Nemeth v Australian Litigation Funders Pty Ltd - [2014] NSWCA 198 - NSWCA 2013 case summary — Zoe

NSWNSWCA

Nemeth v Australian Litigation Funders Pty Ltd

[2014] NSWCA 198

Court of Appeal (NSW)|2013-12-13|Before: Meagher JA, Gleeson JA, Leeming JA, Rolfe J

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At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2013-12-13

Before

Meagher JA, Gleeson JA, Leeming JA, Rolfe J

Source

Original judgment source is linked above.

Judgment (46 paragraphs)

[1]

Background 6The appellant was born in the Philippines and married her former husband, Ferdinand Nemeth, on 19 June 1989. At the time of their marriage the appellant was almost 36 years of age and Ferdinand was aged 64. Ferdinand had a son, Anthony Nemeth, then aged 9 years. He was the child of Linda Nemeth, Ferdinand's second wife (Blue 3/1114). For convenience I will refer to Ferdinand Nemeth and Anthony Nemeth by their first names. By doing so, I intend no disrespect. 7The appellant was an accountant and bookkeeper who had attended University, as well as secretarial school, in the Philippines. She had also undertaken an accounting course at TAFE New South Wales in Sydney (with the exception of one subject) (Blue 4/1535C). She was experienced in the sale and purchase of numerous properties both in Australia and the Philippines. She was actively involved in the marketing and promotion of the Hampton Court Hotel in Kings Cross, which Ferdinand owned through corporate entities. The hotel had 126 guest rooms, a bar, and a restaurant, located across seven floors (Blue 4/1555M). The appellant was successful in increasing its occupancy rate by about 75%. She also assisted in hotel renovations which took place from time to time, she managed the books of one or more of Ferdinand's corporate interests, and was actively involved in the running of a number of his companies. 8By 2003 Anthony, then aged 23, had begun to take an active role in Ferdinand's companies. The appellant was unhappy about what she considered to be a degree of control over Ferdinand exercised by Anthony, particularly in relation to the companies' financial matters (Blue 4/1569P-X). It seems that the appellant's relationship with Ferdinand began to deteriorate in about mid 2003 soon after she revealed to him her claim that DNA test results she had obtained concerning Anthony established that Ferdinand was not Anthony's father. The appellant used the DNA analysis in an attempt to persuade Ferdinand to disinherit Anthony, who she saw as a competitor.

[2]

Family Court property proceedings 9In August 2006 the appellant brought proceedings against Ferdinand in the Family Court of Australia seeking an order for a property settlement (Blue 3/1099-1107). At the time her solicitor was Ms Wendy Baker. By September 2007 the appellant had changed lawyers and had retained York Law (a Mr Nabil Wahhab). On 24 December 2007 the appellant made an amended application seeking final orders that Ferdinand, amongst other things: (1)within 30 days, transfer the Darling Point property to the appellant unencumbered and also vacate that property; and (2)pay to the appellant the sum of $30,000,000 by way of property settlement (Blue 2/602). 10On the same date the appellant made an application seeking interim orders including that F&V Nemeth Holdings Pty Ltd repay the appellant's credit loan account in the sum of $2,845,287, or alternatively that Ferdinand pay the appellant interim spouse maintenance in the sum of $2,840 per week and interim costs (to enable her to meet her legal costs and disbursements of the proceedings) in the sum of $250,000 (Blue 2/610-611). 11In an affidavit sworn on 21 December 2007 in support of these applications, the appellant stated that she had applied for litigation funding and had obtained approval for $75,000 to assist her in funding the Family Court proceedings, but that approval was conditional on her granting a mortgage over the Darling Point property and she did not feel comfortable in giving such a mortgage without Ferdinand's consent (Blue 2/640K-L). At the trial the appellant gave evidence that she did not recall this application for litigation funding, when it was made, or when it was approved. She agreed however that she recalled that she did not want to give a mortgage on the Darling Point property (Black 1/51W-52N). 12On 30 January 2008 the appellant filed another amended application in the Family Court seeking similar interim orders to those sought in the application filed on 24 December 2007 but this time claiming an order that F&V Nemeth Investments Pty Ltd repay the appellant's credit loan accounts (Blue 2/719-726). 13The appellant estimated the value of her net assets in her financial statement of 5 February 2008 (Blue 1/190-202) at approximately $3,300,000, excluding the value of her half share of the Darling Point property which she owned jointly with Ferdinand. She stated its value as "unknown". 14According to Ferdinand's financial statement filed on 11 February 2008 (Blue 1/318-326), the total value of his net assets was in the order of $39,600,000. Other than a relatively small amount in cash and a motor vehicle of insignificant value, Ferdinand's assets comprised his half share in the Darling Point property (he estimated his half share had a value of $10,000,000) and loans to related companies totalling approximately $29,600,000. 15Ferdinand's response document to the appellant's applications was filed on 12 February 2008 (Blue 2/739-751). It sought an alternative order, namely that he pay to the appellant an amount equal to 20% of their net assets as determined by the Court, subject to certain exceptions, and that in return the appellant be restrained from disturbing his occupation of the Darling Point property. It seems that they were both living at the property at this time. He indicated that he was prepared to pay the appellant's solicitors $250,000 in instalments by way of interim and/or partial property settlement. He also indicated, without any admission, that in the event of completion of the sale of the Hampton Court Hotel he would cause the relevant corporate entity to deposit the sum of $30,000,000 in an interest bearing account and undertook to not allow the amount to go below that sum. 16On 12 February 2008 the Family Court made an interim costs order that Ferdinand pay the appellant $250,000 over two instalments (Blue 1/426-430). 17Later in February 2008 the appellant terminated her retainer of York Law and retained Mr Trevor Hall of Hall Partners to represent her in the Family Court proceedings. In December 2008 a mediation was held at which the appellant was represented by Mr Richardson SC. The appellant's then solicitor, Mr Hall, did not attend. This was later a source of complaint by the appellant.

[3]

Heads of Agreement 18As a result of the mediation the appellant and Ferdinand signed Heads of Agreement on 12 December 2008 to settle the proceedings (Blue 3/1121-1123). In broad terms the arrangement involved the appellant receiving $8,000,000 by instalments plus the Darling Point property (unencumbered). The $8,000,000 was to be paid as to $500,000 within 14 days and as to $7,500,000 within 12 months or the date of completion of the sale of the Hampton Court Hotel, whichever occurred first. 19Ferdinand also agreed to give certain indemnities to the appellant in relation to his corporate entities together with other releases and the appellant agreed to use her best endeavours to have each adult member of her family execute certain releases in favour of Ferdinand and his corporate entities. The relevance of the latter releases was that the appellant had previously organised for employment of a number of members of her family at the Hampton Court Hotel, and those persons had apparently worked at the hotel for below the minimum award wage. 20The Heads of Agreement provided in cl 14 that the appellant and Ferdinand would each give undertakings to the other in relation to certain Supreme Court proceedings against their neighbour alleging damage to their Darling Point property as a result of excavation work carried out on his land (referred to as the Prynew-Tsu litigation). The undertakings were to: not seek any costs order against the other, nor seek any contribution order if the defendant sought a costs order against either of them, and to indemnify each other in respect of any loss from breach of such undertaking. 21The appellant however was dissatisfied with the proposed agreement and refused to implement the arrangements. 22In an email to the appellant dated 10 January 2009 (Blue 2/761-767), Mr Hall summarised his advice as follows:

that the Heads of Agreement was not binding, but that Mr Richardson SC had advised that the settlement was in her best interests and she should accept it;
that if she pursued the alternative of going to trial the other side would do their best to make her look like an absolute liar and that there were risks about where the matter could end up;
that when Mr Hall was first retained, Ferdinand had offered $10,000,000 and not the Darling Point property and now he had offered the Darling Point property and about $7,500,000 to $8,000,000 in cash;
that "the advice we are receiving is that putting your case at its highest, $18,000,000 washes it up";
that she should seek a second opinion from York Law, her previous solicitors, as to whether she should accept the current settlement, or otherwise ask counsel (Mr Richardson SC). 23The appellant chose not to discuss the matter with York Law and instead retained a new solicitor, Mr Max Meyer of Meyer Pigdon Family Lawyers. Mr Meyer formally went on the record on 19 March 2009 (Blue 2/772-773 and 778-779). He also advised the appellant that the Heads of Agreement was not binding and that each party, if they chose, could walk away. He told the appellant that Mr Richardson SC believed that the settlement was a very good one for her. 24It seems that Mr Gordon Scurr, who worked with Mr Hall, recommended to the appellant in early 2009 that she consider mediating the dispute privately using someone like Mr Roger Rogerson who he said was a very successful mediator despite his reputation (Blue 1/18-19, 152-153). The appellant met Mr Rogerson with her friend Ms Sarah Winter and Mr Scurr in early 2009 (Blue 1/20, 2/575J-U). 25At a later meeting with the appellant and Ms Winter in 2009, Mr Scurr recommended to the appellant that she needed a good investigator to help gather information relating to the Hampton Court Hotel and missing money which the appellant claimed Anthony had stolen from Ferdinand's businesses, and again suggested the services of Mr Rogerson (Blue 536N-Q). It seems that the appellant had further meetings with Mr Rogerson (Blue 2/536S-W, 2/537O-V, 2/541O-P, 2/575). 26In March 2009 the appellant requested Mr Meyer to apply to the Family Court for further interim funding of $250,000 for legal costs. Mr Meyer advised that the Family Court would "deal with the matter only on a final hearing basis. There is no case for an interim payment of that magnitude" (Blue 2/770). 27In July 2009 the appellant again requested Mr Meyer to apply to the Family Court for further interim funding (Blue 3/1154). Mr Meyer expressed doubt in a letter to the appellant dated 10 July 2009 (Blue 3/1155-1156) as to whether there was a (liquid) fund available against which a court order for interim costs could be effectively made. Mr Meyer also noted that Ferdinand's financial statement did not disclose any significant liquid assets - his major assets being loans to related companies totalling $29,600,000, and the only significant asset of each company being its interest in the Hampton Court Hotel. 28On 12 October 2009 the appellant terminated Mr Meyer's retainer citing lack of funds and indicated that she intended to represent herself thereafter (Blue 3/1162). 29The appellant claimed at trial that in December 2009 she received an anonymous letter warning her that her stepson Anthony had tried, but failed, to "get rid of you" and also warning her not to travel overseas because she was in danger of losing her life (Blue 1/23D-G). She claimed that this was the sixth letter she had received containing similar warnings since about December 2003. The primary judge did not accept the appellant's evidence in relation to these letters: at [201].

