‘Matariki Codex’ software investors are owed $3.2 million by Advanced
Creative Technologies the High Court ruled when ordering repayment of
investors’ decade old investment of $210,000 plus interest at thirty per cent.
Commercialisation
of Creative Technologies’ Matariki Codex software has been talked up since the
turn of the century as being imminent but has never come to fruition. Described in the High Court as a mathematical
and scientific discovery with potential use for DNA data sequencing, the Codex
has proved a loss-making venture for investors.
They formed a special purpose company, D4 Cash Investors, banding
together to force repayment and drive Creative Technologies into liquidation if
necessary.
The High
Court was told Creative Technologies was struggling for further financing in
2005. It decided to spin off potential
commercial benefits from a data compression capability derived from current
software development. Under $300,000 was
raised with investors offered a minority shareholding in the company. With investors grizzling about a lack of
commercial progress, this equity investment was later re-cast as a debt
investment with the loan backdated. The
loan specified interest at twenty per cent, increasing to thirty per cent for
late payment. No payments were ever
made. The reason for this financial restructuring
and its effect were disputed in the High Court.
Creative
Technologies said it represented a joint venture arrangement. Nothing was to be paid until revenue rolled
in. D4 Cash Investors said it was a loan
and nothing had been paid. Backdating
the loan created a legal issue. The
courts enforce promises to do something. They do not enforce promises to do something
which has already been done; past consideration in legal jargon. The funds had already been handed over at a
time when all parties later agreed to call it a loan repayable with interest at
thirty per cent.
Justice
Duffy ruled the loan agreement was not a sham.
There was evidence Creative Technologies had used investor’s money for
purposes other than the agreed commercialisation of data compression
software. Improper use of investors’
money gave them potential legal rights in other software developed with their
money. The loan was enforceable. Legally it represented an acknowledgement
investors funds had been improperly used, that investors would give up any
potential rights they might have against Creative Technologies and in return
the funds already advanced were to be converted into a loan and earn interest.
D4 Cash Investors Ltd v. Advanced Creative Technologies Ltd – High Court
(21.12.17)
18.024