Businessman ordered to pay former investor $400k
When Rob Baker heard about LincSpun revolutionary fibre in a Wānaka cafe in 2015, he thought he was on to a winner.
After a pitch from the technology’s owner, former Canterbury farmer Jean-Michel Libeau, he invested about $263,000.
Nearly 10 years later and after years of grief Baker has obtained a ruling in the High Court ordering Libeau to pay him about $400,000, representing the initial investment, interest and the costs of legal action.
The LincSpun technology is said to combine merino wool and other materials to produce a superior fibre that could be used in a range of products such as YY Nation and Allbirds wool shoes.
In 2015, Baker and Libeau agreed a new company would be formed that would acquire all the intellectual property and royalty income then owned by another of Libeau’s companies.
The new company would essentially be a holding company managing existing licensing agreements owned by Libeau and his other companies. Baker was to have about 25% of the company’s shares, with Libeau owning the rest.
Libeau claimed the technology had a potential value of about $20 million. Baker’s investment was supposed to go into the new company’s bank account but Libeau diverted most of the money to his other entities and used some of it for personal expenses.
Over the next five years Libeau did not show Baker any accounts for the new company and Baker did not receive any return on his investment or any updates on how the company was going.
Soon after receiving Baker’s money, Libeau, without Baker’s knowledge, entered into an exclusive global licence agreement diverting royalty income away from the new company in which Baker had a shareholding.
In 2021 Baker cancelled the contract with Libeau and filed proceedings in the High Court.
After a hearing in which both Baker and Libeau represented themselves with some help, Justice Jonathan Eaton, in a decision released last month, ruled Libeau had breached the contract by not holding Baker’s funds intact until the new company was formed.
The only relief he could order, he said, was to “unravel” the contract into which Baker had entered.
He ordered Libeau to pay back Baker’s original investment of $263,000, interest of 5% from 2015, and about $40,000 costs.
Baker had sought about $5m but Justice Eaton said Baker had provided no evidence to back up the figure other than Libeau’s claim his technology had a potential value of $20m.
Baker’s claim for his share of royalties was also rejected because it would represent a double recovery, and in any event Baker had not asked for royalties in his pleadings (court document claiming relief), Justice Eaton said.
The judge said he could not award compensation for Baker’s claimed emotional and mental stress as it was a commercial transaction.