[6]

The terms of the Funding Agreement 37The Funding Agreement provided that ALF would fund the appellant's costs of the Family Court proceedings as they were incurred, subject to the terms of the Funding Agreement and the attached Terms Sheet (cl 2.2). Clause 2.1(a) of the Funding Agreement provided that the "Terms Sheet will set out the tasks the consultant will undertake". The Terms Sheet described ACRS's role as consultant to be: "Conduct case management, attend to all negotiations, in the event of settlement items being property provide all development management services, project management services and all such other consultant requirements the client needs to effect a settlement and complete any developments as may be required." (Blue 1/76) 38The appellant was obliged to repay the costs paid by ALF, subject to any qualifications in the Terms Sheet (cl 5.1). The appellant was also obliged to pay to ALF and ACRS on the Repayment Date the "Additional Sum" for funding the proceedings and undertaking such work as may have been required by the consultant (cl 5.2). The relevant definitions in cl 1.1 (Blue 1/58-61) were:

"Additional Sum" means the "Percentage of the Net Final Amount received in Proceedings funded by the Funding Transaction";
"Net Final Amount" means "the balance of the Final Amount after deducting Costs and any Applicable GST";
"Final Amount" means "the gross amount received by the Client, whether by way of settlement, orders made or judgment entered in the Proceedings";
"Costs" means, in relation to any Proceedings, amongst other things, the Legal Costs;
"Legal Costs" means "all legal costs and disbursements (including expert witness fees and counsel's fees) incurred by the Client in relation to or incidental to Proceedings, an Appeal therefrom ... other than those incurred prior to the date of the relevant Funding Term Sheet which are not specified in the Funding Term Sheet";
"Percentage" means "the percentage specified in the Funding Term Sheet as the percentage of Gross Final Amount to be paid to the Funder in consideration for its provision of the funding or such other percentage as is determined pursuant to cls 6.1 to 6.3 and cl 10.5". 39The expression "Gross Final Amount" was not in fact defined in the Funding Agreement. 40The Terms Sheet attached to the Funding Agreement stated: "The final sum payable is 25% of the gross final settlement sum plus GST. Provided that the settlement sum is in excess of $8million dollars the fee includes the legal costs expended by the funder." (Blue 1/76) 41The Funding Agreement and the Terms Sheet, which ALF prepared, were not particularly well drafted and contained inconsistencies. (The Funding Agreement seems to have been based on a previous agreement or pro-forma agreement used by ALF in connection with funding litigation by liquidators of insolvent companies, as it erroneously included references to "the Liquidator" in cls 5.3 and 5.4 and references to "an examination" in the definition of "Legal Costs" which was a reference to an examination conducted pursuant to s 597 of the Corporations Act 2001 (Cth).) 42There was no definition of "gross final settlement sum" as referred to in the Terms Sheet. This gave rise to a construction dispute at trial which was resolved in favour of the appellant. The primary judge found that the fee of 25% should be imposed on assets which the appellant received as a result of the consent orders made by the Family Court: at [73]. Thus, assets which the appellant already held were not "received" for the purposes of the assessment of her liability to the funder: at [74]. 43By cl 8.2(b) of the Funding Agreement the appellant undertook to: "Instruct the Solicitors for the client to incorporate The [sic] consultant as case manager and thereafter consult with and consider the views of the Funder in relation to any material issues arising from the conduct and/or progress of any Proceedings ... which is the subject of a Funding Transaction and in particular, in relation to any offer of settlement." (Blue 1/67) 44Clause 9 of the Funding Agreement dealt with termination. Clause 9.2 provided: "Subject to clause 9.3, the Funder may at any time terminate a Funding Transaction on the giving of reasonable notice in writing, such notice to be no less than a reasonable period to enable the Client to source alternate funding for the Proceedings or any Appeal therefrom (but not exceeding 120 days from the date of the notice terminating the Funding Transaction)." (Blue 1/68) 45Clause 9.3 provided that: "The Funder may not terminate a Funding Transaction pursuant to clause 9.2 if an Appeal in the relevant Proceedings is filed." (Blue 1/68) 46By cl 9.5 both the appellant and ALF as funder could terminate a funding transaction and/or consultancy arrangement immediately by notice in writing to the other if the other party was in breach of any term of the Funding Agreement and the breach continued unremedied for 14 days after written notice advising of the breach and requiring its rectification had been given. 47Clause 9.6 provided: "In the event that a Funding Transaction is terminated pursuant to clause 9.2 or by the client pursuant to clause 9.5 above: (a) the Additional Sum in respect of the Funding Transaction will remain payable to the Funder and or the consultant;" (Blue 1/68).

[7]

The Contracts Review Act 48Section 7 of the Contracts Review Act provides as follows: "7 Principal relief (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19." 49Section 4(1) defines "unjust" to include "unconscionable, harsh or oppressive". Section 9 relevantly provides as follows: "9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, ... (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract."

[8]

The participants 50The primary judge made findings concerning the parties to the Funding Agreement and Addendum and others who played a part in them. The following is a brief summary taken largely from his Honour's account. 51Mr Jim Byrnes was at all material times an authorised representative of ALF in the case management of matters on behalf of its clients (Blue 2/556H-K). ALF provided litigation funding services. Mr Byrnes was also an authorised representative of ACRS (Blue 2/556L-N). The sole director of ALF and ACRS at all material times was Mr Byrnes' wife, Catherine Byrnes. Mr Byrnes was disqualified at the time from managing corporations as a consequence of a "banning order" made by the Australian Securities and Investments Commission (Black 148N, 180H-M): see s 206F of the Corporations Act 2001 (Cth). 52Mr Roger Rogerson was a former police officer in the New South Wales Police Force. He had been convicted of certain offences and served time in prison. Mr Byrnes had known Mr Rogerson for over 20 years (Black 176I). Mr Byrnes accepted in his evidence that some people would clearly regard Mr Rogerson as a disgraced former police officer, and an associate of the criminal element (Black 176M-S). Mr Rogerson acknowledged himself as having a "reputation" and that if others knew he was involved in assisting someone it might make them think twice before doing anything of a criminal nature (Black 263T). 53Ms Sarah Winter was a retired person who first met the appellant in around 2005 and in about early 2008 they met again and became casual friends (Blue 2/53L-M). Ms Winter's solicitor was Mr Trevor Hall. She arranged a meeting between the appellant and Mr Hall in February 2008 after the appellant indicated she was unhappy with her existing lawyer, Mr Wahhab (Blue 2/531V-532H). In early 2009 Ms Winter arranged the meeting with the appellant and Mr Scurr at which Mr Scurr recommended to the appellant that she consider using Mr Rogerson as a private mediator. Ms Winter was present at other meetings during 2009 between the appellant and Mr Rogerson, including the meeting in late December 2009 when the appellant met Mr Rogerson and later Mr Byrnes and his driver, Mr Felix Lyle, at the appellant's home at Darling Point (Blue 2/536-538, 541). She was also present with the appellant at the meeting on 18 January 2010 during which the Funding Agreement was signed by the appellant. 54Mr Frederick Rappaport was an accountant carrying on a business under the name "Rappaport & Co". The appellant had known Mr Rappaport for many years and had previously worked for him for three years (Black 27R-28C). He was a close friend and she referred to him as "Uncle Freddie". The appellant consulted Mr Rappaport during the cooling off period under the Funding Agreement.

[10]

The primary judge's reasons 59The primary judge's reasons contain a detailed and careful analysis of the circumstances in which the Funding Agreement and the Addendum were entered into by the parties, their relative circumstances, the appellant's understanding of the transaction, and her capacity to make an informed decision as to where her best interests lay in relation to the Family Court proceedings. 60The primary judge referred to the legal principles governing the appellant's claim (at [76]-[105]), and relevantly in relation to the Contracts Review Act noted: "86 The authorities make it clear that one of the general legislative purposes of the Contracts Review Act is to protect people who, for one or more of a number of potential reasons, are not able to look after themselves and who are preyed upon by dishonesty, trickery and other forms of predation (Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343 at [102] per Campbell JA with whom Hodgson and McColl JJA agreed; Provident Capital Ltd v Papa [2013] NSWCA 36; 84 NSWLR 231 at [7] per Allsop P with whom Sackville AJA agreed; Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [270]). 87 As Allsop P recently observed, some of the potential sources of vulnerability are a lack of education or of intelligence, gullibility, greed, loyalty and love. However, the authorities also establish that a contract will not be unjust merely because it was not in someone's interest to enter into it (Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 at 491 per Handley JA with whom Santow and Simos AJJA agreed) or because it was inopportune or produced a loss (Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 at [78] per Beazley JA with whom Santow JA and Campbell AJA agreed), or because the party seeking relief was foolish, gullible or greedy (Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 at [128] per Basten JA), or because the contract is burdensome, a hard bargain, strongly in the interests of the party against whom relief is sought, or in some sense unreasonable (Conley v Commonwealth Bank of Australia [2000] NSWCA 101 at [96] per Heydon JA with whom Handley JA agreed). ... 89 The authorities also appear to establish that the person against whom relief is sought need not take the initiative to ensure that any independent legal advice obtained by the party seeking relief is accurate or has been understood, but this may be different in circumstances where the party seeking to enforce the contract is actually aware that the advice has not been given or has not been understood (Esanda Finance Corporation Ltd v Tong at 491 per Handley JA with whom Santow and Simos AJJA agreed, approving comments in St George Commercial Credit Corporation Ltd v Collins Wallis Properties Pty Ltd (Rolfe J, 11 February 1994, unreported))." 61The primary judge observed (at [191]) that the case was somewhat unusual because the appellant's counsel had opened the case on the basis that each of the appellant, Mr Byrnes, Ms Winter, and Mr Rogerson would have "question marks over their heads" (for various reasons) in relation to their reliability and/or credibility, but in closing submissions counsel had frankly conceded that most of the criticism was reserved for his own client. The primary judge considered and made findings in relation to, the evidence of the appellant, Mr Byrnes, Ms Winter, and Mr Rogerson.

