Published on the 10/08/2023 | Written by Heather Wright

Good faith and unconscionability in question…

Kilimanjaro Consulting could look to restructure its business if a suitable resolution to an ongoing dispute with MYOB isn’t found.

Elliot Cooper, chief executive of Kilimanjaro Consulting parent Enprise Group, says

Kilimanjaro, which claims to be have the largest installed base of MYOB Exo customers of any A/NZ partner, with 1,200 across Australia and New Zealand, was granted an injunction last week preventing MYOB from taking action for breach of contract or withholding software licenses.

“We will have to look at other vendors in term of the ERP they provide and consider options.”

At issue is MYOB’s decision to go direct, and a revised business partner agreement in mid-2022, which saw MYOB change the agreement requiring Kilimanjaro to pay 80 percent of the licence fees for the Exo ERP software, rather than the previous 65 percent.

While MYOB has a clause in its agreement allowing it to change terms of the agreement provided they give a set period of notice, Elliot Cooper, chief executive of parent Enprise Group, says the companies had a long standing agreement that MYOB wouldn’t go direct.

“The fact is we have 20 years of history dating back to when we split from Solution 6 which is how MYOB came to own Exonet in the first place back in 2002. They said they wouldn’t go direct, then they wrote to everyone and said they wouldn’t, which they have then reneged on.”

MYOB acquired rival accounting software company Solution 6 in 2004 for around AU$233 million, and in doing so gained Exonet, which eventually transformed into MYOB Exo.

The move to go direct followed the acquisition and delisting of MYOB by KKR, and a change in management.

Kilimanjaro relies on trailing revenue, using the annual licence fees to provide support for customers and handle bug testing and logging tickets and reporting back to MYOB on customers’ behalf.

“MYOB won’t accept a ticket or feature enhancement until we have tested it and documented it,” Cooper says.

In a statement to the NZX last year, Enprise said the retrospective 43 percent reduction of margins on existing sales of MYOB Exo software would cost around $935,000 a year for Kilimanjaro, significantly impacting the support services the company could deliver to Exo customers.

At least 30 of Kilimanjaro’s 110 staff are directly involved with MYOB Exo. The company also has a strong MYOB Advanced business, and did more than $2 million in MYOB sales last year, Cooper says.

“We’ve used up our reserves keeping everyone in place and managing this, because we thought it would be resolved by now, and we’re over a year down the track and it still isn’t resolved,” Cooper says.

“We need it reinstated or we will have no choice but to restructure the business, which will mean customer service will drop for MYOB Exo customers.”

Cooper told iStart customers could be asked to pay for support, or have to wait longer for fixes.

“If we don’t get a suitable resolution with MYOB then we will have to look at other vendors in term of the ERP they provide and consider options,” he says.

Those options won’t, however, include dropping MYOB.

“We think Exo has quite a long life yet as well, and those customers have been loyal to us – some of them for over 20 years. I’m not going to walk away from them by any means. We wouldn’t do that to them, unless we’re forced into it.”

The companies are still in negotiations. MYOB presented an offer before the injunction was granted, with Kilimanjaro countering with their own offer, which was rejected by MYOB. That prompted Kilimanjaro’s application for the injunction.

The injunction only applies in Australia. Kilimanjaro has sought undertakings from MYOB that it will have the same practical effect in relation to New Zealand.

Cooper says MYOB has been given until close of business tomorrow, Friday 10 August, to respond or Kilimanjaro will seek leave in the courts to have the New Zealand entity added to the case.

Justice Jackman, who made the injunction orders, noted that while he couldn’t describe Kilimanjaro’s case on the present evidence as compelling, it was sufficient to meet the relatively low threshold for interlocutory injunctions ‘demonstrating a serious question to be tried involving concepts of good faith and unconscionabilty’.

Following the decision, MYOB said Kilimanjaro remained an important partner.

Cooper too, is hoping the two companies remain strong partners.

“We still want to work with them, we just want to have it on commercial terms that make sense and that don’t undermine the hard work that has happened over the last 20-odd years.

“We are doing this to protect ourselves so that we can keep delivering the exceptional customer service Kilimanjaro is renowned for to those Exo customers. And that we expect contracts and representations that have been made historically to be honoured,” he says.

“This is not in anybody’s interest fighting stuff in court.

“The only people who win are lawyers, so we would like to come up with a sensible arrangement so we can all move on and keep driving the business forward and providing the customer service and software that’s needed by Australian and New Zealand businesses to let them operate efficiently.”

If an agreement can’t be found between MYOB and Kilimanjaro the parties will be heading back to court, with the full trial expected to be held in April 2024.