Funder and lawyers ordered to pay over $11 million for “egregious conduct”

The Honourable Justice John Dixon of the Supreme Court of Victoria has found that an Australian litigation funder and five lawyers engaged in egregious conduct in connection with a fraudulent scheme, intending to claim more than $19 million in purported legal costs and funding commissions from the settlement sum in a group proceeding.

In November 2018, the Court of Appeal remitted the Banksia Securities Limited group proceeding to the Trial Division to consider an application by Australian Funding Partners Limited (‘AFP’) to be reimbursed $5.2 million in legal costs and to be paid $14.1 million in litigation funding commission, following a $64 million settlement reached in December 2017.

In March 2019, the court-appointed Contradictor alleged breaches of the overarching obligations, fiduciary duty, professional conduct rules and the funding agreement, such that AFP ought not be entitled to recover any or all of those amounts. Those allegations were rejected and fiercely defended by AFP and barristers Mr O’Bryan and Mr Symons until the trial of the remitter commenced, where they each withdrew their respective defences.

Among other things, the Court has now found that:

• Following the in-principle settlement, Mr Mark Elliott (managing director of AFP), Mr O’Bryan and Mr Symons demanded that the other parties agree to settlement terms that were adverse to the interests of group members, including requiring the other parties to support court approval of AFP’s $19.3 million claim, while broad confidentiality requirements prevented the court and other parties from careful assessment of that claim.

• Mr Mark Elliott reverse engineered the $5.2 million costs claim into ‘fee targets’ that each of Mr O’Bryan, Mr Symons and solicitor Mr Zita then met; none of whom having issued invoices for their fees prior to the settlement.

• Mr O’Bryan and Mr Symons each contrived backdated costs agreements and invoices, to appear as if their fees were legitimately incurred. Each of them included hundreds of hours of time for work that had never been performed.

• Mr Mark Elliott, Mr O’Bryan and Mr Symons deceived the court as to the legitimacy of AFP’s claim, including authoring a misleading opinion of counsel, and procuring a report from an expert costs lawyer, Mr Peter Trimbos, by misleading him into concluding the legal fees were legitimate, resulting in court approval of the $19.3 million claim.

Justice John Dixon has ordered that the funders and lawyers pay damages of $11,700,128 to approximately 16,000 group members, plus the costs of the remitter on an indemnity basis. The above noted barristers have also been banned from practising law, and the case has been referred to the public prosecutor for further investigation and action.

Read the Summary of Judgment.