[11]

Credit findings 62The primary judge noted that he did not accept most of the appellant's evidence: at [236]. Relevantly, his Honour found that by late 2009 the appellant was somewhat disenchanted with her lawyers, although she had not rejected all of the advice that she had been given, nor did she terminate all lawyers (at [194]); that her lawyers told her to settle and that she did for the most part want to do just that (at [195]); but equally, she had very good reasons why at the time she felt unable to execute and/or implement the Heads of Agreement and these reasons were not irrational: at [205] and [207]. 63The primary judge noted that the appellant's counsel submitted that the evidence of Mr Byrnes should be accepted, with four exceptions: at [238]. Relevantly, his Honour found it likely that the appellant mentioned that she wanted Mr Byrnes to provide development services in relation to the Hampton Court Hotel (at [256]) and it is probable that they also discussed the development of the Darling Point property into four townhouses: at [257]. The appellant challenges these two factual findings. 64The primary judge also accepted Mr Byrnes' evidence that he had provisioned to spend $1,000,000 in relation to the appellant's matter: at [239]; that he honestly believed that the settlement offer on the table was "light": at [241]; that he had advised the appellant to seek out the advice of a lawyer or a competent advisor, and pointed out the cooling off period in the Funding Agreement: at [250]; and that he had told the appellant that she could apply to the Family Court for access to funding to help in the action if she wanted and that the appellant responded that Mr Paltos, Ferdinand's solicitor, would make it difficult to get money: at [251]. 65At [292], the primary judge largely accepted Mr Rogerson's evidence, which he had been invited to do by counsel for the appellant: at [279]. Relevantly, his Honour found that, having made inquiries and spoken with Anthony and Ferdinand, Mr Rogerson had observed that Anthony had the upper hand as he had a strong relationship with Ferdinand and he had control of the hotel, this being the very obstacle which the appellant had realistically, rationally, and accurately assessed as existing and in respect of which she felt her lawyers were unable to assist her: at [283]; that Mr Rogerson was asked to try and determine whether a criminal offence could be proved against Anthony and used in the negotiations with Ferdinand: at [284]; and that Mr Rogerson was not of the view that the appellant was irrational or vulnerable: at [292]. 66At [277], the primary judge found that Ms Winter's evidence corroborated Mr Byrnes' evidence of the meeting on 18 January 2010 in a number of important respects.

[12]

The appellant's understanding 67The primary judge found that the appellant was acutely aware that she was being asked to sign an agreement which provided a 25% commission on amounts which were already included in the Heads of Agreement: at [223]; that there was no cogent medical evidence supporting her claims that she was fragile, anxious, and had suicidal feelings at the relevant time: at [224]; that the appellant's circling of the 25% commission figure on the draft Agreement showed a level of control and focus on one of the most important aspects of the Funding Agreement, and displayed attention to detail (as well as composure, not confusion or submissiveness): at [227]; that the appellant consulted her long-time trusted friend and confidante Mr Rappaport, an accountant, and it was probable that she discussed the financial wisdom of entering into the Funding Agreement with him: at [229]-[230]; that she knew precisely what she was doing when she signed the Funding Agreement and, although the 25% commission was significant, she fully appreciated that fact and thought that the combination of Mr Rogerson and Mr Byrnes could help her persuade, cajole, or for that matter pressure Ferdinand, if need be via Anthony, to capitulate and provide her with a more generous outcome: at [231]. 68The primary judge found that from the middle of October 2009 the appellant was short of cash and did not wish to retain Mr Meyer any further for that reason, and did not believe she could accept the advice she had received from him in collaboration with Mr Richardson SC: at [293]. His Honour also found that the appellant was told by Mr Hall (in mid 2009), and believed, that she could not at that point make any further application to the Family Court for funding: at [294]; that she had perfectly rational grounds for not accepting the Heads of Agreement at that time - her family's interests in claiming proper compensation for unpaid wages and entitlements could not be properly protected: at [295], and she was concerned with exposure to a possible costs order in the Prynew-Tsu proceedings: at [296]; and that she thought she should be entitled to more than $8,000,000 plus the Darling Point home: at [297]. 69The primary judge accepted the expert evidence of the Hon Stephen O'Ryan QC, a former judge of the Family Court of Australia, that the appellant could have applied for a further order for interim costs and a competent legal practitioner would have advised her accordingly. His Honour observed, without making any finding, that Mr Meyer may have acted erroneously in advising the appellant as he did in late 2009 but, in view of his findings as to the appellant's predominant intentions in entering the Funding Agreement, Mr O'Ryan's opinion did not affect his conclusions: at [189]-[190]. 70The primary judge found that in the later part of 2009 the appellant was predominantly looking for an "unorthodox solution" and that is why she was attracted to the suggestion that she retain Mr Rogerson and Mr Byrnes: at [300]; that she retained Mr Rogerson knowing fully what kind of reputation he had, that she clearly wanted Mr Rogerson to investigate and expose, if he could, any criminal activity on the part of Anthony so that it could be used as a pressure tactic in negotiations, and she also wanted Mr Rogerson to do violence to Anthony as part of her strategic plan: at [301]; that she wanted Mr Byrnes on her side for a number of good reasons, including because she knew of his reputation before she signed the Funding Agreement on 18 January 2010: at [302]; that she wanted Mr Byrnes to supply his particular skill set for the purposes of negotiating and dealing with Anthony: at [304]; and that she was prepared to have Mr Byrnes' retainer cover possible project development services and she discussed that topic with him in relation to the possible redevelopment of the Darling Point property: at [306].

[17]

Issues on appeal 76The issues on appeal, as raised by the grounds in the amended notice of appeal, were as follows: (1)His Honour erred: (a)in finding that, prior to executing the Funding Agreement, the appellant and Mr Byrnes discussed the respondents providing the appellant with property development assistance for the Darling Point property, and in not finding that the appellant had no need for and could receive no benefit from development services in relation to the Darling Point property or the Hampton Court Hotel: grounds 4, 5, 6 and 7; (b)in not taking into account that the appellant did not have a commercial need to enter into a litigation agreement because she could have applied to the Family Court for interim funding or partial property settlement, and in having regard to the appellant's subjective but erroneous belief that she could not secure such funding through the Family Court: grounds 8 and 9; (c)in not finding that it was in the appellant's best interests to take the offer in the Heads of Agreement, and that it was against her own interest to enter into the Funding Agreement: grounds 12 and 13; (d)in finding that the appellant did have an irrational obsession with Anthony Nemeth but that those characteristics were confined to Anthony Nemeth and did not affect her commercial dealings, and in not finding that the appellant's character traits caused her to be incapable of making rational and informed decisions as to what was in her best interests in connection with the Family Court proceedings: grounds 14-18A; (e)in determining that the absence of medical evidence prevented him from finding that the appellant's state of mind was such that she could not make a rational decision about whether it was in her best interests to enter into the Funding Agreement: ground 20. (2)The appellant was denied procedural fairness because his Honour made findings that, in negotiating with her former husband and her stepson, the appellant wanted Mr Byrnes to provide "unorthodox negotiating capacity" involving "an aggressive approach", when this was not part of either parties' case, had not been put to the appellant, and was a finding made without notice that any submission to that effect was being made and without the appellant having the opportunity to properly deal with it: grounds 10 and 11. (3)His Honour erred: (a)in concluding from three uncontested facts that the Funding Agreement was not unjust: the first being that the appellant decided of her own accord to enter into the Funding Agreement; the second being that the appellant understood the terms of the Funding Agreement; and the third being that the appellant was intelligent and had business and accounting qualifications and commercial experience: grounds 21 to 23; (b)in not finding, and in not dealing with, the two submissions as to the objective unjustness of some of the terms of the Funding Agreement: grounds 24 and 25; (c)in not finding that from the appellant's perspective the Funding Agreement was improvident, in that she gave up a large amount of money in exchange for nothing of value: grounds 1, 2, 3, 24, 25 and 26; (d)in not finding that Mr Byrnes took advantage of the appellant's weakness (and that he did so knowingly) and that Mr Byrnes' conduct - in encouraging the appellant to enter into a contract, which was disproportionately advantageous to the respondents, and which offered no commercial benefit to the appellant - was such so as to make the contract unjust at the time it was entered into: ground 19. (4)His Honour failed to exercise his discretion in favour of setting aside the Funding Agreement, or alternatively varying its terms to limit the recovery available to ALF and ACSR to 25% of the amount that the appellant recovered in her settlement of the Family Court proceedings over and above $8,000,000 (that is, 25% of $1,000,000, being $250,000): grounds 27 and 28.

[19]

Appellant's submissions 82Mr Finch, who appeared for the appellant, advanced six main arguments to support the contention that the primary judge's finding that the Funding Agreement was not unjust should be set aside. First, he contended that the terms of the Funding Agreement were substantively unjust because ALF was providing nothing more than a "risk free loan" to an amount at its discretion and the relativity between what the respondents were obliged to provide and what the appellant would likely receive was manifestly unjust. 83Secondly, it was contended that the 25% commission offended community standards. 84Thirdly, it was contended that the combined effect of cls 5.2, 9.2, 9.5 and 9.6 of the Funding Agreement and the Terms Sheet were substantively unjust because ALF was entitled to cease providing funding without cause and could demand payment of the 25% commission even if the respondents performed minimal work or no work at all, and even if ALF provided no, or minimal, funds. 85Fourthly, it was contended that the procedural injustice (which made the appellant's entry into the transaction "unfair"), was that the appellant's character traits made her vulnerable to exploitation and that Mr Byrnes recognised and exploited this vulnerability by entering into a transaction which, on its face, was so grossly disproportionate between what had been provided and what had been obtained as to be manifestly unjust. Counsel for the appellant described the transaction as "obscene". 86Fifthly, it was contended that the appellant would not have entered into the transaction if she was properly advised or understood the transaction. 87Sixthly, in her written submissions the appellant challenged seven findings. These concerned his Honour's findings of primary fact that:

the appellant and Mr Byrnes had discussed the possible redevelopment of the Darling Point property before entering the Funding Agreement;
the appellant wanted Mr Byrnes to provide her with some "unorthodox negotiating capacity";
the appellant was looking for some person or persons to assist or deal with Anthony or to provide an "unorthodox solution";
the appellant was obsessed with Anthony but her obsession was not irrational in relation to other commercial realities;
the appellant's decision not to accept the offer contained in the Heads of Agreement was not irrational;
the appellant did not suffer from a relevant "special disability" at the time of the transaction; and
the appellant was not exploited by Mr Byrnes.

