Connective combatant Sof Tsialtas
A change in control of mortgage aggregator Connective is in the works following a damning judgment of the Supreme Court of Victoria.
The minority one third shareholder in Connective, Sof Tsialtas, bought an oppression action 11 years ago against his former business partners Mark Haron and Glenn Lees, as well as Macquarie.
After a marathon hearing Tsialtas won hands down in a judgment that appears set to steer Connective into the hands of Liberty Financial.
The judgement may also have ruined the business careers of Mark Haron and Glenn Lees.
The relevant events cover the period from 2001 to 2020, a period of 19 years, which explains, in part, why the trial lasted 52 days.
In May 2008, Tsialtas was asked to resign as a director of the Connective companies, and did so. Slea Pty Ltd (Tsialtas’ private company) alleges that it was the subject of oppressive conduct after he resigned as a director under a cloud of unproven allegations of improper conduct.
Tsialtas was paid three months’ salary and received undertakings to participate in dividends and be kept informed of the financial affairs of Connective. Then in 2011, unbeknown to Slea, the business was restructured.
After the restructure, and without Slea’s knowledge, a 25 per cent interest in the business was sold to Macquarie, at an enterprise value of $20 million . The restructure and sale to Macquarie form part of the alleged oppressive conduct.
The judgment is both lengthy and incredible, mostly as to the underlying conduct of Haron and Lees and Connective, and their antagonistic conduct of the defence, which, in the end, Justice John Robson concluded compounded the oppression.
“I am satisfied that [Mr Lees] and Mr Haron have engaged in a decade-long campaign to eliminate Slea as a shareholder: first by ‘starving out’ Mr Tsialtas; and later (when Mr Tsialtas managed to secure financial support), by engaging in various types of oppressive conduct, including improperly effecting the restructure and sale,” Justice Robson wrote.
“Moreover, Mr Lees and Mr Haron have actively sought to conceal critical aspects of their conduct from Slea.
“I am satisfied that [Mr Lees] and Mr Haron have inflicted financial hardship on Mr Tsialtas and Slea in the hope of being able to acquire Slea’s shares cheaply.
“I am satisfied that Millsave and Mr Haron have conducted themselves on the basis that the Connective companies’ assets are their personal assets. A primary example is the extensive use of company moneys to fund their own legal costs.”
The judgment then turns ugly for the Connective principals.
“I am satisfied that Mr Lees and Mr Haron are unfit to act as company directors.
“Both men have repeatedly displayed a willingness to act dishonestly. I am satisfied that they have consciously refused to comply with court orders, destroyed relevant documents, not complied with discovery obligations, made a false affidavit (in the case of Mr Haron) and (at best) a sharp affidavit (in the case of Mr Lees) to deliberately conceal information, and have twice invoked the Court’s process for a collateral purpose and as a vehicle for oppression.
“In my opinion, an order requiring Slea to sell its shares to Millsave and Mr Haron would effectively reward Mr Lees and Mr Haron for their wrongful conduct,” Robson concluded.
Shea and Tsialtas have an agreement to sell his shares to Liberty Financial in the event he owns more than one third of the shares in Connective.
Liberty is Tsialtas’ current employer and Liberty afforded extensive support to their ally in the litigation.
The judge ordered that Slea have the option of purchasing the majority’s shares in Connective at their current value, to be agreed; and, in default of agreement, at the price determined by the Court.