Kilimanjaro Consulting Pty Ltd v MYOB Australia Pty Ltd

This case arose out of a long-running software channel relationship. KC had sold MYOB's Exo software since 2006 and had been in a commercial relationship with MYOB since at least 2007. By 2018, KC had built a substantial business around Exo as a reseller and provider of related services. The court recorded that KC had also built goodwill attached to that business.

That background mattered because the dispute was not about a one-off sale. It concerned recurring annual licence fee revenue tied to a large installed customer base. According to the evidence summarised by the court, KC had 1,275 Exo customers, representing about 80% of its total customer base, and those customers generated NZ$6.3 million in annual licence fees. KC also had 61 of its 114 staff engaged in relation to Exo software and customers. In other words, Exo was not a side product. It was central to KC's operating model.

The parties entered into a Business Partner Agreement in 2018, together with separate Business Partner Program terms. Later, MYOB changed the commercial framework. In May 2021, it notified a variation to clause 12(a) of the agreement to implement a direct or dual-channel distribution model. Then in May 2022, it advised that the Exo annual licence fee margin would be reduced from 35% to 20% from 1 July 2022.

KC said that this margin reduction struck at the economics of a business it had built over many years. It argued that it had invested in acquiring and servicing customers on the basis of the incentives offered by MYOB, including the 35% margin over the lifetime of those customers. KC also said it had little practical ability to reject the change because MYOB could threaten to withhold licence codes and threaten termination of the Business Partner Agreement.

MYOB, on the other hand, relied on the express terms of the contract and said it had the right to change the commission payable. It also argued that either party could bring the Business Partner Agreement to an end without cause. So the immediate clash was between express contractual rights on one side and broader arguments about the nature of the relationship and the fairness of the conduct on the other.

This was not the final trial. The court was dealing with an interlocutory application for injunctions. That distinction is important. At this stage, the judge was not deciding who would ultimately win. The court was deciding two narrower questions.

First, was there a serious question to be tried? That is a threshold question. KC did not need to prove its whole case finally. It needed to show that its claims were arguable enough to justify temporary protection until a later hearing.

Second, did the balance of convenience favour granting interim orders? In practical terms, the court had to compare the likely prejudice to each side if orders were granted or refused. The court also had to consider whether damages later would be an adequate remedy.

KC framed the underlying legal issue broadly. It said MYOB's prima facie contractual power to unilaterally alter clause 12(a) of the Business Partner Agreement or reduce the Exo annual licence fee margin was constrained by the context of the relationship. KC relied on alleged implied contractual duties, particularly duties of good faith, the statutory duty of good faith under the Franchising Code, and the prohibition on unconscionable conduct under section 21 of the Australian Consumer Law.

MYOB disputed those propositions. It argued that the express terms of the Business Partner Agreement permitted the relevant changes and that implied obligations could not be used to override those rights. MYOB also argued that KC was not a franchisee and the agreement was not a franchise agreement. On unconscionability, MYOB said its conduct did not depart from ordinary community standards of honest and fair conduct, and it also raised a positive case that its conduct was reasonably necessary to protect its legitimate interests.

Justice Jackman held that there was a serious question to be tried. The judge was careful about the level of confidence attached to that conclusion. His Honour said KC's case on the present evidence was not compelling, but it was sufficient to meet the relatively low threshold for interlocutory injunctions.

The judgment explains why the threshold was met. The legal concepts in issue, especially good faith and unconscionability, were described as relatively elastic concepts on which divergent views have been expressed. The judge noted that these concepts must be applied by taking into account all the circumstances of the case, and that subtle factual nuances can matter. On that basis, the court did not regard KC's case as unarguable.

On the balance of convenience, the court found strongly in KC's favour. A significant factor was MYOB's concession, through counsel, that there would be no prejudice to MYOB if certain injunctions were granted. By contrast, the evidence indicated that if relief were refused, KC would suffer a very substantial reduction in Exo annual licence fee margin, directly affecting its current business model.

