. Nothing was put to suggest any inconvenience or onerous burden which would be placed on the plaintiff in complying with the orders. No question of legal professional privilege was raised, although it is conceivable that it might be by way of objection to giving the particulars sought in the summons or by way of objection to production of certain documents. The application was opposed on the grounds that there was no inherent jurisdiction on the part of the Court to make the first order sought in the application, and that ABI was unable to show any real prospect that an application against a non-party would or could be brought or that the information sought would assist in determining whether such an application would be pursued. It was said that ABI had no proper basis to contemplate the bringing of such an action, and that if an order were made, the information given would be insufficient to justify bringing any such action. The information would not be material to any proposed application against a non-party.
The power of the Court to make the orders
The Court’s power to award costs is contained in s 40 of the Supreme Court Act 1935 (SA). That section is cast in extremely wide terms and includes a power to award costs against a person or body not a party to the action.[1] The Court’s jurisdiction extends to making such an order after it has entered judgment and made a costs order between the parties.[2]
[1] Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965; Vestris v Cashman (1998) 72 SASR 449.
[2] NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8. See also r 265(1), Supreme Court Civil Rules 2006, being the rules which would appear to apply in this case: See paragraphs 10 and 11 below.
What ABI now seeks is discovery in aid of ascertaining whether the plaintiff itself has any prospect of satisfying the order for costs made against it and, if not, whether the members of the plaintiff or others who may have promoted the unsuccessful action on the plaintiff’s behalf may properly become the subject of an application for an order that they or any of them pay ABI’s costs.
Notwithstanding that the action was conducted under the Supreme Court Rules 1987 (SA), the relevant rules for consideration of any costs application are the Supreme Court Civil Rules 2006 (SA).[3] Chapter 12 of the Supreme Court Civil Rules does not relevantly qualify in any way the exercise of the Court’s discretion conferred by s 40 of the Supreme Court Act.
[3] Supreme Court Civil Rules 2006, r 8.
Mr Henry, counsel for ABI, argues that the Court has inherent jurisdiction to order a party to disclose the identity of persons who have supported the litigation by providing funding. He also relies on the Court’s inherent jurisdiction to order discovery relevant to the Court’s discretion to make an order for costs against a non-party.
As a corollary of the power to order costs against a non-party, the Court must have power to order disclosure of the identity of such a party. Such inherent power has been held to exist and has been exercised notwithstanding an undertaking given by the party or his solicitor as to confidentiality of the identity of the funder or guarantor.[4] The same power must exist in relation to discovery of documents by the party and, if necessary, by an intended non-party.
[4] Singh v Observer Ltd [1989] 2 All ER 751.
A successful defendant is in a position of considerable disadvantage in deciding whether to pursue an order for payment of costs by a non-party where the plaintiff, an association incorporated for one of the purposes contained in s 18 of the Associations Incorporation Act, declines to reveal its financial position or its membership, and declines to reveal its source of funds for commencing and maintaining an action in this Court to trial, which action is designed to prevent the successful defendant from pursuing what has been held to be a legitimate business venture. If the Court has power in limited circumstances to make an order for costs against a non-party, then it must also have the ability to ensure that the proper exercise of its power cannot be thwarted by a wall of silence. I therefore consider that I have power to make the orders sought.
Principles governing the exercise of the power
The orders now sought are in aid of a possible application for payment of the third defendant’s costs by a non-party. As the order relates to a right which the third defendant has to claim costs from a non-party, and as that is an application now governed by the Supreme Court Civil Rules 2006, I consider that it is appropriate to look to the Supreme Court Civil Rules for guidance as to the exercise of this inherent power.
It is not suggested that any further orders of substance will be sought against the plaintiff. Such orders will only be sought, if at all, against persons who are not parties to the present action. The present application is not unlike a pre-trial application brought under r 32 of the Supreme Court Civil Rules 2006. That rule provides:
32—Investigation
(1)If the Court is satisfied, on application by a person (the plaintiff) that the plaintiff may have a good cause of action and requires further information—
(a)     to determine whether a cause of action exists; or
(b)     to formulate the claim properly; or
(c)     to determine against whom the claim lies,
the Court may exercise the investigative powers conferred by this rule in anticipation of an action.
(2)The Court may, if satisfied that a person may be in possession of evidentiary material relevant to the possible cause of action, make an order imposing one or more of the following requirements—
(a)     to disclose to the Court whether the person is or has been in possession of relevant evidentiary material and, if so, to disclose full particulars of relevant evidentiary material that is, or has been, in the person's possession;
(b)     if the person is in possession of relevant evidentiary material—to produce it to the Court;
(c)     to verify the person's response to the order by affidavit.
(3)After considering a person's response (or failure to respond) to an order under subrule (2), the Court may require the person to appear before the Court for cross-examination.
(4)Subject to any direction by the Court to the contrary, a person against whom an order is made under this rule is entitled to reasonable compensation from the plaintiff for the time and expense involved in complying with the order.
