NZX-listed Enprise Group told investors its Kilimanjaro Consulting subsidiary had been granted an interlocutory injunction against MYOB.
At a hearing on 4 August, Kilimanjaro was granted the injunction after MYOB entered the NZ market directly, damaging margins at Enprise's Kilimanjaro Consulting business.
Kilimanjaro supports the largest MYOB Exo customer base in Australia or New Zealand.
Last August, Enprise Group advised shareholders that MYOB had "purported" to reduce margins on its MYOB EXO services.
Enprise's board rejected MYOB's assertion that it was able to unilaterally alter these and initiated a dispute process.
Now, an Australian Federal Court has restrained MYOB from taking any action for breach of contract against Kilimanjaro under its business partner agreement.
MYOB is also restrained from withholding licence codes for the use of MYOB Exo by any Kilimanjaro end user customer by reason only of Kilimanjaro retaining its annual licence fee margin.
"The practical effect of these orders is that [Kilimanjaro] can retain and utilise the MYOB Exo margin as documented in the 2018 business partner agreement until such time as these proceedings are finally resolved, which in turn means that Kilimanjaro has no need to change its current business model or take any steps to try and absorb or counter MYOB's reduction in the MYOB Exo margin as detailed in the announcement dated 1 August 2022, which had quantified the purported reduction in margin at approximately $935,000 per annum," Enprise CEO Elliot Cooper told shareholders today.
The orders apply only in Australia and not New Zealand. However, Kilimanjaro had sought undertakings from MYOB that would have the same practical effect in relation to its New Zealand entity.
"If these undertakings are not given, Kilimanjaro Consulting will apply to join the proceedings and seek the same orders as those made by the Court in favour of [Kilimanjaro Australia]," Cooper told shareholders.
Kim Clarke, MYOB GM enterprise and practice told Reseller News despite the ligation, Kilimanjaro Consulting remained an important partner of MYOB and MYOB would continue to explore options to expedite a resolution.
“The granting of the injunction by Justice Jackman puts in place an interim arrangement pending the outcome of the trial," Clarke said.
"It does not mean that Kilimanjaro’s case is compelling. We remain confident in our position and that judgment will be delivered in our favour once there has been a full hearing of all the evidence.”
Cooper said the case highlighted there were serious questions to answer about whether the business partner agreement fell under the ambit of the franchising code and whether MYOB had unconstrained power to alter the terms of the agreement.
"The case also will focus on MYOB’s statutory duties of good faith and unconscionability," he said.
The judge accepted that Kilimanjaro Australia’s case was serious and arguable, and a full trial is expected to be held in April 2024.
"The injunction provides Kilimanjaro with an extended window in which to transition from an Exo-centric business, and to continue to develop other revenue streams to contribute meaningfully to the profitability of the business," Cooper said.
"The court action emphasises that Kilimanjaro has done its level best to keep a client focused business model in place, including providing its customers the choice to move to the cloud as and when they choose."