MPM Judge asks: What's the argument?

Mike Pero and the companies bearing his name are back in court this week – and it’s all due to disagreement over whether a $5 million dividend should be paid.

Wednesday, September 5th 2018, 10:43PM

by Miriam Bell

True to form, when this instalment of the long-running case kicked off Monday in the Auckland High Court it was with a dispute over what the hearing is actually supposed to encompass.

But Justice Ed Wylie, who is presiding over the latest round in the dispute between Pero and Mike Pero Mortgages (MPM), reined the combatants in.

He says the five day hearing is simply to determine if the parties are deadlocked over the issue of a dividend and whether the arbitration provisions of the shareholders’ agreement should be engaged.

Pero, who is CEO of Mike Pero Real Estate (MPRE), no longer has stakes in MPM, which is owned by the Australian-based Liberty Financial Group.

However, Pero and MPM are 50/50 partners in MPRE and, as such, remain intimately connected

Their dispute goes all the way back to 2014 when Pero passed directors’ resolutions that led to him being paid over $2 million more than he was entitled to from MPRE.

This kick-started the battle between the parties which has been wending its way through the courts ever since.

Pero’s actions were found to be improper by a court in 2016 and he was ordered to repay the debt to MPRE. While Pero has since paid the debt, he had to get a loan from the Chow brothers to do so.

Originally, Pero wanted to repay the debt via a dividend from MPRE, but MPM opposed it. Now, he wants a dividend pay-out to repay the Chow brothers and MPM are still not keen on the proposal.

It is the parties’ inability to agree on this dividend pay-out which is at the heart of the issue – but it also represents the state of their business relationship.

In his opening, Pero’s lawyer, Nicholas Till QC, told the court that there had been a complete loss of trust between Pero and MPM due to the disagreement over the dividend and governance issues.

He says MPM’s refusal to agree to a dividend policy and pay-out a dividend was a “deliberate ploy to manipulate Pero to sell his shares in MPRE at a loss”.

Further, he alleges that MPM’s directors – Sherman Ma and Mark Collins – made it difficult for Pero to communicate with them by not attending meetings or responding to messages.

Ma and Collins had also refused to go to mediation and would not discuss remuneration with Pero, Till says.

“There are third party partners [franchisees] in the company who have an interest in the company being properly run and not seeing those who run it engaging in public spats like this.”

The situation was not good for the reputation of the company, Till says. “My submission is that they have reached an impasse and they are all just going backwards and forwards.”

For that reason, the situation qualifies as a deadlock and the shareholders should proceed to dispute resolution.

However, MPM’s lawyer, Greg Blanchard QC, says the situation does not amount to a deadlock and does not require the shareholders to engage in dispute resolution. He will be arguing MPM’s case later this week.

Both Pero and Ma are expected to be cross-examined over the course of the hearing. They were both in attendance on the first day, as was John Chow.

Read more:

No adjournment for Mike Pero case

Mike Pero vs Mike Pero companies – the battle continues

Tags: disputes Liberty Mike Pero Mortgage Advisers