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Judgement released in Connective shareholder court case

by Annie Kane5 minute read

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The Supreme Court of Victoria has ruled on the Connective shareholder dispute, outlining it will order the group to undo its share of sales to Macquarie, among a suite of other orders.

After several court cases and a recent 52-day trial, the Slea Pty Ltd v Connective Services Pty Ltd (No 9) case came to a head-on on Tuesday (22 March), after the Supreme Court of Victoria gave its judgement in the major aggregator’s court case. 

The protracted case was brought by minority shareholder Slea Pty Ltd (Slea) – of which Sofianos (Sof) Tsialtas (a former Connective director and now a Liberty Financial Group national sales manager) is sole director. 

The relevant events cover the period from 2001 to 2020 and largely focus on allegations that Mr Tsialtas – a 33.3 per cent shareholder in the aggregation group – was left in the dark about material matters relating to the sale of the aggregation group and was subject to conduct designed to remove him as a shareholder. 


The dispute began in earnest in 2008, when the minority shareholder agreed to leave his management role in the business due to a workplace incident, and subsequently joined Liberty Financial as an employee. 

Liberty features significantly in this case, and assisted the minority shareholder with this litigation – which the court document revealed was on the basis that it could then acquire the remaining two-thirds interest in the Connective companies if he was successful. 

At its heart, the case challenged how the aggregation group Connective Connective Services Pty Ltd (Services) and Connective OSN Pty Ltd (OSN) was restructured and sold, and the behaviour of its directors in doing so. 

The majority of the case looks at the restructuring of the Connective companies in 2011 and the sale of a 25 per cent interest to Macquarie in 2013 for $5 million, allegedly unbeknown to Mr Tsialtas. The case also put forward that the 'starving out' of Mr Tsialtas had resulted in him experiencing financial hardship.

In his 453-page judgement – which has taken nearly two years to be reached – Judge Robson found in favour of Mr Tsialtas, outlining that he believed the company and the directors had been “oppressive to, unfairly prejudicial to, and unfairly discriminatory” against the minority shareholder, and had breached their duties as directors in carrying out the restructure and sale. 

The judge also found that Macquarie should also be held liable as a knowing participant for any damage or loss flowing from the breaches. 

While final orders and costs are expected to be released next month, Judge Robson laid out his intentions of what he expects to order – including, notably the undoing of the $5 million Macquarie sale. 

Among a range of intentions, the judge said he proposes to make orders to:

  • give Slea the option of selling its shares in Services and OSN to the directors at their fair value or, alternatively, that Slea has the option to buy the shares in Services and OSN held the directors at their fair value (to be agreed or determined by the court if not agreement is met); 
  • undo the sale of shares in Connective Group to Macquarie (with the object that the Connective business will be restored to Services and OSN, in which Slea holds a 33.3 per cent interest);
  • for the Connective Group to reimburse Macquarie for the purchase price of those shares;
  • for Macquarie to refund the group the dividends received from Connective, with interest. 

The judge also proposes making orders for the directors to repay moneys received from Connective and OSN upon the sale to Macquarie and to reimburse the Connective companies for all costs and expenses incurred by them in relation to the restructure and sale to Macquarie and all costs and expenses incurred in setting aside the restructure and sale. 

The court also outlined that the plaintiff should have his costs reimbursed, among of range of other orders yet to be finalised. 

In a statement provided to The Adviser, Connective said: “Over the last 10 years, Connective’s majority shareholders and directors have been involved in protracted and complex litigation with a minority shareholder who has not been involved in the business for over 13 years. While attempts were made to resolve the dispute at various times, ultimately, they were not successful. 

“While we respect the court’s process, we do not agree with many of the findings and will be appealing the decision. 

“The litigation continues to be a dispute between shareholders and has no impact on the operations or continued success of Connective and our brokers.  

“Over the last 10 years Connective has grown to be the largest aggregator in Australia, with a membership of over 4,000 brokers who last year wrote over $85 billion in loans.  

“Our focus remains on growth.” 

Liberty Financial had not issued a statement at the time of writing. 

The shareholder dispute has had far-reaching effects in the aggregation space, and the delays in reaching a conclusion are believed to have contributed to the halting of the AFG-Connective merger. 

More to come.

[Related: AFG-Connective merger unlikely to complete]

Judgement released in Connective shareholder court case
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Annie Kane

Annie Kane


Annie Kane is the editor of The Adviser and Mortgage Business.


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