Judge oks brother’s suit against LiveTiles CEO Karl Redenbach
Corporate May 1, 2018 10:34 pm By Cat Fredenburgh | Melbourne

The founder of Microsoft solutions provider nSynergy has been given the greenlight to bring a derivative suit against his brother and co-founder Karl Redenbach, alleging Redenbach diverted tens of millions of dollars in nSynergy’s assets, including software company LiveTiles.

Keith Redenbach and fellow shareholder, Campbell Ray, claim in the suit that Karl Redenbach — a former Minter Ellison lawyer — and another nSynergy director, Peter Nguyen-Brown, breached their duties when they created separate corporate entities through which they funnelled nSynergy’s assets.

The case, which was brought in the New South Wales Supreme Court in June 2017, on behalf of nSynergy and nSynergy owner Legal Practice Management Group, also names the 10 corporations as co-defendants.

The applicants claim that Redenbach and Nguyen-Brown transferred nSynergy’s assets to the corporate entities they created, including nSynergy’s consulting and services business, which was then sold to publicly traded cloud solutions provider Rhipe for $25 million in 2014.

The directors also allegedly diverted LiveTiles, nSynergy’s collaboration platform business. LiveTiles was backdoor listed on ASX for $33.75 million in 2015. Karl Redenbach is now CEO of LiveTiles.

In allowing the derivative suit to be filed, Justice Ashley Black said Keith Redenbach and Ray were acting in good faith in taking the action and that there were serious questions to be tried.

The judge said the applicants had provided enough evidence to suggest there was “a real prospect of significant recoveries from the proposed proceedings.”

Judge Black disagreed that the history of conflict between the Redenbach brothers should weigh against approval of the suit. The Redenbach brothers founded nSynergy in 2002.

“The respondent companies submit, and I accept, that judgments as to prospects of recovery and as to possible settlement terms may be more difficult to make where emotions run high. It does not, however, follow that the fact that an applicant may be strongly, and possibly justifiably, aggrieved by particular conduct, that he or she ought to be deprived of the means to seek redress for it, including by the commencement of derivative proceedings,” Justice Black said.

The applicants have received litigation funding from Balance REV. They want compensation and an order that their shares be purchased by Redenbach and Nguyen-Brown at fair value “without taking into account the effect of the alleged oppression or breaches of duty”.

Keith Redenbach and Campbell Ray are represented by Deutsch Miller.

Karl Redenbach and Peter Nguyen-Brown are represented by Arnold Bloch Leibler.

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Cat Fredenburgh

Cat Fredenburgh has been covering legal news for 12 years. She was previously Editor-in-Chief at US legal news publication Law360. She is the Co-Founder of Lawyerly.