by Jenny Ruth
Last year, Master James Thomson of the High Court agreed with the objectors’ argument that it appeared that the management company, Waltus Investments which is owned by the Hodge family, would pocket $2.95 million in pre-paid management fees if the $227 million merger proceeded.
Given Waltus’ explanations delivered at a hearing in June, "I am satisfied that there is no double payment involved in the way first thought," Master Thomson says in his judgement this week.
Last year, he said the matter had caused him "real concern" and that "I think the objectors criticisms on this issue are well made."
The Master’s view has changed radically. "It has to be said that it was somewhat of an opportunist submission made late in the original hearing," he says in his latest judgement.
At the time each syndicate was formed, investors paid a 3% management fee to cover 10-years worth of management. The objectors argued that because some syndicates haven’t existed for 10 years yet, their investors shouldn’t be charged fees twice. The amounts range from zero for some syndicates to $663,982. A new fee structure started from the date of the merger.
Waltus successfully argued that investors were compensated through a variety of measures, including specific fee reductions and the cancellation of promoter’s shares in the syndicates, which had a total value of $2.58 million. That and other concessions were worth more to the investors than the prepaid fees, it claimed.
In any case, the prepaid fees were non-refundable and were written off in the year they were received and so weren’t an asset in the books of each syndicate.
On the matter of costs, Master Thomson says the merger process was structured in a way which allowed any objectors the right to be heard in court.
The fact that they were "greatly assisted the Master in making his decision by testing the integrity of the arrangement," he says.
"Further, I do not think, given the massive task this exercise was for all involved, that the quantum of costs claimed by the objectors is unreasonable and they are ordered to be paid."
Waltus director Shayne Hodge says the decision "vindicates the integrity of Waltus."
The merged syndicates have since been renamed
Urbus Properties.
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