Perpetual, the Sydney fund manager, is facing a multi-million dollar costs bill after losing its long running court case to try and break apart the Washington H. Soul Pattinson and Brickworks cross shareholdings that is the core business of the multi-millionaire Milner family.
Soul Patts and Brickworks were awarded costs in the Federal Court yesterday after it dismissed Perpetual’s long-running legal bid to prove the conglomerate’s cross-owned structure lost value and behaved oppressively.
In rejecting Perpetual’s decade-long claim that Millner family companies Washington H. Soul Pattinson and Brickworks engaged in oppressive conduct and reduced value for shareholders, through a cross-shareholding structure, Justice Jayne Jagot found that "reasonable directors" would not consider the cross-shareholding to be "unfair or oppressive".
“Accordingly, Perpetual’s claim must be rejected,” Justice Jagot wrote in her judgment, released on Monday, and Perpetual was ordered to pay costs.
The full judgement will be released tomorrow. Perpetual could always appeal the decision. Shares in the three companies hardly moved after the judgement was released. Perpetual shares rose 0.9% to $54.38, Soul Patts shares eased 0.06% to $1697while Brickworks shares rose 0.7% to $13.49.
Soul Patts CEO Todd Barlow described as ‘just absurd’ Perpetual’s criticism of the 40 years of Soul Pattinson and Brickworks cross-shareholding. Perpetual owns 6.3% of Soul Patts.
Soul Pattinson owns 44% of Brickworks and Brickworks owns 42.7% of Soul Patts, with members of the level of control Sydney’s Millner family a big part of Perpetual’s claim that this cross-shareholding structure entrenched control in the hands of the respective boards and billionaire chairman Rob Millner.
Having several director board nominees for Brickworks rejected, Perpetual had argued that the Millner family enjoyed both undue influence and control over both companies.
But Mr Barlow rejected this saying both Soul Pattinson and Brickworks had very strong and independent boards that worked hard for stakeholders and acted in the best interest of all shareholders.
Mr Millner added that the boards of the two companies had always "done the right thing" in terms of protecting all shareholders from fallout from the legal tussle and guaranteeing success.
“We’ve always taken the high ground over a very long period, concentrating instead on looking after shareholders and their interests,” Mr Millner said in a statement.
In giving her reasons for her judgment, Justice Jagot noted that while Perpetual remained in a strong financial position in relation to its stake in Brickworks, a beneficiary of the current strength of both companies, it had remained isolated among shareholders in its claim.
"Perpetual has been selling its shares in both companies and cannot suggest it is unable to continue to do so given the recent increases in share prices for both companies; there is no evidence that any shareholder in either company other than Perpetual wishes orders to be made to the effect Perpetual seeks," Justice Jagot wrote.
The only question now is how much Perpetual will have to pay in legal costs for a claim that was many years in the making. Both Messrs Barlow and Millner made it clear yesterday that someone would pay – that presumably is Perpetual.