(5)The compensation is to be fixed by agreement between the plaintiff and the person entitled to the compensation or, in default of agreement, by the Court.
In this case ABI’s purpose for bringing the present application is to determine whether a right of application against a present non-party exists and to determine against whom such an application might lie. The investigative powers required to be exercised in these circumstances are similar to those which might be exercised by the Court in an application under r 32.
A convenient starting point for the discussion is the decision of Bollen J in Modbury Hospital & Ors v O’Loughlin.[5] In that case the Court was considering the operation of r 60.01 of the Supreme Court Rules 1987 which provided that the Court could make an order for disclosure and production of documents “by any person seeking such an order against another person where both are likely to be parties to subsequent proceedings.” The operation of that rule was obviously narrower than that of r 32.
[5] (1988) 49 SASR 452.
Bollen J referred to the decision of White J in Gerard Industries v Wee[6] which in turn had referred to the English cases of Dunning v United Liverpool Hospital Board of Governors[7] and Shaw v Vauxhall Motors.[8] Having referred to what White J said in Gerard Industries, Bollen J continued:
The decisions of the Court of Appeal in Dunning’s case and in Shaw v Vauxhall Motors (supra) suggest very strongly that the question whether the parties are likely to be parties in subsequent proceedings does not depend on the state of affairs prior to pre-action discovery. If one concentrates solely on things as they stand prior to pre-action discovery then it will often be impossible to say that anyone is likely to be a party to any subsequent proceedings. But as Lord Denning said in Dunning’s case: “One of the objects of this section is to enable a plaintiff to find out – before he starts proceedings – whether he has a good cause of action or not”. Again, I quote from the reasons of White J in Gerard Industries, this time at 568. His Honour said:
“There must be some grounds for making the application; there must be some foundation for the belief that discovery is necessary; speculation and hope and unwarranted suspicion are not enough; and busybodies on fishing expeditions ought to be discouraged. But as Lord Denning said, it is not necessary to show as a condition precedent to an order, that one has a good cause of action already, that is, without the benefit of the information which is sought by the discovery. Such a view would defeat the object of the legislation in England and of the rules here.”
Rule 60 must provide an avenue of inquiry – inquiry whether some evidence exists to justify proceedings. If the word “likely” is given too literal a meaning the object of the rule could often be defeated. After all if a plaintiff has grounds for bringing proceedings without pre-action discovery he will launch his action and get “ordinary discovery”. Nevertheless we must remember as White J said in Gerard Industries “speculation, hope and unwarranted suspicion are not enough”. There must be some ground seeking pre-action discovery. I think that there is here some ground for granting the application for pre-action discovery.[9]
[6] (1986) 43 SASR 562.
[7] [1973] 1 WLR 586; 2 All ER 454.
[8] [1974] 1 WLR 1035; 2 All ER 1185.
[9] (1988) 49 SASR 452 at 463.
Proceedings under r 32 are not limited to a situation where the parties to the application are likely to be parties to subsequent proceedings. Under r 32 the Court may act if it is “satisfied” –
(a)that the applicant “may” have a good cause of action, not that the applicant has a good cause of action, nor that the person against whom the applicant may have the cause of action is identified; and
(b)     that the applicant requires further information –
(i)     to determine whether a cause of action exists; or
(ii)    to formulate the claim properly; or
(iii) to determine against whom the claim lies.
The Court may exercise the investigative powers referred to in the rule if it is satisfied, not that the person is in possession of evidence or material relevant to the possible cause of action, but that the person may be in possession of such material. It is also to be noted that the definition of “evidentiary material” in r 4 includes any document, object or substance that should, in the opinion of the Court, be produced for the purpose of enabling the Court to determine whether or not it has evidentiary value, thereby further extending the powers of the Court.
The dictum of Bollen J quoted above was considered appropriate to r 60 of the Supreme Court Rules 1987. The position is a fortiori with respect to an application under r 32 of the Supreme Court Civil Rules 2006. The great flexibility allowed by r 32 in an application for pre-action investigation is entirely appropriate to the exercise of the inherent jurisdiction of the Court to aid a party to determine whether he or she may properly bring an application for an order for costs against a non-party when it cannot be ascertained whether such application may be successful, and when it cannot be ascertained against whom such an order might be made.
The relevant facts
After the order for costs was made ABI engaged a costs assessor to provide a preliminary assessment of the party/party costs claimable on an adjudication of costs. The assessment was in the order of $73,360 exclusive of GST, counsel fees and disbursements. I have not been informed of the total amount of counsel fees and disbursements, but it would not be surprising if the total amount claimed by ABI, inclusive of GST, was in excess of $100,000.
On 3 February 2006, before trial, another judge of this Court ordered that the plaintiff provide security for costs in the form of a bank guarantee in the amount of $10,000. That guarantee was provided by Mr John Haagman, one of the members of the plaintiff and its then Chair. The order did not provide for security for the third defendant’s costs but for costs generally. I have no information as to whether the first and second defendants propose to enforce the order for costs in their favour or whether they claim any interest in the bank guarantee.
