Powerhouse is back in court as advisor claims they’ve not paid up on a takeover fee
Struggling Kiwi venture capitalist Powerhouse Ventures (ASX:PVL) is back in court — but this time in Australia over a deal done in New Zealand and the US.
Shape Capital is chasing Powerhouse for a $US300,000 success fee for helping sell off the main asset at mobile marketing startup Motim Technologies, and alleging a breach of contract.
Powerhouse said in a statement on Thursday evening it disputes a success fee is payable and claimed the contractual conditions for a success fee hadn’t been satisfied.
It wanted the issue to be determined by an independent expert, but the Victorian County Court denied Powerhouse a stay in proceedings and ordered the company to pay Shape’s court costs.
Earlier in 2018, Powerhouse won an injunction from the High Court of New Zealand to prevent the founders of its SolarBright solar lighting investment from selling the company’s intellectual property.
Powerhouse alleged the couple sought to transfer transfer intellectual property out of the company before they resigned.
Powerhouse engaged Shape, led by local businessman Anooshirvan Manzoori, in August 2017 to help sell Motim Technologies. The deal completed in May last year but not without controversy in the lead-up.
Motim NZ’s main asset was sold to Motim USA, set up by Boston-based Crosstech Partners, for $US5m. Shape then issued its invoice for $US300,000.
But Powerhouse argued that part of the sale was non-cash — Motim USA took on some liabilities, gave Motim NZ a 30 per cent stake and a right to future revenue — and the dollar value of this wasn’t agreed at the May meeting approving the deal.
Powerhouse alleges the dispute is about the size of the fee, and wanted the issue decided by an independent expert.
Shape, on the other hand, says otherwise.
“On Shape’s case, it was said that the parties did agree the market value of the sale consideration as a whole was US$5 million and therefore, it is not now permissible to seek an expert valuation,” the ruling read.
“It was not until more than 14 days after settlement on 20 August 2018 that Powerhouse asserted the valuation of the consideration was less than US$5 million… It was noted the independent expert process is only triggered upon the failure to agree within 14 days after financial close.
“Powerhouse seeks to hold Shape out of its own income on all fronts because it contends that one aspect must be expertly determined.”
It also noted Powerhouse’s “precarious financial position” as a reason to settle the issue quickly, in that the venture capitalist had $NZ827,000 in the bank as at the end of December yet planned to spend $NZ2.9m in the current quarter.
Judge A Ryan said the issue was likely to end up back in court anyway, due to contractual issues raised, so to save time and money the courts could deal with the whole claim rather than involving an independent expert.