Sherman Ma’s backdoor Connective takeover fails; Painful outcome in Colonial class action

Liberty Financial Group founder Sherman Ma has failed in a 13-year court action.

For 13 years, the ruthlessly ambitious Sherman Ma, founder of Liberty Financial Group, has been pouring his vast wealth into a marathon court case against Australia’s largest aggregator, Connective, if only to try to take control of the business.

This, for anyone unsure about what that means, is all about home loans. Connective has cornered about 25 per cent of the aggregator market. It’s what your broker punches into their computer when you, dear reader, decide it’s time to upgrade to a seven-room mansion with a helipad but are only sporting lint to actually pay for it.

Ma’s plan was a novel one: he funded a minority shareholder’s lawsuit against Connective, in a deal that would ultimately give him two-thirds of the company when victory was achieved. No need for a soaring IQ to work out that Ma’s most likely next move would have been to use his stake in Connective to wrest control of the company. In short, a hostile takeover; this is what the guy does.

Had he actually succeeded, Ma would have created a powerhouse of aggregated financing, a realm that Liberty Financial already dabbles in but mainly as a minnow. A backdoor takeover of Connective would have launched Ma into the major leagues overnight. Call him a jerk, call him a scoundrel, but don’t bother trying to say it wasn’t clever.

Two years ago Ma won the first round in the Victorian Supreme Court with a 458-page judgment that took the retiring Ross Robson nearly 24 months to write.

Quinn Emanuel’s Beau Deleuil.

Connective appealed and won back the case in December last year, leaving Ma with a final roll of the dice in the High Court of Australia. It delivered a smackdown that landed with an almighty thud on Thursday, the court refusing leave to appeal (with costs, a final kick in the keister) and all of it a terribly bitter blow not just for Ma but also the Arnold Bloch Leibler lawyers who’ve lugged this case around from day one.

Presumably Liberty Financial won’t be rushing to put out a press release explaining this total humiliation to the market.

Others, of course, are glorying in the victory and vindication, namely Beau Deleuil of Quinn Emanuel, who’s been just as tethered to this case for the past six years and advised on large tracts of the appeal for majority stakeholders.

The greater consequence for Ma is that Connective will probably never again do business with his Liberty Financial Group.

Brokers using Connective will be showered with home loan deals from AFG, Lendi, Mortgage Choice … but Ma’s outfit might as well no longer exist on the platform.

If that sounds like a small price to pay compared with the actual cost of this 13-year gambit for control of Connective, consider the cumulative loss of potential business that Ma is facing. Now that, as they say, has gotta hoit.

Painful outcome

Meanwhile, further down the legal totem pole, a painful outcome in the four-year class action run by Slater and Gordon against Colonial First State – partly owned by Commonwealth Bank – on behalf of 84,000 ripped-off superannuation customers.

They collectively sued in the Federal Court over fees charged by Colonial for its FirstChoice Superannuation Trust between 2013 and 2020.

The fees, it was claimed, were not only excessive but funded generous commissions for financial advisers, who weren’t supposed to get fees for new customers in the first place (not from 2013 anyway, when government reforms were introduced).

On Monday, Justice Bernard Murphy approved the finer points of a settlement struck last year worth $100m.

An enormous downside of that deal is that $23.1m will now be set aside for London-based litigation funder Augusta, or about more than double what it invested in the case.

Slater and Gordon were awarded $4.1m for their troubles.

After lawyers and fees, $68m now remains to be distributed among the many customers who joined the proceedings.

They’ll get something like $800 each, which, according to the ABS, works out to be roughly two days’ pay against the average salary.