Connective shareholders to appeal court ruling

Judgment entitled Slea to purchase majority shares

Connective shareholders to appeal court ruling

Connective majority shareholders have confirmed an appeal has been lodged in a bid to overturn a court ruling enabling Slea Pty Limited to buy majority shares in the company.

A 13-year conflict between Slea Pty Limited (‘Slea’), of which Sofianos Tsialtas is key principal, and Connective Services Pty Ltd (‘Connective’), resulted in a 453-page judgement handed down by Justice Ross Robson in the Supreme Court of Victoria on 28 March 2022.

The court ruled that Slea, a founder and one-third minority shareholder of Connective, was entitled to purchase majority shares in the company. 

Read more:  Court rules Tsialtas can buy Connective shares

Connective shareholders have now confirmed they wish to overturn the ruling.

In a written statement provided to MPA, Connective said the litigation and now the appeal continued to revolve around a dispute between Connective shareholders.

“Connective is not involved in any appeal.  This action was taken by the majority shareholders,” a Connective spokesperson said.

“The appeal has no impact on the operations or continued success of Connective and our brokers.”

At the centre of the dispute are events occurring during and after Tsialtas’ alleged forced resignation as director of the Connective companies in May 2008. 

The key parties involved in the case are Glenn Lees, Connective executive director and CEO (Millsave Pty Ltd), Mark Haron, (executive director Connective Services Pty Ltd and OSN) and Graham Maloney, independent non-executive director and chairman, appointed as director and chairman of the boards of Connective companies in 2011.

Tsialtas, together with Glen Lees and Murray Lees, founded Connective, now a leading broker aggregator, in 2003. 

In his judgment, Justice Robson outlined that Tsialtas’ resignation stemmed from a complaint made by an employee in relation to conduct whilst travelling to South Australia on business.  Tsialtas denied the allegations.

The judgment stated that in 2011, as a result of a restructure of the Connective business, the business was transferred from Connective Services and OSN, to a number of subsidiaries known as the Connective Group (‘Group’), without Slea’s knowledge or consent.

Group, and five of its subsidiaries, were defendants in the oppression proceeding and derivative proceeding. 

According to the court document, Slea was unaware that following the restructure, a 25% share in the Group, and therefore the business, was sold to Macquarie. The restructure and sale formed a critical part of the alleged oppressive conduct of the derivative claim.

Slea alleges that Lees and Haron led Tsialtas to believe they were agreeable to selling Slea’s shares in Services and OSN to an outside investor.

The judge said as directors of Services and OSN, Lees, Haron and Maloney were found to have breached their duties as directors in giving effect to the sale process.

In the oppression proceeding, the defendants are the Connective companies, Millsave, Haron and Connective subsidiaries. In the derivative case, Slea alleges that Lees, Haron and Graham Maloney (a director of services and OSN) breached their duties as directors and that Macquarie was a knowing participant in this breach.

Tsialtas is now national sales manager at Liberty. The court decision has raised the possibility that if Slea were to acquire the majority shares, the interest would be on-sold to Liberty.

Founded in 2003, Connective said it had a vision to give brokers a fairer deal by creating long-lasting, valuable partnerships and providing members with tools and services needed to achieve the best outcomes for customers.

Over the last 10 years, Connective has grown to be a leading aggregator in Australia, with 4,221 broker members.

During 2021, Connective said brokers lodged $110.06bn in residential home loan applications, and $74.9bn in total residential settlements. Across residential, commercial and asset finance, Connective brokers achieved total gross settlements of $85bn.

A company spokesperson said Connective’s focus “remains on growth”.

Connective confirmed Millsave and Haron, who held a two-thirds shareholding in the company, had lodged the appeal.

The court confirmed that three separate matters have now been filed as part of the appeal.  The first is Millsave Holdings Pty Ltd & Ors v. Connective Group Pty Ltd & Ors. The second is Millsave Holdings Pty Ltd & Ors v. Connective Services Pty Ltd & Ors.  A third matter is for Millsave Holdings Pty Ltd & Ors v. Slea Pty Ltd & Ors.

A hearing date has not yet been listed for any of these matters.