[20]

Respondents' submissions 88Mr Coles QC, who appeared with Ms Horvath for the respondents, supported the primary judge's reasoning that the Funding Agreement was not unfair or unjust. 89The respondents submitted that the Funding Agreement gave the appellant at least two benefits that she did not have and clearly needed, being money to afford to pay for lawyers and access to someone with a deal of commercial experience who could help her manage her litigation and negotiate a settlement with her former husband. 90The respondents submitted that the majority of the grounds of appeal asked the Court to substitute its own factual findings for those of the primary judge, notwithstanding that those findings were influenced by both his Honour's impression about the credibility of the key witnesses - the appellant, Mr Byrnes, Mr Rogerson and Ms Winter - and also by the "feeling of a case which an appellate court cannot always fully share": Fox v Percy [2003] HCA 22; 214 CLR 118 at [23]. The respondents submitted that this Court should not intervene because the appellant had not shown that the primary judge had palpably misused his incomparable advantage of having seen and heard the witnesses: Carnemolla v Adelaide Bank [2013] NSWCA 122 at [72]. 91The respondents complained that the case of substantive injustice advanced in oral argument was not pleaded or run at trial and that the appellant should not be permitted to raise a new case on appeal: Metwally v University of Wollongong (No 2) [1985] HCA 28; 60 ALR 68 at 71. 92The respondents further submitted that no evidence was led at trial to support the contention that the 25% commission was unjust compared to other options for litigation funding in 2010. The respondents drew attention to this contention not having been put to Mr Byrnes in cross-examination. Reference was also made to his Honour's findings that the appellant entered into the Funding Agreement with the clear understanding that the respondents' commission was 25%, that she negotiated further terms contained in the Addendum to reduce the figure by excluding one of the assets she expected to receive from the application of the formula, and that the appellant did not give evidence that she thought the 25% commission was unfair or unjust. 93The respondents also submitted that in circumstances where they did not fail to perform, and did not terminate the litigation funding, no complaint of injustice could be made in relation to those terms of the Funding Agreement which permitted ALF to cease providing funding subject to giving reasonable notice.

[21]

Principles concerning relief under Contracts Review Act 94In the leading decision not long after the introduction of the Contracts Review Act, McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620 recognised that a contract can be unjust "because of the way it operates in relation to the claimant or because of the way in which it was made or both". He recognised (at 620) that a contract could be unjust because it contained "substantive injustice" - which arises "because it terms, consequences or effects are unjust" - or because of "procedural injustice" - which arises "because of the unfairness of the methods used to make it" - or both. 95McHugh JA observed (at 621) that in an appropriate case gross disparity between the price of goods or services and their value may render the contract unjust even though none of the provisions of s 9(2) (which are mostly concerned with matters of procedural injustice) can be invoked by the claimant. He also observed (at 621) that if a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, the contract could not be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. 96In Provident Capital Ltd v Papa at [7], Allsop P recognised that the broad evaluation of unjustness under the Contracts Review Act involves the normative evaluation of the totality of relevant circumstances. His Honour observed at [7] that: "Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances." 97In an application for relief under s 7 of the Act, the Court undertakes a three-stage process: Perpetual Trustee Co Ltd v Khoshaba (Khoshaba) at [99], per Handley JA; at [106], per Basten JA. The first stage is to make findings of primary fact. The second stage involves a finding that the contract is or is not unjust. The third stage is the exercise of the power to grant relief under the Act which may, but need not, follow from the conclusion that a contract is unjust.

[22]

Appellate review of finding of no injustice 98Appellate review of findings of primary facts takes place in accordance with the principles applicable to an appeal by way of rehearing. Where the findings involve an assessment of the credibility of witnesses, the review is conducted in conformity with the principles stated or affirmed in Fox v Percy. 99The determination that a contract is unjust requires an evaluative judgment, based on the primary facts as found. In Khoshaba, Spigelman CJ characterised (at [37]) such a determination as a finding of fact despite its evaluative character. He said (at [403]) it "may be" that an appellate court asked to review a finding that a contract was unjust should apply the principles stated in Warren v Coombes [1979] HCA 9; 142 CLR 531, rather than those applicable to the review of a discretionary judgment stated in House v The King [1936] HCA 40; 55 CLR 499. Handley JA said (at [100]) that appellate review of the indeterminate standard set by s 7 of the Act is to be undertaken in accordance with the principles in Warren v Coombes, at 551-552. Basten JA was of the same opinion (at [107]). On this basis, the appellate court, when reviewing a finding that a contract was unjust, is generally taken to be in as good a position as the trial judge to decide on the proper inferences to be drawn from the established facts, although respect and weight will be given to the conclusions reached by the trial judge. 100The third stage involves the exercise of a discretion which is subject to review by the appellate court in accordance with the principles stated in House v The King, at 504-505. Thus it is not enough that the appellate court would have exercised the discretion differently from the trial judge. The latter must be shown to have acted on a wrong principle or to have made an error of a kind vitiating the exercise of discretion, such as failing to take into account a material consideration or reaching a decision that is unreasonable or plainly unjust. In the present case, the primary judge never reached the discretionary determination under s 7 of the Contracts Review Act. Accordingly, this Court would determine the question of relief itself, if otherwise satisfied that there was error in the primary judge's conclusion that the Funding Agreement was not unjust.

[25]

Darling Point property 106The primary judge accepted Mr Byrnes' evidence (given in cross-examination) that he discussed with the appellant potentially acquiring an apartment in any future development of the Darling Point property in lieu of payment of the fee under the Funding Agreement. The appellant contends that his Honour's finding was glaringly improbable and contrary to compelling inferences. The appellant relies on three matters. 107First, the appellant points to there being no evidence of this conversation, other than Mr Byrnes' evidence that he and the appellant had had such a conversation. Of itself this is not a reason for rejecting his Honour's finding, particularly in circumstances where there was no conflicting evidence on this topic and counsel for the appellant at trial did not put to Mr Byrnes in cross-examination that his evidence was untruthful or mistaken. 108Secondly, the appellant complains that his Honour took into account the appellant's email of 8 February 2008 to her then solicitor, Mr Wahhab, as corroborating the assertion that the appellant had considered developing the Darling Point property into apartments: at [257]. The appellant contends that, having regard to the date of this email (February 2008) and its context (a difference of opinion between the appellant and Ferdinand as to the value of the Darling Point property in its undeveloped state), the email is not cogent evidence of the appellant's intentions at a later time in December 2009 and January 2010. 109The difficulty with this contention is that it ignores other evidence concerning the appellant's intentions to develop the Darling Point property which is consistent with her statements in the February 2008 email. In a later email of 12 January 2009 to Mr Hall, her then solicitor, the appellant referred to always wanting to develop the "house", being the Darling Point property. Further, in an affidavit in the Family Court proceedings filed in November 2011, the appellant's evidence was that she had long had a desire to develop the Darling Point property since about 1988. She explained in her affidavit the steps that had been taken and why the proposed development had not yet proceeded including: that development approval was obtained in about December 1999 from the Woollahra Council; that she and Ferdinand intended to commence the development in 2000, however their plans did not eventuate as Ferdinand gave priority to other matters, and later the Darling Point property was subjected to structural damage as a result of works being carried out at the adjoining property of Mr Tsu (Blue 1/608B-G). 110Thirdly, the appellant complains that it was not put to her in cross-examination that she had any plan to develop the Darling Point property, as his Honour noted: at [257]. However, there was no obligation of fairness to put that matter to the appellant in circumstances where it was consistent with her own evidence. If the appellant disputed Mr Byrnes' evidence on this issue she could have challenged his evidence in cross-examination and also given evidence to the contrary in her own case in reply. She did not do so. 111In my view, the challenge to his Honour's acceptance of Mr Byrnes' evidence on this topic must fail. None of the matters to which the appellant draws attention are inconsistent with Mr Byrnes' evidence. Nor is it glaringly improbable, in light of the evidence of the appellant's long held intention to develop the Darling Point property, that she discussed this matter with Mr Byrnes in the context of ACRS agreeing to provide development services to the appellant.

[26]

Hampton Court Hotel 112The appellant made a related complaint that the primary judge erred in not finding that she did not want, or need, and could not derive a benefit from, any development services in relation to the Hampton Court Hotel. The premise of this contention was that such services were not needed as the hotel had already been sold or was subject to a binding contract for sale in January 2010 when she entered into the Funding Agreement. 113At trial no contract for sale of the hotel was in evidence. The earliest reference in the evidence to a proposed sale of the hotel was in correspondence from Ferdinand's solicitors to the appellant's solicitors dated 1 April 2010. This advised that a proposed Project Delivery Agreement was "to be entered into" between F & V Nemeth Investments Pty Ltd with a proposed developer whose name was not disclosed (Blue 3/1178). Subsequently, on 23 April 2010, consent orders were made in the Family Court proceedings requiring Ferdinand to disclose to the appellant the name of the proposed developer. Those same orders noted that the developer was disclosed to be the Toga Group (Blue 3/1183). 114The relevant finding of his Honour (at [286]) was that it was unknown "for sometime" that Anthony had, according to Mr Rogerson, negotiated a secret deal for the sale of the hotel. This finding was based on an acceptance of Mr Rogerson's evidence that he discovered this "secret" deal some time after the Funding Agreement had been entered into (Black 264N-Q, 265H-K). There was no challenge to this finding. There was no finding as to precisely when Anthony negotiated the deal with the Toga Group, which was first disclosed to the appellant's solicitors on 1 April 2010. It was not suggested on appeal that this "deal" had occurred before the Funding Agreement was entered into in January 2010. 115It follows that the premise of the appellant's contention relating to the sale of the Hampton Court Hotel was not established in the evidence. 116Grounds 4 to 7 are not made out.

