Boys, their toys and the courts

The rise of young coal baron Nathan Tinkler is one of the more remarkable stories I’ve seen in my time covering rich lists.

In less than five years Tinkler has turned a $1 million punt on an old coal deposit into a fortune climbing rapidly towards $1 billion. He now owns a football club, a soccer club, a horse racing empire and countless private assets, in addition to his large stake in budding coal miner Aston Resources.

But Tinkler’s willingness to invest in passion assets – that is, cool stuff that rich guys love – has not been a total success, as a NSW Supreme Court judgement revealed yesterday.

In late 2008 and early 2009, Tinkler invested $2 million in the Supercar Club, a organisation that allowed wealthy people to use a variety of luxury vehicles in return for $50,000 a year in membership fees.

Tinkler rapidly became chairman of the club, working alongside founder and chief executive, Tim Sommers.

But by 2009 – with the GFC raging and high-end purchases suddenly on the nose – the pair were fighting.

Tinkler claimed he had been “induced” to invest by Sommers’ exaggerated claims about the profitability of the club.

Sommers claimed Tinkler had failed to follow through on several promises, including the promise to provide the club with $1 million in working capital and introduce 40 new members.

The club later collapsed and the ugly mess ended up in court, with Tinkler claiming Sommers had misappropriated $458,820.60 from the club and Sommers claiming he was owed money from an agreement to sell his shares.

The 115-page judgement handed down by Justice Richard White yesterday ended two-years of bitter litigation. But on reading the judgement, it’s a little hard to decide exactly who won.

Both Tinkler and Sommers were found to have engaged in “oppressive conduct”, but White found that “while Mr Sommers engaged in misleading and deceptive conduct in one of the respects alleged [by Tinkler Group] that conduct is not shown to have induced Tinkler Group to make its investment”.

White found that while Sommers did not misappropriate funds from the car club, he is liable for the transfer of two luxury Audi vehicles to his personal possession.

Sommers was found to be liable to pay $150,000 plus interest over the two cars.

But the Supercar Club – which was subsequently wound up by White – was ordered to pay Sommers $218,500 plus interest over the agreement it made to purchase his shares.

Tinkler was given just $10 in damages by White for a minor breach of contact.

But White had some criticism for Tinkler as well, saying Sommers had legitimate concerns about Tinkler’s “autocratic management style” and his decision to buy a $740,000 Rolls Royce without prior approval from the board.

“Mr Sommers was also concerned that Mr Tinkler did not introduce another 40 members to the Club, which Mr Tinkler had told Mr Sommers he could do,” White said.

Tinkler is claiming victory in this battle and has promised to pursue Sommers for the $150,000 the Court found him liable for.

If it is a victory, it’s a hollow one. Tinkler might have gone into the Supercar Club hoping to combine business and pleasure, but it was a poor decision and one that has cost him a lot of money in both lost capital and lawyer fees.

And there could be more pain to come – Sommers is writing a book about the case, which apparently contains explosive allegations about Tinkler. The coal baron has taken legal action over the book’s publication.

It’s interesting to note that in Tinkler’s latest passion plays – the Newcastle Jets soccer club and more recently the Newcastle Knights football club – he is the sole shareholder. At least this time he won’t get lumped with a problematic business partner.