Virtue unrewarded – when to fold your hand

A few months ago, a representative of the Litigation Funder to the WestConnex Resumption Class Action approached me and asked whether I’d like to become the solicitor for the lead claimant. 

“Why me?” I asked.  “I’ve never advised the claimant on a class action.” 

“Yes, I’m aware of that, but you understand toll road transactions, which will be very helpful.  The barristers can assist you with litigation strategy, court procedures and the like”, the representative replied. 

“And we have a good legal argument”, he continued.  “Transport for NSW compulsorily acquired the sub-stratum from the affected landowners with the intention of ultimately selling the toll road concession to the highest bidder.  By doing so, it breached section 179 of the Roads Act 1993, which states:  “Land may not be acquired by compulsory process under this Division without the approval of the owner of the land if it is being acquired for the propose of re-sale.”  “Read the Fazzolari case”, he said. 

“Oh, and like Fazzolari, we’ll need to take this case to the High Court to get the desired result”, he adds. 

“Let me think about it”, I replied. 

Fazzolari 

The Fazzolari case [1] concerned a Public Private Partnership (PPP) contract between the Parramatta City Council and Grocon for the redevelopment of Civic Place, now known as Parramatta Square.   

The PPP contract was conditional upon the Council acquiring title of certain land, including the land owned by Fazzolari.  The contract provided that various parcels of land, including that acquired from Fazzolari, would be consolidated and re-subdivided, with most of it transferred to Grocon.  Grocon would then use the land to construct a 31-storey residential apartment building, a 40-storey commercial office tower, council facilities, and public domain.  Under the PPP contract, the Council was to receive various benefits from Grocon, including upfront participation payments, a revenue share, council facilities and public domain, and a housing cash contribution.  

Fazzolari was represented in the High Court by Bret Walker SC.  The High Court accepted Mr Walker’s argument that “re-sale” should not be artificially limited to the re-sale of Fazzolari’s block for money, as doing so “would allow transactions to be structured by local authorities in such a way as to avoid the constraint imposed by [s.179 [2]] while perpetrating the very mischief it is designed to prevent.”  It did not matter that none of the benefits flowing from Grocon to Council under the PPP contract were allocated to the Fazzolari property.  The Fazzolari land was to be transferred, along with other land, by Council in exchange for money and other consideration.  The Fazzolari land was, therefore, to be the subject of a “re-sale” by the Council within the meaning of [s.179]. 

The proposed compulsory acquisition of Fazzolari’s land was declared unlawful, and the Council was prevented from proceeding with it. 

The position on WestConnex is quite similar, I noted.  When Transport for NSW compulsorily acquired the substratum needed for the toll road tunnels, it had entered into a PPP contract with entities owned by Sydney Motorway Company under which it agreed to grant a 37-year lease of the land to the SMC entities.  The Roads Act defines land to include any estate or interest in land.  A leasehold interest is, therefore, land, and it was to be granted in exchange for valuable benefits that the SMC entities would provide.  Further, the Government had announced its intention to sell its equity interest in SMC after the ramp-up patronage risk associated with the new toll roads had been retired. 

We must get Bret Walker SC to argue our case, I thought.  Inquiries were made, and Mr. Walker’s team indicated he was interested in being briefed at the appellant level. 

Let’s do it 

I agreed to take on the case.  After all, opportunities to litigate in the High Court with Bret Walker SC by your side don’t come around often. 

An engagement letter with the proposed new lead claimant was put in place.  The Funder (Litigation Fund WCX Pty Ltd) agreed to pay my fees and was added as a party to the engagement letter for this purpose. My client was the proposed new lead claimant, not the Funder.  A minimum total fee was agreed upon, together with security arrangements for my fee. 

Red flags begin to emerge 

Shortly after, red flags began to emerge.   

• The proposed new lead claimant signed a funding agreement with the Funder several years ago, so no advice on its terms is required. “Nothing to see here.” 

• By the end of the first month, the agreed security for my fees had not been received, but the fees for that month were immediately paid, and the security was “on its way”. 

• I learned that the Funder is disputing money held in trust by the solicitors for the current lead claimant. A court hearing had occurred, but Justice McGrath had yet to make his decision. The class action couldn’t progress until he did so. 

• The Funder decides it wants to proceed with a different new lead plaintiff.  When I ask to meet with her, I’m told she is in a nursing home, but her daughter (who has full power of attorney) will instruct me on her mother’s behalf. 

• Justice McGrath hands down his judgment [3].  It isn’t pretty for the Funder.  It details the terms of the funding agreement with the current lead claimant and says, “[t]he Funding Agreement is an unhappily drafted document, with numerous errors, grammatical mistakes and oddities in it”. 

• I learned that the Funder’s representative is a former bankrupt and solicitor (struck off the roll in 1997) with a long history of disputing his lawyers’ fees and abusing court processes. He is also the sole director and shareholder of the Funder. 

Uh-oh! 

How it ends 

I decide I should take a closer look at my client’s Funding Agreement with the Funder. Like the one considered by Justice McGrath, it has numerous problems, which result in me recommending to my client that she doesn’t become the lead claimant unless and until the Funding Agreement is amended. I also decide my client could use some advice on the obligations and risks she would assume as the lead claimant. 

The Funder refuses to amend the Funding Agreement and my client decides she no longer wishes to become the lead plaintiff. Good decision. 

The Funder’s not happy. He tells me that he doesn’t see any new lead claimant being advised by Infralegal. 

Virtue unrewarded – time to fold my hand and move on.   

Endnotes 

[1] R&R Fazzolari Pty Ltd v Parramatta City Council [2009] HCA 12 

[2] The Fazzolari case concerned section 188 of the Local Government Act 1919, which is in identical terms to section 179 of the Roads Act 1993. 

[3] Mitchell v Roads and Maritime Services (now known as Transport for NSW) (No 2) [2024] NSWSC 1165