The court accepted that this would likely generate a need to retrench employees who were important to servicing Exo customers and maintaining customer relationships. The judge accepted that recruiting and training staff is not easily done and that once staff capabilities are lost, it is very difficult to return to the previous position if the applicant later succeeds at trial.

The court also accepted that damages were not an adequate remedy. Although there was evidence quantifying some loss of goodwill, the judge accepted that this did not capture the broader loss of goodwill and capability that could result from a changed business model caused by staff losses. The court therefore accepted that there would be difficulty, if not impossibility, in proving the full consequences in monetary terms.

The court partially granted KC's application, but the relief was narrower than KC had asked for. This is one of the most important parts of the judgment for business readers.

KC had sought an order restraining MYOB from issuing invoices on any basis other than a 35% annual licence fee margin. The court refused that order. Justice Jackman said that such an order would effectively require MYOB to issue invoices on a basis it bona fide believed to be wrong. His Honour considered that undesirable. The court also considered that order unnecessary because narrower orders could give KC enough practical protection.

Instead, the court granted two limited injunctions until further order. First, MYOB was restrained from taking any action for breach of contract under the Business Partner Agreement by reason only of KC paying MYOB 65% of the annual licence fee paid by an end user of Exo. Second, MYOB was restrained from withholding licence codes for the use of Exo by any end user who was a customer of KC by reason only of KC retaining 35% of the annual licence fee and paying MYOB 65%.

The wording mattered. The judge narrowed the proposed orders so they would not protect KC against unrelated breaches of the Business Partner Agreement. The protection was confined to action taken by reason only of the disputed payment split. That means the court was preserving the status quo in a targeted way, not giving KC a broad immunity under the contract.

The orders were also expressly interim. They operated until further order. The costs of the interlocutory application were ordered to be costs in the cause. The judgment also records that the orders were made upon KC giving the usual undertaking as to damages.

Businesses should read this case as a practical lesson in dependency risk and evidence, not as a final statement that a supplier cannot change a margin. The judgment shows that a court may intervene on an interim basis where a reseller has built a substantial business around a supplier's product, where the supplier controls operational levers such as licence codes, and where a sudden change threatens staff, customer relationships and goodwill in ways that are hard to repair later.

At the same time, the case should not be overstated. MYOB still relied on express contractual rights, and the court did not reject those rights finally. The judge expressly said KC's case was not compelling on the present evidence, only that it crossed the relatively low threshold for interlocutory relief. So the decision is best understood as a status quo order in a finely balanced dispute, not a final endorsement of KC's legal theories.

For businesses negotiating reseller, distribution or partner agreements, the case highlights several pressure points. If your revenue depends on recurring fees or commissions, look closely at variation rights, notice periods, termination rights and any supplier control over customer access or product activation. If the supplier can both reduce your margin and interfere with your ability to service customers, the commercial risk is much higher.

If a dispute does arise, evidence is critical. KC appears to have persuaded the court because it could point to specific operational facts: customer numbers, revenue concentration, staff allocation, product lifespan and the likely need for retrenchments. General complaints about unfairness are unlikely to be enough. Courts want to see what will actually happen to the business if relief is refused, and why damages later will not truly fix it.

Speed also matters. Interlocutory relief is about preventing irreversible harm before trial. A business facing a major supplier change should quickly assess the contract, preserve documents, quantify the likely impact and obtain advice before the practical position deteriorates further.

The judgment was delivered on 4 August 2023 by Jackman J in the Federal Court of Australia. It concerned an interlocutory application dated 12 July 2023. The reasons record that a later hearing was anticipated in late March or April 2024, but this judgment itself does not state the final outcome of the broader proceeding.

That means the case note should be read as an explanation of the interim ruling only. The judgment is useful because it shows how the court approached serious question, balance of convenience, adequacy of damages and the form of interim relief in a commercial distribution dispute. It is not a final ruling on whether MYOB was entitled to reduce the margin, whether KC was protected by the Franchising Code, or whether MYOB engaged in unconscionable conduct.