In the application of Harris Freidman Pty Limited [2014] NSWSC 511

The Federal Court proceedings 4The background to these proceedings is as follows. 5Two Arizona limited partnerships, Australian Equity Investors ("AEI") and 258 Nest ("258 Nest"), commenced proceedings in the Federal Court of Australia against Colliers International (NSW) Pty Limited ("Colliers"). They alleged that Colliers had engaged in misleading and deceptive conduct contrary to ss 52 and 52A of the Trade Practices Act 1974 (Cth) in relation to a parcel of land in Crows Nest. 6The proceedings were the subject of partial determination by a judge of the Federal Court of Australia. AEI and 258 Nest were successful in persuading that court on a preliminary issue that Colliers had engaged in the misleading and deceptive conduct that had been alleged. 7In the way that the matter proceeded, the Federal Court did not get to the point of having to determine all of the other issues in the case. In anticipation of the determination of those other issues an order was made for the provision of security for costs by AEI and 258 Nest in relation to the further conduct of the Federal Court proceedings. 8AEI and 258 Nest had some difficulty in obtaining the funds to provide that security for costs. They eventually were able to do so by entering into the LFA with CAID Industries Inc ("CAID"). 9The LFA contained the following relevant provisions: LITIGATION FUNDING AGREEMENT dated April 26, 2103 BETWEEN: CAID Industries, Inc. ("Funder") and Australian Equity Investors, an Arizona Limited Partnership, Debtor in Possession and The 258 Nest, an Arizona Limited Partnership, Debtor in Possession ("Litigant') INTRODUCTION A. The Litigant is lawfully entitled to pursue the Action. B. The Litigant enters into this Agreement subject to the approval of the US Bankruptcy Court. C. The Funder intends to provide financial and other assistance to the Litigant in respect of the Action. D. The parties intend that certain payments be made to the Funder. E. It is intended that the Litigant prosecute the Action for the joint benefit of the Litigant and the Funder and that the Funder provide the security for costs required by the Federal Court of Australia by and through its Order dated September 7, 2011 of such Action on the terms of this Agreement. TERMS 1. Definitions and Interpretation In this agreement: 1.1 "Action" means each and every legal proceeding issued or arising out of or in connection with the Principal Cause of Action including any appeal from any final judgment therein and any action brought to enforce or recover under any such final judgment. 1.2 "Action Costs" means the reasonable costs and expenses incurred by the Litigant in the performance of this Agreement comprising: 1.2.1 Reasonable costs and expenses (including disbursements) incurred directly by the Funder in relation to the Action or this Agreement including and subject to Clause 15, without limitation, international traveling [sic] and accommodation costs; 1.2.2 Charges of Solicitors; 1.2.3 Time charges of barristers; 1.2.4 Court filing fees, Court-ordered security for costs and all other incidental Court fees; 1.2.5 Witness fees and expenses; and 1.2.6 Costs incurred by Gregory Moore in travelling to Sydney when required as a witness at the trial of the Action, for strategy meetings or as otherwise necessary. ... 1.7 "Principal Cause of Action" means the causes of action defined in Item 3 of Schedule A hereto; 1.8 "Recovery" means all and any amounts received by the Litigant by way of judgment, settlement sum, interest, and costs or otherwise in or as a result of the Action, subject to Clause 15; ... 2. Payment 2.1 In consideration of the Funder agreeing to enter into this Agreement and perform its obligations hereunder, and subject to Clause 15, the Litigant covenants and agrees to pay to the Funder Forty Percent (40%) of the Recovery; ... 11. The Funder's Obligation Subject to this Agreement, the Funder agrees to: 11.1 Satisfy the order of Justice Cowdroy made on 7 September 2011 requiring the Litigant to provide security for costs in the amount of AU $250,000. ... 13. Bankruptcy of Litigant 13.1 The Litigant is subject to administration pursuant to Chapter 11 of the Bankruptcy Code of the United States of America. 13.2 This Agreement shall not become effective and shall not bind any party unless or until it shall have been approved by the United States Bankruptcy Court after notice and opportunity for hearing to all creditors and parties-in-interest in the proceedings entitled In re Australian Equity Investors and The 258 Nest case number 4-12-bk-10590-EWH. 13.3 The Litigant will use its best efforts to obtain the approval referred to in Clause 13.2 as quickly as possible. 13.4 For the avoidance of doubt, any costs incurred by the Litigant in respect of its bankruptcy, including obtaining the approval referred to in clause 13.2, are not Action Costs. 14. Security for Costs The Funder shall provide funds sufficient to satisfy the order of Justice Cowdroy made on 7 September 2011 requiring the Litigant to provide security for costs in the amount of AU $250,000. 15. Distribution of Recoveries 15.1 If the Litigant receives any Recovery from any source in or as a result of any Action it must pay the Recovery into the trust account of the Solicitors to be held in trust and distributed for the Litigant and the Funder only in accordance with the following and as soon as reasonably practicable. The Solicitors will have the Recovery paid out as follows in the following order of priority: 15.1.1 Attorneys' fees and costs incurred by the Solicitors, MBJ Lee, Barrister and Edward Cowpey, Barrister; 15.1.2 Return to the Funder the security posted as security for costs; 15.1.3 Return to the Litigant the security posted as security for costs; 15.1.4 Fifty Percent (50%) of all asset recovery to the Funder; 15.1.5 Ten Percent (10%) of all asset recovery to Gregory Moore; 15.1.6 Repayment to the parties that advanced Action Costs paid by them in connection with this Action; 15.1.7 The balance to the Litigant. 15.2 For the avoidance of doubt the parties acknowledge that any property other than cash recovered in or as a result of the Action will be realized and converted to cash as quickly as reasonably possible by the Litigant and then applied in accordance with this Clause 15. ... 27. Governing Law This Agreement is governed by the laws of the State. However, to the extent this Agreement concerns litigation pending before the Federal Court of Australia, that Court's rules and Australian federal law shall control the administration of the case. ... SCHEDULE A ... Item No. 3 Principal Cause of Action: Claims made by the Litigants in Action Number 1344 of 2009 in the Federal Court of Australia, New South Wales District Registry. Item No. 4 The State: New South Wales, Australia ... SCHEDULE B STATEMENT REGARDING DISTRIBUTION OF RECOVERIES The undersigned agrees to distribute any proceeds from litigation known as Australian Equity Investors, L.P., et al v. Colliers International, et al. in accordance with Clause 27 of this agreement. In so agreeing the undersigned does not become a party to this agreement. Signature of Scott Freidman Scott Freidman Harris Freidman Lawyers 10In accordance with the LFA, CAID made arrangements for the security for costs that was required to be provided in accordance with the orders that had been made by the Federal Court. Some time after that was done but before any further hearing in the Federal Court, those proceedings were the subject of a mediation. That mediation resulted in a settlement agreement between the parties. That agreement was that the proceedings would be disposed of by a payment of AUD$1,577,500 to 258 Nest. While the proceedings brought by AEI were also dismissed, no amount was payable to AEI under the settlement agreement. 11The payment required by the settlement agreement was paid into Harris Freidman's trust account. Some disbursements have been made from that account, leaving a current balance of AUD$1,222,000 in Harris Freidman's trust account.

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