The court file a business fought to keep hidden

Jamie Beaton of Crimson Consulting, who has run a year-long bid to keep details of a High Court case out of the media. Photo: NZ Herald
Jamie Beaton of Crimson Consulting, who has run a year-long bid to keep details of a High Court case out of the media. Photo: NZ Herald

Court documents have revealed the tactics allegedly employed by much-hyped start-up Crimson Consulting when buying up one of its competitors.

Crimson, a $200 million tutoring business founded by 23-year-old wunderkind Jamie Beaton, spent a year battling the Herald to try to keep the allegations a secret.

The company wanted its file at the High Court in Auckland totally sealed so the public could never know why a former employee took legal action - despite a judge ruling that was against the principles of open justice.

It argued the case all the way to the Court of Appeal. It lost there this month, with the court ordering that some documents from the file be released - although in a heavily redacted format - and the details of those documents can now be published for the first time.

The papers provide a window into the way Crimson allegedly acted when buying up small businesses after its founding in 2013.

During that phase, Crimson - which helps get students into Ivy League universities - bought out at least five companies.

The court case centred on claims and counter-claims about the purchase of one of those companies, named UniTutor, which was founded by Otago businesswoman Samantha Berry.

Legal action began in the Employment Relations Authority in 2016 and then spilled into the High Court.

Berry's affidavits across both cases contain an extensive history of what she alleges were the events leading up to the sale of her shares to Crimson in 2015 and of the events which occurred when she was its employee.

The documents released today include some of those claims.

They claim that Crimson broke its agreement with her by failing to issue her shares and that it breached a promise to pay her a share of revenue from UniTutor.

She also claimed it failed to commit any resources to the development of UniTutor, and undercut UniTutor by offering its tutors more money to work for Crimson's other businesses instead.

The allegations about offering more money to the tutors was viewed as extremely contentious by Crimson, however the court refused to redact it. It did, however, withhold three other allegations in the same section of the claim.

As a result of the alleged breaches, Berry said she lost the opportunity to earn her share of revenue, which was guaranteed as part of the sale.

Crimson refuted those allegations, saying Berry had to be employed for three years to get shares.

It also said because Berry's employment agreement was terminated before two years, she was not entitled to revenue from UniTutor.

A bid for suppression

Crimson fought in three separate courts to keep Berry's allegations secret, to protect what it says is commercially sensitive information.

Initially, Crimson tried to get the Employment Court to suppress its name as well as the details of the case, and its lawyers also attempted to get media websites to delete articles about the court action.

During the hearings, Crimson argued Berry's evidence contained significant irrelevant, commercially sensitive, confidential and disparaging information, hence its application for suppression.

In an Employment Court hearing prompted by applications by the Herald and other media to see the court file, the company said it wished to ensure any published stories reflected positively on Crimson, as its reputation was important for ongoing development.

It argued that therefore the publication of commercially sensitive information and "unfair criticisms" should be prohibited. Not to do so would significantly tarnish relationships with investors and clients, it said.

It said the affidavits included "potentially damaging allegations" about matters that were not relevant, which would require consideration at a substantive hearing.

In the Employment Court, the judge dismissed the application to suppress names. He released some of the files, but with heavy redactions - making it almost impossible to report their contents. It was to be revisited after the substantive hearing.

However, the matter was never heard in either the Employment Court or the High Court, and instead both proceedings settled privately in October. Judge Corkill ordered that the court file in the Employment Court proceedings could only be searched with leave of a judge.

At that point Crimson asked for its file in the High Court to be sealed but Justice Matthew Palmer declined to do so.

Subsequently, the Herald and the National Business Review applied to the High Court to see the file.

Palmer granted limited access, with some redactions for commercial sensitivity.

The judge said it was a matter of public interest that the proceedings were brought, and directed the judgment be sent to media.

However, lawyers from Crimson intervened and asked the registry not to send the judgment out because it was going to appeal the decision.

Without referring to the judge, the registry obliged. The media were not informed their case had been successful until later, after Crimson had applied for a stay on the information being released and were about to file a notice of appeal.

In a memorandum, Crimson said it would appeal the ruling because releasing untested allegations could be "misleading" and again arguing the information is commercially sensitive.

The Herald challenged that appeal, and won.

'Commercial sensitivity is maintained'

Justice Raynor Asher ruled the court agreed with Justice Palmer's assessment, saying that allowing access to the redacted statement of claim and statement of defence struck the correct balance.

"Commercial sensitivity is maintained, there is no undue interference with the privacy of the parties, and the public confidence in the administration of justice can be maintained, while the nature of the dispute and thus the business of the Court can be known by the public. There is nothing in the allegations and denials that has a particular pejorative or personal flavour," the judgment said.

The court also refused Crimson's assertion that lower than usual costs should be paid because the appearance of (Herald parent company) NZME's lawyer was an "indulgence".

"NZME, as a reputable media organisation wishing to publicise details of a proceeding, has a direct and legitimate interest in the outcome of the appeal," it said.

"Therefore we do not regard NZME's involvement in the appeal as an indulgence."

Crimson asked the court to make one further redaction, which it refused. The court sent the documents to the Herald today, meaning they could at last be published.

Crimson will also pay the New Zealand Herald's legal costs, as ordered by the court.

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