[28]

Significance of commercial need for litigation funding 120The primary judge's findings in relation to whether the appellant had a commercial need for litigation funding arose in the context of evidence that Mr Meyer had advised the appellant in 2009 that she could not make any further application to the Family Court for funding. 121The appellant's case at trial was that Mr Meyer's advice was incorrect and that a competent legal practitioner would have advised the appellant that a further application to the Family Court for interim funding was possible. The appellant relied upon expert evidence from a former judge of the Family Court of Australia, the Hon Stephen O'Ryan QC, in support of this contention. As the respondents point out, when Mr Meyer provided his advice he did not have the benefit of Strahan v Strahan [2009] FamCAFC 166, the authority referred to by Mr O'Ryan in expressing his opinion. Nonetheless, the primary judge (at [187]-[190]) accepted Mr O'Ryan's view that the appellant could have applied to the Family Court for a further order for interim or partial property settlement. Mr O'Ryan acknowledged that the Family Court did have a discretion and that any application was not guaranteed success (Black 112D-X). 122Whilst his Honour accepted Mr O'Ryan's evidence, he observed at [190]: "What follows, although I make no finding, is that Mr Meyer may well have acted erroneously in advising the plaintiff as he did in the latter part of 2009. However because of the findings I have otherwise made as to the plaintiff's predominant intentions in entering the Agreement, Mr O'Ryan's opinion does not affect my conclusions." 123However later in his reasons (at [252] and [294]) his Honour concluded that the better view was that the appellant's erroneous belief that she could not make any further application to the Family Court for funding was engendered by Mr Meyer. His Honour also noted that there was no suggestion that Mr Richardson SC was consulted about this issue and found that the appellant did not seek a further opinion from anyone else: at [294]. 124Contrary to the appellant's submissions, the primary judge did not fail to take into account the appellant's commercial need for litigation funding or her erroneous belief, engendered by Mr Meyer, that she could not make any further application to the Family Court for funding when considering whether the contract was "unjust". His Honour expressly referred to these matters (at [294]) as part of his consideration of the circumstances in which the appellant entered the Funding Agreement. Other relevant circumstances which his Honour considered included that the appellant was short of cash and did not wish to retain Mr Meyer any further in mid October 2009 for at least that reason, and that she also believed at this time that she owed substantial moneys to Mr Hall, her previous solicitor: at [293]; that the appellant had perfectly rational grounds for not accepting the offer in the Heads of Agreement: at [295]; and that she believed that she was entitled to more than what had been offered, possibly due to the expectation engendered in her by Mr Wahhab of York Law: at [297]. 125The contention that the appellant was incapable of making sensible decisions in January 2010 is inconsistent with other findings of his Honour, which are not challenged. These included the finding that Mr Byrnes told the appellant that she could apply to the Family Court for funding if she wanted and that she responded that Mr Paltos, Ferdinand's solicitor, would make any further funding application difficult: at [251]. This occurred during a telephone conversation between the appellant and Mr Byrnes in the "cooling-off" period after 18 January 2010 (Blue 2/567H-568H). The appellant's belief that Mr Paltos would make any further court application very difficult was not shown to have been irrational. His Honour also found that the appellant readily appreciated that a 25% commission was going to be charged, and it was not contended that she had any difficulty understanding either the Funding Agreement or the Addendum. Indeed the appellant sought and obtained the changes she considered appropriate after discussing it with Mr Rappaport: at [307]. 126In my view, the primary judge did not err in giving appropriate consideration to the availability of funding through the Family Court, nor the appellant's belief in this regard, when considering the "unjustness" of the contract.

[30]

Grounds 13 and 18: Appellant's best interests and rejection of legal advice 132The appellant contended that the primary judge ought to have found that it was in the appellant's best interests to have accepted the offer contained in the Heads of Agreement and that her rejection of legal advice that she should implement that agreement was irrational. 133The appellant points to the evidence that each of her specialist legal practitioners - Mr Richards SC, Mr Meyer and Mr Hall - had strongly recommended that she should take the offer in the Heads of Agreement. It was contended that her conduct in rejecting legal advice, terminating the services of various lawyers, and searching for a new lawyer or adviser who was prepared to agree with her belief, was demonstrative of her irrationality and her inability to make judgments that were in her own best interests. 134The primary judge rejected this submission. He found that the appellant was unhappy with the Heads of Agreement for perfectly rational reasons and that she was entitled to hold a contrary view to that of her legal advisers as to whether she may not come across as an honest witness at trial: at [207]. He saw nothing irrational in a client rejecting advice to settle a dispute merely because the client had decided to have a court determine the dispute rather than accepting an offer in negotiation: at [316]. He also found that it was inaccurate to describe the appellant as having "rejected" the legal advice given to her because what she had rejected was their assessment of her character as a witness, rather than advice on the legal question: at [324]. The appellant challenged these findings. 135In my view these challenges to his Honour's findings should be rejected. 136First, it may be accepted that the advice Mr Richardson SC gave, as recorded by Mr Hall in his email to the appellant of 10 January 2009, was that "the settlement is in your best interests and that you should accept it". However, the other references in that email to this being the best "we can do for you" and you "have" to settle and that not to settle would be "in any view, madness", were views expressed by Mr Hall. The fact that Mr Hall urged the appellant, in strong terms, to accept Ferdinand's offer does not establish that her rejection of his advice or that of Mr Richardson SC was irrational. It is only necessary to observe that in 2011 the appellant ultimately negotiated a larger settlement of her claim with the cash component increased by $1,000,000. 137Next, I do not agree with the appellant's submission that the primary judge's reasoning in distinguishing between advice given on matters of credit, or "impression", and advice on legal questions is flawed. I agree with his Honour that there is a material difference between a client rejecting advice given on matters of "impression" and legal questions. It is not to the point, as the appellant contended, that it is part of a lawyer's role, especially senior counsel's role, to advise on the likely reaction of a court to a party and how that might affect their case. Obviously this is a matter upon which senior counsel can be expected to be able to provide a view. Nonetheless, as Mr Hall acknowledged in his email to the appellant of 10 January 2009, the appellant had the right to insist on her day in court (Blue 2/766E). 138Nor did the primary judge err, in my opinion, in taking into account the uncertainty of litigation and the appellant's own view as a party as to the likely "impression" a court may have of her: at [316]. The mere fact that a party has a different view to their legal adviser on this issue and is willing to pursue litigation rather than accept a settlement offer (with the attendant possibility that they may ultimately do better or worse), does not demonstrate irrationality on their part. Being more confident and less risk averse than one's lawyer does not mean that one is irrational. In my view, that there was no error in his Honour's finding that the appellant could rationally hold a different view to that of Mr Richardson SC and others on whether she would come across as an honest witness: at [207] and [324]. 139The relevant question is whether the appellant made an informed decision to reject the offer contained in the Heads of Agreement. Clearly she had been provided with legal advice as to why she should accept the offer and what the risks were if she did not. It was not shown that she did not understand that advice. As already noted, the primary judge found that she had perfectly rational reasons for seeking a greater settlement from Ferdinand. These included her possible exposure to a costs order in the Prynew-Tsu proceedings, and claims from her relatives who worked in Ferdinand's hotel and who were underpaid. There is no challenge to these findings. The mere fact that the appellant's lawyers maintained their views concerning settlement, despite the appellant's rational concerns that the settlement offer was deficient, does not make the appellant's disregard of legal advice irrational. 140The appellant also contended (in the alternative) that whether or not her reasons were rational is not to the point, if her decision-making was in any way affected or tainted by one or more of her "vulnerabilities". The difficulty with this contention is that the appellant did not challenge his Honour's findings that she had perfectly rational reasons for being concerned about the Heads of Agreement. The primary judge's finding (at [175(a)]), that the appellant rationally held the belief that she wanted a larger settlement, has not been shown to be inconsistent with incontrovertible facts, nor glaringly improbable. 141Appeal grounds 13 and 18 must be rejected.

[31]

