After paying $9 million in legal costs to fossil fuel giant Santos, Australia’s biggest environmental law charity may fall into insolvency and shut down, according to its latest financial report.
Experts with decades of public interest litigation experience are worried the news will discourage lawyers from taking on major companies, and weaken the prospects of public interest litigation on the whole.
The Environmental Defenders Office (EDO) was hit with the legal bill last year while representing traditional owners of the Tiwi Islands, who were trying to prevent Santos building a new gas pipeline near the archipelago.
During the failed case, the federal court judge slammed the EDO for what she ruled was coaching a witness.
While that finding was not subject to direct examination in the trial, the EDO did not appeal it, and said it “treated the court’s findings with the utmost seriousness”.
Santos argued the EDO’s behaviour was so bad, it should be held responsible for all of Santos’s costs associated with the case, rather than Santos or the litigants represented by the EDO.
The judge agreed, saddling the EDO with the multi-million dollar legal bill.
Some public interest lawyers argued that move by Santos was a “SLAPP suit” — Strategic Litigation Against Public Participation — intended as a warning to others who might consider litigation in the future.
David Morris is the chief executive of the Environmental Defenders Office. (Supplied: Environmental Defenders Office)
It’s a claim Santos denies.
“The findings of the court in relation to the EDO’s conduct in the [Tiwi Islands] case, including that part of the evidence had been confected by the EDO and its experts, were extremely serious,” a spokesperson for Santos said.
“It was the court that ordered the EDO to pay Santos’s costs in the circumstances.”
Lawyer Elaine Johnson worked for the EDO for 12 years, and now runs her own environmental law firm. She says the damage inflicted to the EDO has ramifications well beyond that one charity.
“There will be a smaller pool of lawyers willing to take on these matters,” she said.
“And that’s really concerning, because in this time where we’re facing multiple planetary crises — biodiversity crises, water crises and a climate crisis — we really need more practitioners who are willing to step up and take on these public interest environmental cases.”
Simon Munkara (second from left) with other traditional owners who protested against the project. (
ABC News: Michael Franchi
)
Barrister Geoffrey Watson SC examined the case last year, before the costs order was issued.
“It becomes an existential crisis for [them] if you’ve got a powerful and wealthy litigant, who is willing to litigate you to death over these sorts of issues,” he told the ABC at the time.
The EDO will submit its financial report to the Australian Charities and Not for Profits Commission (ACNC) today.
The report paints a picture not dissimilar to Mr Watson’s 2024 prediction, but the charity is confident it will survive.
“Given the circumstances described, a material uncertainty exists that may cast significant doubt on the EDO’s ability to continue as a going concern,” the report says.
Taxation lawyer and chartered accountant Tony Watson has spent years examining documents like the EDO’s financial report. He said the organisation was in trouble.
“They’re shaky — and the auditors and the directors don’t step away from that,” he said.
“If they’re a cat, they’ve now used up eight of their lives.”
The Santos spokesperson said the EDO board needed to answer for its financial position arising from the costs order.
“The costs order was not awarded lightly by the court, and was a reflection of its findings in relation to the EDO’s conduct in the [Tiwi Islands] case,” they said.
‘Greatest threat to EDO’s existence’
The EDO represents individuals and community groups who are seeking legal outcomes that improve the environment.
It’s been involved in cases that have sought to stop gas pipelines, coal mines and oil projects; impose tighter rules around projects like Adani’s Carmichael coal mine; and protect water resources around Australia.
EDO chief executive David Morris described the fallout from the Santos case as a grave and humbling experience.
“We weren’t prepared for a cost order of that magnitude [$9 million], and it has been the greatest threat to EDO’s existence in our 40-year history,” he said.
The financial report shows the EDO ran at an $8.6 million loss for the last financial year and held a net liability of more than $3 million at its close.
If it weren’t for the cost order, the EDO otherwise ran at a surplus of nearly half a million dollars.
The EDO was only able to pay Santos by securing a $6.5 million interest-free loan from an undisclosed philanthropic source. It covered the rest with an insurance payout and its own funds.
“Very pleasingly, what we’ve seen throughout the course of last year has been really strong community backing for the organisation.”
But that loan must be paid by August 2027, meaning the charity would have to repay an average of about $2.3 million each year.
Given it has run at an average operating surplus of about $320,000 since 2019, the EDO would need significant funds to service such a substantial loan.
Mr Morris said the organisation had been buoyed by pledges of financial support.
“We have taken on a loan liability that we have to repay, and so our ability to continue is reliant on ongoing community support, and we have great confidence in that community support,” he said.
“There are some very powerful forces, here in Australia and abroad, who would be delighted if the EDO ceased to exist.”
Tony Watson said the financial report highlighted the imbalance between the EDO and its clients versus a company like Santos.
Santos spent more than $9 million fighting this one case — a figure equivalent to about 70 per cent of the EDO’s entire staffing expenditure in a year.
“It highlights the exorbitant costs of litigation in Australia,” Mr Watson said.
“It’s a problem not just for the EDO, but for anyone trying to bring litigation against a powerful, well resourced opponent.”
