Liberals fall short in bid for control of $70 million war chest
Victorian Liberal president Michael Kroger wants the directors of the party's main benefactor to resign and give back control of a $70 million fund after the Federal Court ruled the party was entitled to a quarter of the donor’s shares.
The move risks deepening the conflict between the Liberal Party and the Cormack Foundation just months before the state election.
"It is now our proposal to write to the Cormack directors asking them to acknowledge the decision of the court and resign as directors and shareholders," he said.
The Cormack Foundation described the decision as a "Pyrrhic victory, if a victory at all" that had no practical impact.
It said the court had confirmed the foundation's independence and the litigation should have been avoided in the first place.
“It remains entirely for the [Cormack] board to determine the timing and quantum of any donations and to conduct all of its other activities," the foundation said in a statement.
Mr Kroger said "further options would need to be examined" if the Cormack directors did not return control of the fund to the Liberal Party.
The Victorian Liberal Party had a partial win in its legal battle against its Cormack Foundation funding arm, but failed to gain the full control it wanted over the $70 million investment fund.
The party will get 25 per cent of the shares in the foundation after Federal Court Judge Jonathan Beach handed down his decision on Thursday, but the party did not gain control of the money it needs to fight this year's state election.
Justice Beach ruled that when the Cormack Foundation was established in the 1980s, two of its three shareholders held their shares in trust for the Liberal Party.
However the number of shareholders has since grown to eight, giving the Liberal Party ownership of just a quarter of the foundation's shares.
Mr Kroger said the ruling showed the majority of Cormack's shares were owned by the Liberal Party when the foundation was set up, which should be reflected in its current structure.
Mr Kroger launched the litigation after the foundation's directors witheld funding in a dispute over financial governance. He argued that Cormack was founded solely to support the Liberal Party and that the party should have full control of its millions.
The Cormack Foundation provided crucial funding to the Liberal Party until relations deteriorated in 2016 after the foundation gave donations to the election campaigns of Family First and the Liberal Democrats.
The foundation was established in 1988 to manage and invest $15 million generated from the sale of a broadcast licence for radio station 3XY. The licence was originally issued to the United Australia Party, which later joined the Liberal Party.
The foundation initially had three shareholder directors – John Calvert-Jones, Hugh Morgan and Stanley Guilfoyle.
A central plank in Mr Kroger’s legal argument was that Mr Calvert-Jones and Mr Morgan had held their shares in trust for the Liberal Party.
Hugh Morgan and Calvert-Jones resigned as directors in June last year. Cormack currently has eight shareholders.
The Liberals had also argued in court that the Cormack Foundation held its assets in trust for the party.
Mr Kroger's controversial decision to challenge the Cormack Foundation in court angered many party members who were concerned by the adversarial tactics and reputational damage generated by the public legal action.
Mr Kroger promised to spend $1 million of his own money to cover the legal costs of the court proceedings.
He was elected president in 2015 following a stint in the top role from 1987 to 1992.