An Australian court has upheld a litigation funding agreement against a claim of unconscionability.

The agreement arose during negotiations over the divorce of a wealthy Sydney couple. In late 2008 Virginia Nemeth had received a settlement offer from her then-husband of $8 million plus the house in which she lived. A little over a year later, after firing several lawyers who recommended she accept the offer on the table, Nemeth entered into a funding agreement with businessman Jim Byrnes, who agreed to take over the case in exchange for 25 percent of settlement, excluding her house.
 
Nemeth eventually hired new lawyers of her own and agreed to divorce settlement giving her around $9 million and her house. She sued to invalidate her deal with Byrnes, arguing that she was “irrational” at the time she entered into it. Citing her firing of several lawyers and the rejection of their advice, Nemeth claimed she was the sort of person who only listened to “sugar-coated” advice. She also argued that she was an unusually greedy and manipulative person.
 
According to Nemeth, Byrnes took advantage of these characteristics to get her to sign a litigation funding agreement against her interests.
 
“This is a somewhat unusual case,” wrote Judge John Sackar of the Supreme Court of New South Wales in his decision in the case. “It is one of the few cases I can recall where the epithets used by the plaintiff’s counsel to describe his client far exceeded any used or hinted at by the defendant’s counsel.”
 
But the judge rejected Nemeth’s claim that she was irrational at the time she entered into the agreement with Byrnes. In doing so, he noted her background as a qualified accountant and bookkeeper who had managed a number of her and her husband’s businesses. He also found that she had reasonable concerns about accepting the original settlement offer as well as a cash shortage that the funding agreement could have ameliorated.
 
Nemeth was introduced to Byrnes by Roger Rogerson, an ex-police detective whom she had previously engaged to help negotiate her divorce. Both men are well-known in Australia for previous criminal convictions and alleged underworld ties. The judge said Nemeth’s hiring of these men in particular was telling.
 
“In the latter part of 2009 she was not looking for lawyers competent or otherwise,” the judge wrote. “She was predominantly looking for an unorthodox solution and that is why she was attracted to suggestion that she retain Mr. Rogerson in the first instance and Mr. Byrnes.”
 
The fact that they disappointed her by not resorting to unorthodox means did not mean her decision to hire them was uninformed, Judge Sackar said.
 
Nemeth’s lawyer, Susan Warda of Coleman Greig, said Monday that no decision had yet been made on an appeal. She did not respond to further requests for comment. The plaintiff was also represented by barristers Robert Newlinds SC and Jane Muir.
 
Byrnes was advised by HWL Ebsworth instructing barristers Bernard Coles QC and Anne Horvath.
 
Litigation funding agreements have become fairly common in Australia over the past two decades. While lawyers in the country are prohibited from taking a percentage of a settlement, third parties are not.
 
Email: alin@alm.com .