In a David and Goliath court case, the small firm Vasco Investment Managers has won a $1.03 million payment from the giant Morgan Stanley over the advice given in the recapitalisation of the former Orchard Capital Investments.
In his judgment, Justice Peter Vickery in the Supreme Court of Victoria, found that Morgan Stanley used the services of Vasco in the turnaround of Orchard, which managed seven unlisted funds that had been frozen since the global financial crisis, but did not pay for them.
The judgment says that Morgan Stanley, through the then head of its real estate division, Anthony Kingsley, made numerous requests to Vasco staff for information, assistance, advice, calculations and drafting of documents, including the drafting of an expression of interest letter, the final form of which Morgan Stanley ultimately sent to Orchard.
"There were the numerous requests made by Morgan Stanley for further work to be done by Vasco to refine its proposal and present the product to Morgan Stanley, not only for its consideration, but also for use by it, including for example, the preparation of the draft expression of interest," Justice Vickery's judgment says.
"These assurances give rise to the inference that Morgan Stanley itself regarded the services being provided by Vasco as being of value to it, and were not regarded as merely a gratuitous pitch towards a formal contract.
"I do not accept that the market value of the services provided by Vasco to Morgan Stanley was zero."
Vasco, run now by Craig Dunstan, first lodged a writ to sue Morgan Stanley in January 2013, saying that it came to Morgan Stanley in April 2011 with a plan to acquire and turnaround Orchard Capital Investments.
That included working on the refinancing of Orchard with Morgan Stanley and share in the returns when the business was once again operating in full capacity.
But in a twist, Morgan Stanley bought the Orchard business, which has now been rebranded as Arena Funds Management, and was given a $200 million lifeline from Morgan Stanley.
Arena is now paying distributions and operating as a real estate investment trust.
Mr Dunstan said on Wednesday his group was pleased to have worked on the deal and was pleased with the outcome of the court action.