Grounds 14-17 and 18A: The appellant's character 142The appellant contended that the primary judge erred in not finding that she was incapable of making a rational decision about the Family Court proceedings because of her character traits, her obsession with Anthony, her lack of trust in legal practitioners, and her belief that the Family Court proceedings were worth far more than the offer in the Heads of Agreement. The appellant further contended that these matters were the dominant motivation for the appellant's decision in entering into the Funding Agreement. 143The appellant also challenged the primary judge's finding (at [322]) that she did not suffer from a "special disability". The reference by his Honour to a "special disability" may be taken as a reference to the appellant's claim under the general law for relief against unconscionable dealings. The same matters were also relied upon by the appellant in support of her claim under the Contracts Review Act. 144The 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. The appellant seeks to set aside his Honour's finding that the appellant's obsession with Anthony was confined to Anthony, and did not affect her dealings in relation to "commercial" matters: at [247], [248] and [324]. His Honour's finding was based on Mr Byrnes' evidence, which he accepted as an honest assessment of the appellant at the time: at [248]. Mr Byrnes described the appellant's obsession with Anthony as one in which she felt betrayed by her former husband, who had a relationship with Anthony of which she was extremely jealous (Black 161I), and which caused her to be very angry at Anthony. He described the appellant as a divorced woman who was very upset, like most women who have had a 20 year relationship breakdown (Black 203K-P). The appellant points to other evidence of Mr Byrnes where he agreed that he thought the appellant was not only unfocused but was also completely and utterly irrational at the time she signed the Funding Agreement (Black 203D-F). However this evidence must be read in its totality which includes Mr Byrnes' assessment of the appellant as referred to above, which his Honour accepted. 145So far as the appellant also points to evidence of other witnesses (that the appellant was obsessed with or fixated on Anthony), none of this was directed to the appellant's motivation to enter into the Funding Agreement. Indeed the appellant herself did not give any evidence that any obsession with Anthony played a role in her decision to enter into the Funding Agreement. 146Whether or not the appellant was obsessed with Anthony, did not trust lawyers, and had a particular belief about the value of her Family Court proceedings, his Honour's finding was that these matters did not amount to a relevant "disability". His Honour reasoned (at [323]) that unlike the claimant in Aboody v Ryan [2012] NSWCA 395, whose fear or obsession (that if the Australian Labour Party were elected to Federal Government he would lose both his war pension and his home) was wholly divorced from reality, the appellant's obsession or hatred of Anthony was not shown to be "irrational" in that sense. 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. His Honour found that the appellant signed the Addendum indicating implicitly that she had obtained professional advice, which his Honour found she had received in the form of advice from Mr Rappaport, an accountant, and that it had not been shown that the respondents knew that any such advice was inaccurate or inadequate. His Honour also noted that the appellant was not dependent on, nor had a relationship of trust or close affection with, the respondents. None of these findings are challenged. 147It may be accepted that by the latter part of 2009 the appellant was disenchanted with lawyers, as his Honour found: at [194]. However, this is not to be equated with having no trust in legal practitioners, as the appellant contends. Moreover it was not shown that being disenchanted with one's lawyers amounted to a special disability. The real significance of his Honour's finding was that the appellant did not have legal advice at the time she entered the Funding Agreement. Nonetheless, she had the benefit of the seven day "cooling off" period, and had been advised to obtain professional advice by Mr Byrnes. The appellant consulted her close friend Mr Rappaport, an accountant. She then sought changes to the Funding Agreement, which Mr Byrnes agreed to. 148The appellant submitted, somewhat inconsistently, that the respondents could not justly enter into the Funding Agreement with the appellant until she had obtained legal advice, but that, even if she had obtained legal advice not to enter the contract, she would have ignored such advice. There was no evidence of what legal advice the appellant would have received if advice had been sought, or whether she would have not accepted any such advice. The matter must be assessed on the evidence. His Honour found that it was probable that the appellant discussed the financial wisdom of entering the transaction with Mr Rappaport, who she consulted during the "cooling off" period: at [230]. The obtaining of financial advice and requesting and obtaining of the changes in the Addendum is inconsistent with the appellant's claim that her decision to enter the contract was irrational. 149Like the primary judge, I do not consider that the appellant's disenchantment with lawyers, or the absence of legal advice, made her decision to enter the Funding Agreement unjust, particularly in view of the unchallenged finding (at [323]) that the respondents did not know that any advice the appellant had received was inaccurate or inadequate. 150Nor, in my view, was the appellant's belief that her case was worth more than the offer contained in the Heads of Agreement a relevant disability for the purpose of assessing whether her decision to enter the Funding Agreement was irrational. As already noted, his Honour found that the appellant had perfectly rational reasons for rejecting that offer and those findings are not challenged. 151I 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. Appeal grounds 14-17 and 18A are not made out.

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Ground 20: Absence of expert medical evidence 152The appellant's case was that she was vulnerable when she entered the transaction because of her state of mind at the time. The relevant findings of his Honour were that:

there was no cogent expert medical evidence supporting any psychiatric or psychological disorder from which the appellant suffered at any relevant point of time (at [106]) such as to rob her of her ability to make an informed decision as to what she wanted to do: at [308]; and
there was no medical evidence supporting the appellant's claim to be fragile and anxious and having suicidal feelings, and the appellant in her evidence had unduly sought to exaggerate various aspects of her mental state: at [224]. 153At [227] the primary judge also noted that it was accepted on behalf of the appellant that she had a capacity to read and understand the Funding Agreement and that she was an intelligent woman at the time she signed it. His Honour also found that at the time of the transaction the appellant was controlled, focused, and had attention to detail, exemplified by her circling the 25% figure commission fee on her copy of the draft Agreement. These findings were not challenged. 154The appellant contended that the primary judge erred in determining that the absence of medical evidence prevented him from finding that the appellant's state of mind was such that she could not make a rational decision about whether it was in her best interests to enter into the Funding Agreement. 155This contention should be rejected for at least two reasons. 156The first is that, as the respondents correctly point out, this contention does not accurately reflect his Honour's findings. His Honour's reference to the absence of medical evidence was directed to the appellant's claims that her mental state at the time of the transaction made her vulnerable and affected her ability to make an informed choice as to what she wanted to do. 157The second reason is that the state of the appellant's physical or mental capacity was a relevant circumstance which his Honour was necessarily required to consider when assessing whether the Funding Agreement was unjust: s 9(2)(e) Contracts Review Act. His Honour did not err in taking into account the absence of expert medical evidence of any relevant physical or psychological disability suffered by the appellant at the time of the transaction. 158This ground of appeal must be rejected.

[34]

Ground 19: Knowing exploitation of the appellant's vulnerabilities 163The appellant contended that the respondents, through Mr Byrnes, knowingly exploited the appellant's vulnerabilities. In oral argument it was put that the respondents had assessed the appellant's situation, drafted an agreement "cleverly" with a cooling off period, and when the appellant requested changes to the Funding Agreement to exclude the Darling Point property from the commission calculation, quickly acceded to her request. This was part of a broader submission that the respondents exploited the qualities of the appellant, which in turn caused her to enter into the Funding Agreement. These were said to be her acknowledged greed, her hatred of her stepson, Anthony, and her desire to seek revenge on Ferdinand by way of extracting the maximum available from the matrimonial property. 164The appellant also challenged his Honour's finding (at [311]) that the appellant was not exploited by Mr Byrnes. His Honour's finding was in the following terms: "Even if it is open for me to find that the plaintiff acted irrationally or with some form of obsession so far as Anthony is concerned the characteristics which I have been otherwise asked to accept wherever present, such as greed and potentially her ability to manipulate people, places her in a category where it is difficult to see how on the facts of the case she was in fact exploited by Mr Byrnes." 165His Honour identified five matters which satisfied him that the appellant was not exploited by the respondents, namely:

her use of Anthony's DNA material in order to manipulate Ferdinand to her financial advantage: at [312];
her considerable commercial experience, spanning many years, and her commercial acumen: at [313];
her University qualification in the Philippines and her Australian accounting qualifications: at [313];
that it was the appellant who sought out Mr Byrnes and Mr Rogerson (after undertaking some background checks) and that she had happily invited them into her home notwithstanding the fact that they were total strangers with somewhat dubious reputations: at [314]; and
that she wanted to convey the impression to Anthony that she was being assisted by persons with somewhat notorious reputations in order to improve her bargaining power: at [315]. These findings were not challenged on appeal. 166Nonetheless the appellant contended that Mr Byrnes knew, when negotiating with the appellant, that she was "not quite right" and was taking advantage of her. 167The difficulty with this submission is that there was no evidence supporting the assertion that the appellant was "not quite right". Reference has already been made above to the absence of any medical evidence that the appellant was suffering from any relevant physical or psychological disability. 168The characterisation of the appellant as being "not quite right" was also contradicted by the unchallenged findings that the appellant was educated, intelligent, possessed accounting qualifications, and had a demonstrated commercial skill. Indeed it was acknowledged in the appellant's written submissions that the Addendum to the Funding Agreement was the result of a request by the appellant. This showed an ability to negotiate in her own interest. 169Next, complaint is made that Mr Byrnes knew the appellant was a difficult person and he "sugar coated" the views he gave her. His Honour seems to have accepted as much: at [311], but this finding must be seen in context. Contrary to the appellant's submission, Mr Byrnes gave unchallenged evidence that by "sugar coating" he was referring to the way he interacted with the appellant, not the content of the information that he gave her. Mr Byrnes' view was that if he was confrontational the appellant would reject any advice (Black 164P-R and 165B-H). It was not shown that Mr Byrnes' manner of dealing with the appellant involved exploitation of her suggested character traits or vulnerabilities. 170Next, it was contended that Mr Byrnes knew the appellant would not act on legal advice in relation to the Funding Agreement, even if he suggested she do so. It was argued that his offer of a "cooling off" period for the appellant to obtain advice on the contract was hollow. There are three difficulties with this submission. 171The first is that as noted at [148] above there is a complete absence of evidence as to what the legal advice might have been and how the appellant would have acted in response. The second is that the appellant actually did seek advice from her close friend and confidante, Mr Rappaport, an accountant, and she did negotiate the changes contained in the Addendum. The offer of the "cooling off" period was not a hollow offer. The third is that there is no challenge to his Honour's finding that the respondents did not know that any advice the appellant had received was inaccurate or inadequate: at [323]. 172This ground of appeal must be rejected.

[35]

Denial of procedural fairness 173The appellant contended by appeal ground 10 that his Honour erred in finding that the appellant was in fact seeking to have Mr Byrnes threaten or harm Anthony on her behalf or to provide an "unorthodox solution", because this was not part of either party's case and the finding was not open on the evidence. 174There are two aspects of this appeal ground. The first is the contention that the appellant was seeking to have Mr Byrnes threaten or harm Anthony on her behalf. His Honour did not so find. To this extent, this ground of appeal must be rejected. The second aspect concerns his Honour's reference to Mr Byrnes providing an "unorthodox solution". His Honour did make observations to this effect, as well as observations that the appellant wanted Mr Byrnes to provide some sort of "unorthodox negotiating capacity" involving "an aggressive approach", "fighting fire with fire", by a person who "would be prepared to do things her lawyers would not even contemplate doing": at [211] and [231]. 175The appellant complained that she was denied procedural fairness because these findings were made without notice that any submission to that effect was being made, and without the appellant having an opportunity to properly deal with it. The consequence was said to be that his Honour's evaluative judgment that the Funding Agreement was not unjust had miscarried. It was submitted that this Court should re-examine the facts and come to its own conclusion, or alternatively remit the matter for a new trial. 176Appeal ground 11 was advanced in the alternative to appeal ground 10. This ground embraced his Honour's finding that the appellant wanted Mr Byrnes to provide an "unorthodox solution", and contended that his Honour ought to have concluded that the Funding Agreement was unjust and should be set aside because, inter alia, it did not contain any promise to perform such services and that the appellant had entered into the transaction under a complete misapprehension as to what she was to receive because she could not receive any such benefit. Alternatively it was said that his Honour ought to have concluded that the Funding Agreement was for an illegal purpose and therefore unenforceable. 177The respondents submitted that the findings by his Honour that the appellant wanted Mr Byrnes to provide "some unorthodox negotiating capacity" or an "unorthodox solution" was never part of the respondents' case, but were findings inspired by the appellant's opening submissions at trial, and the appellant could not be heard to complain that she was denied the opportunity to deal with the issue. 178The respondents further submitted that the findings were irrelevant to the respondents' case because the Funding Agreement was neither unjust on its terms nor in the manner in which it was negotiated. The respondents emphasised that they did not contend at trial, nor on appeal, that the presence or absence of these findings would have assisted their case.

