Flat White

Will the Cormack-Liberal jaw-jaw lead to more war-war?

14 June 2018

7:15 PM

14 June 2018

7:15 PM

At the moment I’m re-reading AJP Taylor’s classic The Origins of the Second World War. In his uniquely lucid and forensic style, Taylor highlighted how the Allies effectively caused the Second World War in how they ended the first. Instead of being the harbinger of peace, the Treaty of Versailles became the harbinger of a far greater and more destructive global conflict.

So it appears with the Federal Court’s judgment, delivered by Mr Justice Beach, ruling on the bitter dispute between the Victorian leadership of the Liberal party and its biggest source of donor funds, the independently-controlled Cormack Foundation.

The Australian reports that ‘the Victorian Liberal Party has secured a critical win’ in Mr Justice Beach’s ruling that the party is entitled to the shares in Cormack currently held by former Liberal stalwarts John Calvert-Jones and Hugh Morgan, and that these shares should be returned to party nominees. Yet the learned judge with a Lord Denning eye for storytelling also found that, due to the convoluted history of the Liberal-Cormack association, this does not entitle the Liberal leadership to appoint their own nominees to the Cormack board.

To this lay observer, the Beach decision is a judicially-confirmed stalemate. To Liberal state president Michael Kroger, however, it is a clear win. Outside the court, Kroger claimed vindication of his dogged and costly Javert-like pursuit of Cormack, saying, ‘The court has held today that when Cormack was set up in 1988, the Liberal party was the owner of the foundation, and it held we owned 66 per cent of the 99 shares. And so we’re now proposing to write to the Cormack directors to ask them to resign as directors and shareholders and hand control back to us’.

But why should they? The party now has a large Cormack stake confirmed by the Federal Court, and presumably a right of guaranteed access to the Cormack kitty to go with it, but according to Mr Justice Beach no right to appoint directors. Despite Kroger’s bullish rhetoric, the Cormack entity appears to remain independent and firmly out of his reach.

Beyond its legal mumbo-jumbo and hoary precedents, like the Treaty of Versailles the Beach judgment, unfortunately, solves nothing in the real world. Sticking to the legal questions before him, Mr Justice Beach does not address the root cause of this costly and regrettable stoush: the Cormack board’s concern about the quality of internal party governance. Former state director Damien Mantach’s $1.5 million fraud highlighted to it, corporate donors and party supporters that they could not donate in absolute confidence that their investments are properly protected and accounted for. And not just donors: the same applies to the whopping dollops of public funding for election campaigns. The fraud having occurred on his predecessor’s watch, Kroger’s swift and decisive response on assuming the presidency deserves praise, but the remedial actions instituted under him have not, for many, gone far enough to give that absolute confidence.

In claiming complete vindication, therefore, the Liberal Victoria organisational leadership continues to avoid the reality that an organisation that receives and holds in trust many millions of dollars, let alone valuable assets like Melbourne’s Exhibition Street headquarters, needs and deserves governance structures and accountability on the lines of a public company, not a church cake stall.

The Mantach fraud should have told the party leadership before and during Kroger’s presidency that it needed more than Band-Aid governance reform. The Cormack board, with its Melbourne movers and shakers, effectively gave Kroger and his committee its constructive two bob’s worth about how that should be done. In the corporate world, if a chief investor asked a company to reform itself to give comfort to that investor, its leadership would ask how high should it jump to keep the cash flowing. It’s not about ending the party’s institutional autonomy; it’s about donors doing their fiduciary duty by protecting an investment.

Notwithstanding this, any donor, from mighty corporations to aged pensioners, deserves to be assured by the Liberal party that their donations – and they – are treated with respect. They are equally entitled to say in how they want their money to be used, while not assuming control over the party’s affairs.

In a practical sense, this judgment appears inconclusive and unhelpful. To the likely dismay of many disaffected Liberals, its terms invite an appeal from one or both parties, presaging yet another lawyer’s picnic and more Machiavellian power games. In the interests of Liberal members and supporters generally, and to get some funding certainty to the party with state and federal elections just months away, Michael Kroger and the Marcus Bastiaan-led faction dominating the state party’s Administrative Committee should cut everyone’s losses and broker a negotiated peace with Cormack rather than fight another protracted legal campaign. They should resolve this avoidable mess as common sense has suggested all along: by the Victorian Liberals professionalising their management and financial governance and accountability. In return, Cormack should release millions of locked-up dollars to the party to ensure that Bill Shorten and premier Daniel Andrews aren’t the real beneficiaries of this very unfriendly friendly fire.

Indeed, that is the hint to the wise from deciphering the tangled complexities of Mr Justice Beach’s curate’s egg. But doing so would require a willingness to compromise gracefully to look for a win-win solution, a quality in short supply in the making of the Treaty of Versailles, and in equally short supply in this costly, divisive but avoidable legal battle.

Illustration: Wikimedia Commons.

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