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    Friday
    Jul112014

    Landmark judgments

    Big Jim Byrne's litigation funding caper with a 25 percent commission ... Divorcee in unsuccessful struggle to unwind funding deal ... Roger Rogerson plays a starring role as a "mediator" ... Also, a tedious dispute about the cost of transcribing file notes ... "Bordering on the unseemly" ... Reports from courtside

    Mr 25 Percent

    Nemeth v Australian Litigation Funders Pty Ltd 

    Virginia Nemeth may have to hand over a $2 million chunk of her divorce settlement under a lucrative litigation funding agreement struck with colourful Sydney business identity Big Jim Byrnes. 

    The Sydney divorcee agreed to pay a 25 percent commission to Australian Litigation Funders, a company of which Byrnes' wife, Gina, is sole director. 

    Ms Nemeth attempted to wriggle out of the payment by arguing that Byrnes had exploited her and that the terms of the funding agreement were unjust.  

    Justices Anthony Meagher, Fabian Gleeson and Mark Leeming of the NSW Court of Appeal have upheld the primary finding against Ms Nemeth.  

    Background

    The appellant married the late Ferdinand Nemeth in 1989. 

    She was 36 at the time and he was 64. 

    Ms Nemeth was actively involved in a number of Ferdinand's businesses, notably the Hampton Court Hotel in King's Cross. 

    The marriage began to deteriorate in 2003, when Ms Nemeth's stepson, Anthony, began to take a more active role in a number of his father's companies. 

    In 2006, Ms Nemeth commenced proceedings in the Family Court seeking a $30 million settlement and full ownership of the couple's Darling Point property. 

    In 2008, both parties signed a head of agreement, under which Virginia was to get $8 million and the Darling Point property.  However, she was dissatisfied and refused to implement the agreement.

    In 2009, Ms Nemeth engaged Roger Rogerson as a private mediator and to gather information relating to money Anthony allegedly stole from his father's business. 

    In 2010, Ms Nemeth met with Big Jim Byrnes and signed a funding agreement to sustain her pricey legal battle. 

    In 2011, the Family Court proceedings were resolved - with Virginia to receive $9 million and the Darling Point property unencumbered. 

    Hampton Court Hotel Kings Cross in its glory days

    The exploitation argument

    Trial judge John Sackar held that Byrnes had not exploited Ms Nemeth, despite securing the 25 percent commission.

    Ms Nemeth contended that her "character traits made her vulnerable to exploitation" and that Big Jim used her vulnerability to enter into a transaction that was "grossly disproportionate between what had been provided and what had been obtained".

    On appeal, Fabian Gleeson found that Sackar was right to be unconvinced. 

    "The appellant contended for a finding on appeal that she was obsessed by Anthony, and irrational in her conduct, and that those aspects of her character permeated all her dealings, including her decision to enter into the Funding Agreement ... His Honour noted that the appellant had significant experience in the operation of the Hampton Court Hotel, held significant assets, was described by almost all witnesses as being clever and intelligent, and there was no relevant medical evidence to suggest that she was suffering from poor health, nor was there any expert opinion to that effect ... 

    I am not persuaded that his Honour's finding that the appellant did not suffer from a 'special disability' should be set aside. The finding is not inconsistent with incontrovertible facts, nor glaringly improbable or contrary to compelling inferences."

    Gleeson noted that Sackar identified a number of matters to support his conclusion that Ms Nemeth was no mere victim. These included:

    • Her use of DNA to suggest that Anthony was not Ferdinand's biological son and to manipulate him financially. 

    • Her considerable commercial experience and qualifications. 

    • Her desire to "convey the impression to Anthony that she was being assisted by persons with somewhat notorious reputations". 

    • The fact that she actively sought out Byrnes and Rogerson, who were total strangers with "somewhat dubious reputations". 

    Sackar found that Ms Nemeth had wanted Rogerson to expose any criminal activity on Anthony's part in order to gain extra leverage in the negotiations. 

    HH also found that Ms Nemeth had asked Rogerson "to do violence to Anthony as part of her strategic plan" and that she had told Brynes that she wanted "horrible things to be done to Anthony" - although neither agreed to do so. 

    Unjust terms

    Ms Nemeth also tried to argue that the 25 percent commission was unjust by community standards, when compared with other options for litigation funding in 2010.  

    Justice Gleeson said this was a new argument that had not been raised at trial and therefore should not be heard on appeal. 

    Finally, Gleeson upheld Sackar's finding that the funding agreement was not unjust under the Contracts Review Act. He held:

    "It may be accepted, as the primary judge found, that Mr Byrnes thought that the Funding Agreement was an extremely good and viable transaction which he would make a profit on, notwithstanding that he had provisioned to spend $1,000,000 in funding the appellant's claim. Nonetheless ... the appellant understood the transaction she was entering into, believed it was in her best interests, and had not been threatened or intimidated by Mr Byrnes or anyone on his behalf to do so." 

    *   *   *

    Reid v Wright

    JUSTICE Hormones Harrison was mighty peeved at the waste of time and energy spent arguing over the cost of a transcript. 

    Christine Reid is suing her solicitor Diane Wright for damages in relation to the conduct of a family law case. 

    Harrison wanted the issue of the transcription of Wright's file notes resolved between the parties without further intervention from him. 

    While that issue was resolved, the question of costs was the next hurdle. 

    Reid contended that Wright had no basis to oppose the orders for transcription of the file notes. 

    Wright said that she never refused to provide a transcript and so no adverse costs order should be made. 

    Even if she had refused, the notes are not all illegible and Reid could simply nominate for transcription which parts she could not decipher. 

    Hormones said: 

    "The dispute is bordering upon the unseemly. A moment's reflection by both parties should have led to the resolution of this tedious contest without any recourse to the court. The Civil Procedure Act 2005 says as much." 

    Reid was entitled to receive a legible copy of the file notes sooner or later. This was inevitable. 

    Wright was ordered to pay the costs of Reid's motion, assessed at $600. 

    Harrison signed off, saying: 

    "It is to be hoped that this litigation proceeds more smoothly hereafter ..." 

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