[37]

Denial of procedural fairness not established 182The premise of the appellant's complaint is that his Honour's findings (which are not part of the respondents' case) can only be understood as being consistent with a finding that the Funding Agreement was one whereby Mr Byrnes had agreed, or was expected by the appellant, to carry out illegal acts. It was contended that such a contract may have been unenforceable at common law: Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410 at 413 (Gibbs ACJ). 183It is useful to start with a consideration of how the issue of an "unorthodox solution" arose at trial and what seems to have inspired his Honour's findings. It is also necessary to consider whether (as submitted by the appellant) implicit in his Honour's findings relating to an "unorthodox solution", is the finding of a promise by Mr Byrnes, or an expectation by the appellant, that illegal activities would be performed. 184At trial senior counsel for the appellant adverted in his oral opening to the possibility that the Funding Agreement was not a "real" litigation funding agreement but a facade for something else. He referred to the appellant looking for some "muscle" and a "bit of negotiation of the style that lawyers aren't known for". The transcript (at Black 17-18) records this part of the appellant's counsel opening as follows: "Now is there something lurking behind all of this? I hear your Honour thinking, in light of the characters involved. Is what is really going on here that the plaintiff is scared of Anthony Nemeth, 1. And 2. Thinks that with a bit of negotiation of the style that lawyers aren't known for she might be able to get some more money. In other words, is she looking for some muscle or looking for some type of bodyguard type services? As I've said, at least on some of the evidence at the time she's dealing with Mr Rogerson, she's perhaps looking for some sort of protection, if that is really going on. Firstly, Mr Byrnes doesn't say it. Secondly, of course the plaintiff already has Mr Rogerson onboard and would seem to have that aspect of her needs covered. But, thirdly, and perhaps this is close to the truth, perhaps what is really happening is that it is all dressed up as 'litigation funding agreement' when it is an agreement to do other things. And it is called 'litigation funding agreement' because it is accepted by the Courts and the community that's the way you pay for litigation funding is by a percentage of the result in the Court case. Because if what was being provided is something else under the rubric of whatever other services that the plaintiff requires, then the defendant runs into the difficulty, we would suggest, of acquainting those services with a percentage of the whole of the result of the Court case." [Emphasis added.] 185The respondents' counsel disclaimed in his oral opening any suggestion that the Funding Agreement was not a "real" litigation funding agreement (Black 23). 186In written closing submissions at trial the appellant's counsel contended that there was no evidence that Mr Byrnes had any special negotiating skills, but it might be thought that his "notorious reputation as a standover man" might have been of some assistance when dealing with the late Mr Nemeth, and perhaps that was why the appellant was impressed with him. It was submitted, however, that this was an unlikely scenario because Mr Rogerson (whose reputation, it was said, in that regard would greatly exceed Mr Byrnes) had been unable to achieve anything (Black 406G-J). 187Thus, by the close of the appellant's case, her contentions had evolved and what was ultimately advanced was the contention that, although he had a "notorious reputation", Mr Byrnes had no special negotiating skills which justified a 25% commission. In my view, his Honour's findings relating to an "unorthodox solution" and the like should be understood in this context. That is, his Honour was saying no more than the obvious conclusion which flowed from the appellant's own submissions. The appellant was disenchanted with her lawyers. She wanted a more aggressive approach in negotiating with Ferdinand with a view to obtaining a larger settlement. She wanted someone in her "corner" who might make Ferdinand reconsider his offer. She believed that the mere presence of a litigation funder standing behind her would signal to Ferdinand and Anthony the strength of her resolve to pursue her claim. 188That his Honour's references to an "unorthodox solution" should be so understood is apparent from his Honour's later findings that the appellant wanted to convey the "impression" to Anthony that she was being assisted by persons who had a particular reputation (at [315]), and that she was prepared to pay for their presence at the negotiating table as she thought that their "very presence" would enhance her prospects of getting a substantially increased offer: at [319]. These were not findings that Mr Byrnes agreed, or the appellant expected him, to do harm to Anthony. 189Moreover, the appellant's written submissions accepted that Mr Byrnes gave evidence that he did not provide services involving carrying out illegal acts. His Honour did not find otherwise. Nor did his Honour find that the appellant expected Mr Byrnes to do harm to Anthony. 190The error in the appellant's submissions is that they conflate his Honour's findings in relation to the role the appellant expected of Mr Rogerson, whose services the appellant had retained in early 2009 (well prior to Mr Byrnes' offer of funding in late December 2009), with his Honour's findings relating to the "unorthodox solution" provided by Mr Byrnes. His Honour found that the appellant clearly wanted Mr Rogerson to investigate and expose, if he could, the commission of any criminal activity on the part of Anthony, so that it could be used as a pressure tactic in negotiations. His Honour also found that the appellant wanted Mr Rogerson to do violence to Anthony as part of her strategic plan: at [301]. His Honour accepted Mr Rogerson's evidence that he refused to do so: at [123]. Whilst his Honour also found (at [245]) that the appellant told Mr Byrnes that she wanted horrible things to be done to Anthony, and that Mr Byrnes was also aware that the appellant had requested that Mr Rogerson do violence to Anthony, his Honour did not find that Mr Byrnes agreed to do so, or that the appellant expected Mr Byrnes would do so. 191In my view, the appellant's complaint in appeal ground 10 must be rejected. 192Appeal ground 11 may be dealt with briefly. The premise of this contention - that the Funding Agreement was for an illegal purpose - is incorrect for the reasons given above. No allegation of illegality was pleaded or relied upon as part of the appellant's case at trial, nor put to Mr Byrnes in cross-examination. The contention that the primary judge erred in not making such a finding because it was implicit in his references to an "unorthodox solution" and the like is untenable. 193Appeal ground 11 must be rejected.

[42]

Grounds 24 and 25: Unjustness of the terms of the Funding Agreement 204The appellant contended that the primary judge erred in not dealing with two submissions relating to the combined effect of cls 5.2, 9.2, 9.5 and 9.6 of the Funding Agreement and the Terms Sheet. The contentions were that these clauses were substantively unjust because first, subject to the giving of reasonable notice, ALF was entitled to terminate a funding transaction (that is, to cease provide funding) without cause. Secondly, the respondents could demand payment of the 25% commission even if they performed minimal work or no work at all, and even if ALF provided no, or minimal funds. 205It may be accepted that his Honour did not expressly address these contentions when concluding that the contract was not unfair by its terms in any way at all: at [318]. However, I do not consider that this failure gives rise to any material error. 206These contentions were directed to a complaint of injustice which was entirely theoretical. None of those events occurred and if they had then, as the respondents correctly submit, the Court may have well faced an entirely different case. In particular, ALF did not terminate the funding of the Family Court proceedings. ALF provided litigation funding to the appellant's new solicitors, Beazley Singleton, between January and August 2010. It was the appellant who purported to terminate the Funding Agreement in August 2010, and thereafter claimed that she was not bound by the terms of the Funding Agreement. 207It is unnecessary to consider on appeal whether or not these provisions were unjust because they might operate in a way that was not reasonably necessary to protect the respondents' interests. Even if it be assumed that this was the case, there was no reason for the primary judge to have considered exercising his discretion to grant relief in respect of these provisions, in circumstances where the respondents did not fail to perform, and did not terminate the litigation funding without cause.

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Ground 26: Improvidence of the contract 208The appellant contended that the primary judge erred in failing to find the Funding Agreement was improvident from her perspective, and accordingly "unjust" because: (a) she did not need litigation funding; (b) she did not want or need any development services concerning the Hampton Court Hotel or the Darling Point property; (c) Ferdinand's offer contained in the Heads of Agreement was in a commercial sense readily available to her and therefore she would receive no benefit for a payment of 25% of the $8,000,000 that was "already on offer"; (d) she had no need for any negotiating services over and above what a competent legal practitioner could provide; and (e) she had no need for, and Mr Byrnes was not offering "collateral" services. 209The first contention, that the appellant did not need litigation funding, has been addressed above under appeal grounds 8-9. 210The unchallenged findings of the primary judge are that by mid October 2009 the appellant owed substantial moneys to her previous solicitor, Mr Hall, was short of cash and did not wish to retain Mr Meyer, and believed that Mr Paltos, Ferdinand's solicitor, would make any further application to the Family Court for funding very difficult. The appellant needed funding for further legal representation to pursue her claim in the Family Court proceedings. It is apparent that between February and December 2008 the appellant exhausted at least $250,000 in legal costs, being the interim funding obtained from Ferdinand in February 2008. It was not in contest that, as at January 2010, substantially more work was required to prepare the matter for hearing in the manner required by the appellant. Clearly the appellant had a need for litigation funding. The appellant did not challenge his Honour's finding that Mr Byrnes had provisioned $1,000,000 to fund the Family Court proceedings. 211The second contention, that the appellant did not want or need any development services concerning the Hampton Court Hotel or the Darling Point property, has been addressed above under appeal grounds 4-7. The factual basis for the appellant's contention that she could obtain no benefit from any development services has not been made out. 212The third contention, that Ferdinand's offer in the Heads of Agreement was "on the table" and readily available to the appellant to accept, has not been made out. First, his Honour rejected the appellant's construction argument that the Heads of Agreement was a binding contract, and there is no appeal against this finding. 213Secondly, his Honour did not find that there was a "certainty" that the appellant would receive at least $8,000,000 in the Family Court proceedings. 214Thirdly, it is an everyday common experience that litigants resile from previous negotiated positions or agreements in principle which are not binding or enforceable. 215Fourthly, the premise of this contention - that the "floor value" of the appellant's entitlement to the asset pool of the marriage was not less than $8,000,000 - is unsound. It assumes no change in the value of Ferdinand's net assets (either assets or liabilities) as disclosed in his financial statement filed on 11 February 2008. Whilst the large portion of Ferdinand's assets comprised loans to related companies (approximately $29,600,000) which in turn held his interests in real estate, the Hampton Court Hotel, it could not be reasonably assumed, in the absence of evidence, that as at January 2010 either Ferdinand's liabilities or those of the related companies had remained static over the previous two years. 216Fifthly, it is necessary to distinguish between the appellant's contention that the offer in the Heads of Agreement was "on the table" and readily available to her to accept, which did not rise above mere assertion, and his Honour's finding that Mr Byrnes thought, as a skilled negotiator no doubt, he could get the offer back onto the table at some point: at [239]. The critical distinction is that absent the support of a litigation funder and a negotiator with a reputation such as Mr Byrnes had, there was no basis for drawing an inference that the offer in the Heads of Agreement was readily available to the appellant in January 2010 in circumstances where she was without legal representation and lacked the financial ability to pursue her claim in the Family Court proceedings. 217The fourth contention, that the appellant had no need for any negotiating services over and above what a competent legal practitioner could provide, may be correct in a general sense, but it does not accommodate his Honour's unchallenged findings concerning what the appellant wanted and was prepared to pay for, namely the presence of Mr Byrnes (and Mr Rogerson) at the negotiating table, as she thought that their very presence would enhance her prospects of getting a substantially increased offer. 218The final contention that the appellant had no need for and Mr Byrnes was not offering "collateral" services, has been dealt with above under grounds 10 and 11. It is based on the incorrect premise that Mr Byrnes was offering to perform illegal acts. It is also inconsistent with the appellant's written submissions which accepted that Mr Byrnes gave evidence that he did not provide services involving carrying out illegal acts. 219It may be accepted, as the primary judge found (at [239]), 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 well understood that a 25% commission was going to be charged. She discussed the financial wisdom of entering the transaction with Mr Rappaport, an accountant. She was not suffering from any relevant disability which prevented her from making an informed decision about what she wanted to do in January 2010. It is not enough for the appellant to assert that objectively the transaction was not in her best interests. Nor is it sufficient to assert that the appellant's pursuit of a larger settlement in the Family Court proceedings was driven by either greed or jealousy concerning Anthony's control of Ferdinand's financial affairs (see the authorities referred to by the primary judge at [87], which is extracted at [60] above). 220The 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. The appellant was not a person unable to protect herself. She did not lack education or intelligence. On the contrary, she had accounting qualifications and accounting experience and had demonstrated commercial acumen. She was not shown to be vulnerable because of gullibility or loyalty or love. Nor has it been shown that his Honour was in error in concluding that her reasons why she wanted to enter the transaction were not irrational. 221In my view there was no error in the primary judge finding that the Funding Agreement was not unjust.

