The big legal battles of the wealthy

Spare a thought this weekend for New South Wales Supreme Court judge Justice Paul Brereton, who has had an exhausting couple of weeks dealing with two of the most high profile cases in recent rich list history.

Starting on September 12, Brereton has been presiding over the salacious court fight between the estate of the late Richard Pratt and his former mistress Madison Ashton, a case that has had everything from threesomes and slush funds to assassins-turned-bodyguards.

In between hearing this case, Brereton has had to deal with the preliminaries in a case that pits Australia’s richest person, Gina Rinehart, against her own daughter. At least that case, which is centred around a family trust dispute, will attract a little less public attention – Brereton slapped a suppression order on the case last week, saying there was little public interest in a family dispute.

While we wouldn’t presume to guess what His Honour is thinking, we can wonder if he shares the thoughts of many of those who have watched these cases explode in the media: Why on earth do wealthy people who profess to love their privacy allow disputes to go to trial?

It seems logical that one of the benefits of being rich is that you have the ways and means to make these legal disputes go away.

However, the rich are nothing if not strong willed and those pools of money that can make legal problems go away can also be used to make a point, defend a principle or even make a new fortune.

Here are some of the reasons why the rich are prepared to go to court.

Defending a reputation

One of the most common reasons for the wealthy to call in the lawyers is when they believe they have been defamed by the media, a competitor or some other pesky commentator. In 2009, Queensland billionaire Clive Palmer launched legal action against the state’s premier Anna Bligh after she questioned the influence his political donations gave him, although the action was dropped in August 2010. Earlier this year, billionaire property developer Bob Ell took action against a Tweed councillor who has been a vocal opponent of his property developments and had also made comments about political donations.

Defending your turf

The problem with being very successful is that you do attract your fair share of rivals looking for a slice of the action. Earlier this year, US billionaire Andrew Mason, co-founder of group buying giant Groupon, launched legal action in Victoria against local group buying company Scoopon, which had (cheekily or cleverly, depending on your point of view) also registered the domain name groupon.com.au. Scoopon, which also attracted investment from James Packer earlier this year, eventually settled the case. The terms were confidential.

The personal war

One reason that the disputes of the wealthy reach the courts is that there are personalities involved – when two wealthy types fall out, only a judge can find a resolution. The battle between Gina Rinehart and her daughter Hope Welker is only the latest in a series of personal court fights that Rinehart has been involved in. She took on fellow billionaires Angela Bennett and Michael Wright, the children of her father Lang Hancock’s business partner Peter Wright, in a nine year legal battle of mining royalties that was resolved in Bennett and Wright’s favour in 2010. Prior to that, she fought an 11-year war against Lang Hancock’s second wife Rose Porteous for control of his estate.

The matter of principal

Settling a legal dispute may be convenient and quick, but sometimes there are principles at stake that the rich are just not prepared to give up. Principle appeared to be at the heart of Kerry Stokes’ monumental battle with News Limited, Foxtel, Telstra and Publishing & Broadcasting Limited over the death of Seven Network’s pay television business, C7. Stokes launched the case in 2002, aiming to get $1 billion in damages. But after five years of legal wrangling – which cost the parties a stunning $200 million – Seven’s claim had been reduced to $212 million. Stokes lost the case and was slated by the presiding judge, who said there “were simply too many occasions on which Mr Stokes evidence was implausible for me to regard him as a reliable witness on disputed issues”. But even after losing an appeal in 2009, Stokes appeared to have no regrets – he was prepared to see the matter through to the bitter end.

The wealth-generating case

Legal stoushes don’t drain a wealthy person’s funds – sometimes they can greatly increase them. Take rich list member Jack Cowin, whose Competitive Foods organisation owns burger chain Hungry Jack’s. For most of the 1990s and early 2000s, Cowin waged a legal battle against Burger King after the US chain came into Australia and tried to set up in competition with him.
Cowin emerged victorious in 2001, with Burger King ordered to pay him $75 million for breaching their franchise agreement. The US giant also agreed to rebrand 81 of its Burger King stores as Hungry Jacks stores. For Cowin, it was a huge win and one which has helped his wealth increase from $135 million in 1998 (while the case was in progress) to $353 million in 2003 (after the case was finished) to $618 million in 2011.

A final note…

If Australia’s wealthiest entrepreneurs need any proof that the only winner from a legal stoush are the lawyers, they need only look at the nation’s rich list.

There on BRW Magazine’s Rich 200 list, ranked in 56th place with a fortune of $739 million in one of Australia’s top commercial barristers, Allan Myers QC.

While the bulk of Myers fortune is made up of his investments in Polish brewer Grupa Zywiec and extensive rural land holdings, it is of course his work as one of Australia’s most expensive silks that has helped fund these interests.