JPMORGAN appears likely to dispute a ruling by the New South Wales Supreme Court that declared the investment bank's $50.8 million bill for its work advising Consolidated Minerals through a takeover was $30 million higher than it should have been.
The court yesterday told JPMorgan it must be satisfied with the $20 million cheque Consolidated paid shortly after it was taken over by Ukrainian group Palmary Enterprises for $1.36 billion in January 2008.
JPMorgan acted as advisers to Consolidated for 18 months in the lead-up to the takeover, then billed the mining house for a $10 million base fee, $36 million in incentive fees plus GST and almost $100,000 in expenses, including $6.32 for a Big Mac.
Justice David Hammerschlag said JPMorgan's incentive fees should have been $9.5 million.
He agreed with Consolidated that the fees should be based on the difference between Palmary's initial offer of $3.95, and it's final offer of $5.
JPMorgan had calculated the fee on an earlier offer from another bidder, Pallinghurst, of $2.08.
Yesterday the corporate advisory firm issued a statement saying: ''We believe there are strong grounds for appeal and we are currently assessing our response in that regard.''
Justice Hammerschlag found JPMorgan's interpretation of its contract ''would result in an outcome which would be capricious, unreasonable and unjust''.
JPMorgan also claimed it could charge multiple base defence fees for various offers.
But Justice Hammerschlag said it had not defended offers from rivals Pallinghurst and Territory, but watched as the Consolidated Minerals price swelled during a bidding war, partially caused by what one analyst described as a ''massive spike'' in the price of Consolidated's key product, manganese.
In August 2007, the Consolidated board recommended in favour of a Pallinghurst offer.
''From then on, it can hardly be said that the defendant was defending itself against Pallinghurst, when all that occurred was that a bidding war ensued, ensuring that the price being offered continued to burgeon,'' Justice Hammerschlag said.
Consolidated's president, Gennadiy Bogolyubov, issued a statement saying the court's decision was a win for all shareholders ''who should not be subject to the excessive contractual terms of investment banks''.
It also provided certainty for Consolidated Minerals, he said.
Consolidated argued in court that the $20 million cheque it sent in response to the $50 million bill was accepted by JPMorgan as a final settlement of payment the moment JPMorgan banked the cheque.
Justice Hammerschlag said this was not the case, and banking the cheque could not be seen as acceptance of a final payment offer.
But in any case, the $20 million had fully discharged any liability of Consolidated to JPMorgan.
Justice Hammerschlag is yet to rule on costs.
Consolidated withdrew an earlier cross-claim against JPMorgan and did not dispute payment for the Big Mac.
