Comvita sets record straight in honey court case

Comvita sets record straight in honey court case

Recent media reports potentially misleading

Recent media reports regarding the resolution of a dispute between Comvita and WaikatoLink are potentially misleading and damaging, says Comvita CEO Brett Hewlett.

“We are concerned that readers may be left with a false impression of the outcome of the High Court ruling of June 4th, and may also have inferred a larger liability for Comvita than is actually the case. It is important that our shareholders and other key stakeholders understand the facts”.

For the past two and a half years Comvita has been trying to resolve a dispute that ensued with WaikatoLink (the commercialisation arm of the University of Waikato).

The dispute arose after the parties signed a comprehensive intellectual property license and research agreement in December of 2006, covering the application of medical honey in the field of woundcare and skincare.

During negotiations for the agreement, and in particular around the assessment of value of the agreement ($3.5 million paid over three years in instalments plus an additional $0.5 million if certain milestones could be met), Hewlett says Comvita relied very heavily upon the representations made by WaikatoLink about the stage of progress the research team at the University of Waikato had made in isolating and classifying the active compound behind UMF™ Manuka honey.

Those representations subsequently turned out to be either false or misleading; as a result, Comvita sought relief from their obligations to pay WaikatoLink according to the terms of the agreement. Comvita had already paid WaikatoLink $1.5 million in shares and cash and withheld paying the remaining $2 million.

Attempts to resolve the issue through mediation were unsuccessful, says Hewlett, so in April this year, Comvita and WaikatoLink appeared in the High Court of New Zealand.

Justice Rhys Harrison in his judgment dated 4th June found that:

“On an objective analysis WaikatoLink’s conduct was, I find, misleading, deceptive or false in three material respects.” The court granted Comvita $1 million as compensation for its loss or damage.

During the March 2008 financial year, Comvita made a provision for payment of $2m (the balance of the total $3.5m contract). Hewlett says that unless the judgement is appealed Comvita will now release half of that provision, which will increase Comvita’s net earnings before tax by approximately $1m in the current financial year.

While the agreement has been terminated, Comvita still retain ownership of certain patents that formed part of the original agreement.

Hewlett says Comvita no longer have a working relationship with WaikatoLink or the University of Waikato, and have instead forged a close working relationship with the University of Auckland, where Comvita’s research on honey and other products continues.

ENDS

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