Parties

Applicant/Plaintiff:

Nemeth

Respondent/Defendant:

Australian Litigation Funders Pty Ltd

Legislation Cited (3)

Trade Practices Act 1974(Cth)ss 51AB, 51AA

Contracts Review Act 1980(NSW)ss 4, 7, 9

Corporations Act 2001(Cth)ss 206F, 597

Cases Cited (23)

tutor) v Australian Litigation Funders Pty Ltd and Ors [2013] NSWSC 529 Warren v Coombes [1979] HCA 9; 142 CLR 531 Water Board v Moustakas [1988] HCA 12; 180 CLR 491 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410 Category: Principal judgment Parties: Virginia Nemeth (by her tutor, Salwa Elias) (Appellant) Australian Litigation Funders Pty Ltd (First Respondent) Australian Corporate Restructuring Services Pty Ltd (Second Respondent) Jim Byrnes (Third Respondent ) Representation: Counsel: P Finch (Appellant) B A Coles QC and P A Horvath (Respondents) Solicitors: DC Legal Pty Ltd (Appellant) HWL Ebsworth (Respondents) File Number(s): 2013/235377 Decision under appeal Jurisdiction: 9111 Citation: Virginia Nemeth (by her tutor) v Australian Litigation Funders Pty Ltd & Ors [2013] NSWSC 529 Date of Decision: 2013-05-31 00:00:00 Before: Sackar J File Number(s): 2011/44884

[This headnote is not to be read as part of the judgment] The appellant, Mrs Virginia Nemeth, commenced proceedings in the Family Court of Australia in August 2006 against her former husband, Ferdinand Nemeth, seeking an order for a property settlement. In connection with these proceedings the appellant filed a number of applications seeking final settlement orders as well as interim costs orders to cover the cost of her legal fees and disbursements. In December 2008 a property settlement was negotiated and Heads of Agreement were signed between the appellant and Mr Nemeth, however the appellant was dissatisfied with the proposed settlement and refused to implement the agreement. Under the agreement the appellant was to receive $8,000,000 in cash by way of instalments and exclusive legal ownership of the Darling Point property, which she had shared with her former husband. During 2009 the appellant was introduced to Mr Roger Rogerson, who was recommended to her as a mediator and a private investigator, and later to Mr Jim Byrnes, who was a representative of ALF and ACRS (the respondents). In December 2009 there was a discussion between Mr Byrnes, Mr Rogerson, and the appellant (and her friend Ms Winter) regarding the possibility of ALF managing her Family Court proceedings. At that time the appellant was unrepresented in the proceedings and had no funds to retain new solicitors. In January 2010 the appellant entered into a litigation funding agreement with the respondents. Under the agreement the respondents agreed to provide funding as well as case management and property development services, and in return the appellant agreed to pay ALF a 25% commission based on the final settlement sum received from the Family Court proceedings (excluding the Darling Point property). After the agreement was signed ALF arranged for new solicitors to represent the appellant and funded the proceedings until August 2010, when the appellant terminated the agreement and her retainer with the new solicitors. The Family Court proceedings were finalised on 22 November 2011 following a further mediation in which it was agreed that the appellant would receive $9,000,000 in cash and the Darling Point property. The appellant then brought proceedings against ALF and ACRS seeking to be relieved from her obligations under the funding agreement. At trial the appellant argued that the contract was unjust and should be set aside ab initio, or alternatively that its terms should be varied to limit the amount payable by the appellant to 25% of any cash amount she recovered over and above $8,000,000. This claim was put forward on the basis that her decision to enter into the agreement was irrational and the transaction was improvident. The respondents brought a cross-claim seeking payment of the 25% commission. The primary judge: 1 made a number of credit findings in relation to the evidence of the appellant, Mr Byrnes, Ms Winter, and Mr Rogerson; 2 found that the appellant was an experienced accountant and businessperson with a significant degree of commercial acumen, who was acutely able to understand the nature and content of the litigation funding agreement and the likely return to the respondents, and fully appreciated the fact that the 25% commission was significant. The primary judge also found that she had consulted a trusted friend and accountant, Mr Rappaport, regarding the contract and it was probable that they had discussed the financial wisdom of entering into the agreement; 3 found that the appellant was, in the later part of 2009, seeking an "unorthodox solution" and believed that by retaining Mr Rogerson and Mr Byrnes (through her agreement with ALF)- whose reputations she was aware of- it might be possible to persuade, cajole, or pressure Ferdinand to provide her with a more generous outcome; 4 found that the appellant had perfectly rational reasons for not accepting the Heads of Agreement and for seeking a greater settlement offer, despite legal advice that it was in her best interests to accept the offer contained in the Heads of Agreement; 5 found that there was no cogent medical evidence suggesting that the appellant suffered from any relevant physical or psychological disabilities which might have prevented her from making an informed decision. Nor did the appellant suffer from any "special disability" and she was also not exploited by Mr Byrnes; 6 found that the funding agreement was not unfair by its terms, and that, in the circumstances in which it was entered into, a 25% commission did not give rise to unfairness under the Contracts Review Act 1980 (NSW), nor did it give rise to claims of unconscionability under the general law or under the Trade Practices Act 1974 (Cth); 7 ordered the appellant to pay ALF $2,250,000 plus interest, and the costs of the proceedings. Mrs Nemeth appealed. On appeal she challenged a number of factual findings made by the primary judge, and contended that the primary judge had erred in finding that the funding agreement was not unjust. The appellant also contended that she had been denied procedural fairness because, it was asserted, the finding that the appellant was seeking an "unorthodox solution" was not part of either parties' case and was not put to the appellant. The respondents sought to uphold the primary judge's finding that the agreement was not unfair or unjust. Appeal dismissed. The Court held, per Gleeson JA (Meagher JA and Leeming JA agreeing) that: 1 the appellant's challenges to the primary judge's findings of fact, and resulting conclusions, were unsuccessful. The appellant did not establish that the primary judge's conclusions of fact were erroneous by reason of incontrovertible facts or uncontested testimony, or on the basis that they were glaringly improbable or contrary to compelling inferences: at [101]-[172]. Considered: Fox v Percy [2003] HCA 22; 214 CLR 118; Strahan v Strahan [2009] FamCAFC 166; Aboody v Ryan [2012] NSWCA 395. 2 the appellant was not denied procedural fairness. The primary judge's comments regarding an "unorthodox solution" arose in the context of submissions by the appellant's own counsel and therefore it could not be said that the findings were made without notice: at [173]-[193]. Considered: Adamson v Ede [2009] NSWCA 379; Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1; Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410. 3 the primary judge did not err in finding that the funding agreement was not unjust or improvident. The appellant was not a person who was unable to protect herself nor did she lack education or intelligence; she had accounting qualifications and experience as well as demonstrated commercial acumen. The appellant had also discussed the financial wisdom of entering into the funding agreement with Mr Rappaport, an accountant. On the evidence it was open to the primary judge to find that the appellant understood the transaction she was entering into, believed it was in her best interests, had rational reasons for wishing to enter into it, and had not been threatened or intimidated to do so. Nor was it shown that the appellant was suffering from a relevant physical or psychological disability or any "special disability" at the time of entering into the agreement: at [196]-[198], [204]-[221]. 4 the appellant was not entitled to assert, for the first time on appeal, that a 25% commission for litigation funding was offensive to community standards: at [194]-[195], [199]-[203]. Considered: Coulton v Holcombe [1986] HCA 33; 162 CLR 1; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418; Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37; Water Board v Moustakas [1988] HCA 12; 180 CLR 491; Metwally v University of Wollongong (No 2) [1985] HCA 28; 60 ALR 68.

[1985] HCA 28

[2009] FamCAFC 166

[1988] HCA 12

(1997) 41 NSWLR 482

(1986) 5 NSWLR 610