Since February 2007 some negotiations have taken place as to the settlement of the third defendant’s claim for costs, but no agreement has been reached.
On 30 April 2007 the solicitors for the third defendant wrote to the solicitors for the plaintiff advising that the third defendant intended to proceed to an adjudication of costs and to make application to the Court for discovery of documents from the plaintiff, its members and the plaintiff’s solicitors with a view to making a subsequent application for a non-party costs order against specific members of the plaintiff. It sought production of a number of documents specified in the letter. The request was not complied with.
In connection with the earlier application for security for costs, ABI had previously requested information from the plaintiff as to its financial standing, and whether any members of the plaintiff had a commercial competitive interest in the proceedings. That request was not complied with at the time and has not been complied with since.
ABI is concerned that proceeding to an adjudication will involve further expense and may, in the end, be a fruitless exercise if the plaintiff has no assets. In addition, if ABI waits until after the adjudication to ascertain whether the plaintiff has any assets, this may further delay any application for costs against a non-party.
Apart from affidavits of solicitors deposing to various technical matters necessary for the plaintiff’s application, such as the formation and rules of the plaintiff, incorporation of ABI and its associated companies, the granting of leases, the conduct of the Development Act application resulting in the ultimate approval granted to ABI and like matters, there were two deponents who swore affidavits who were members of the plaintiff, both of whom were actively involved in the formation and incorporation of the plaintiff. One was Mr John Haagman, mentioned above, who held an abalone licence for the area which includes the area where ABI conducts its aquaculture venture. The other was Mr Tony Custance who worked for Mr Haagman as a “sheller” during the abalone season, and who holds a marine scale licence with hook endorsement. When he is not working for Mr Haagman, he is a professional line fisherman in waters adjacent to Elliston. When the original development application was lodged by Mr Hitchcock, it did not appear to interfere with his activities and he made no representations. In his affidavit he expresses concern about the possible restriction of his own fishing activities by the aquaculture venture of ABI.

There was a public meeting at Elliston on 8 March 2005, shortly before the lodging of the application for incorporation of the plaintiff, at which the principal speakers were Mr Allan Suter, described as “President of the West Coast Profession Fishing Association” and “Member (of) the West Coast Recreational Fishing Association”, Mr Peter Shaughnessy, an employee of CSIRO who had studied the sea lion population on Waldergrave Island near the development, Mr Haagman and Mr Custance. All spoke against or expressed concern at the proposed development. Mr Haagman particularly opposed the development application and spoke of the potential impact of the development on natural abalone in the area and of encroachments on recreational and professional anglers including “concerns pertaining to potential economical impact on the commercial abalone industry”. Mr Custance spoke, among other things, about potential harm to the local fishery.
In order to make the order for security for costs the Court had to be satisfied that “the plaintiff is a mere nominal plaintiff and is in a condition of poverty or insolvency” or that “for special circumstances the justice of the case so requires”.[10] The circumstances suggest that it may have been the former in this case.
[10] Supreme Court Rules 1987, r 100.01.
The affidavit in support of the application for security for costs identified four persons who were actually involved in the formation of the plaintiff or their spouses who held fishing licences in the area, including Mr Haagman and his abalone licence. The affidavit also exhibited an email from which it might be inferred that persons engaged in the existing abalone industry were alive to the possibility of opposition by them being perceived as being based on “trade competition”, and of that perception being advanced as a reason for forming an incorporated organisation “not directly linked to the wild fishery”.
I consider it not unreasonable that ABI should be informed of the plaintiff’s financial position before deciding whether to apply for an order against a non-party. Given that the plaintiff is not primarily a trading entity but is a voluntary association, of recent origin prior to the commencement of the proceedings, and unlikely to be able to sustain the costs of bringing and maintaining an action of this nature without substantial external assistance, I consider that ABI is entitled to be informed of the source of that assistance by way of the requirement to disclose the information sought and to give discovery of the documents sought. At this stage I am not required to form any view on whether ABI has a good claim against a non-party or who that non-party may be. However, in all the circumstances, I am satisfied that ABI may have a justifiable claim against a non-party and that it requires further information to determine whether that claim is justifiable and to determine against whom the claim lies.
The prospect of such a claim is not merely based on speculation or suspicion without any foundation. I reject the submission of Mr Swan, counsel for the plaintiff, that provision of the information or documents sought would not give ABI any information material to any proposed claim against a non-party. All ABI knows about provision of financial assistance is that Mr Haagman provided the bank guarantee by way of security for the defendants’ costs. It does not know who, if anyone, provided the plaintiff’s costs of maintaining the action, nor can it know what motive such provider may have had in doing so, both of which are relevant to any potential claim for costs against a non-party.
Accordingly, I am satisfied that orders of the type now sought by ABI should be made. I will hear counsel as to the precise terms of the order.