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Kilimanjaro wins temporary reprieve on MYOB Exo margins

Regulation

Federal Court grants injunctions preventing software developer from withholding licences or pursuing the reseller for breach of contract.

By Philip King 10 minute read

Kilimanjaro Consulting has been granted injunctions that prevent MYOB from pursuing a reduced margin on its software until the outcome of a court case between the two.

The Federal Court ruling last week restrains MYOB from acting for breach of contract or withholding software licences if Kilimanjaro pays MYOB 65 per cent of the licence fee instead of the 80 per cent it wants under a revised business partner agreement dating from mid-2022.

The dispute involves MYOB’s Exo enterprise resource planning software, which has been sold by Kilimanjaro since 2006, and its Advanced cloud-based version which became available in 2014.

The two entered a business partnership agreement in 2018 and Kilimanjaro claims to have built up the largest installed base of Exo customers among MYOB resellers, accounting for at least 25 per cent of the total in Australian and New Zealand. It says more than half of its 114 staff are engaged in work on the product.

In May 2021 MYOB revised the arrangement as part of dual channel distribution strategy, reducing the Exo licence fee margin from 35 per cent to 20 per cent. Kilimanjaro claims the reduction in the Exo licence fee margin is arbitrary or capricious while MYOB claims the agreement between the two allows for the variation.

Justice Jackman said there was a serious question to be tried.

“While I would not describe Kilimanjaro Consulting’s case on the present evidence as compelling, it is a case which is sufficient, in my view, to meet the relatively low threshold for interlocutory injunctions of demonstrating a serious question to be tried involving concepts of good faith and unconscionability.”

Justice Jackman denied an injunction that would have prevented MYOB issuing invoices to Kilimanjaro on “any basis other than a 35 per cent annual licence fee margin” because it would require MYOB “to issue invoices on a basis which it bona fide believes to be erroneous”.

In a “finely balanced” decision he granted revised versions of the two other orders sought by Kilimanjaro restraining MYOB from taking any action for breach of contract under the 2018 business partner agreement, where it receives only 65 per cent of the annual licence fee or from withholding licence codes for Exo.

In the wake of the decision, MYOB general manager of enterprise and practice Kim Clarke said Kilimanjaro Consulting remained “an important partner”.

“We’ll continue to explore options to expedite resolution of this matter,” she said.

“The granting of the injunction by Justice Jackman puts in place an interim arrangement pending the outcome of the trial. 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.”

Kilimanjaro Consulting was contacted for comment.

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Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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