Sparks fly in Power Beat v Tindall

By PETER GRIFFIN

The inventor-investor relationship between Peter Witehira and Stephen Tindall seems to have reached its lowest ebb with a failed court case effectively separating Witehira from the technology he helped to create.

Witehira's Hamilton-based technology firm Power Beat this week failed in its legal bid to stop financial restructuring of Deep Video Imaging, a company of which it is a minor shareholder.

Power Beat had objected to DVI's fundraising plans, claiming that "oppressive" behaviour had effectively excluded it from being involved in contributing capital.

Presenting a case for Power Beat, lawyer Brian Henry said DVI had "starved the plaintiff of information" and given Power Beat just 20 days to raise $840,000. He also argued that unreasonable non-disclosure contracts had prevented wealthy Australian investor and Power Beat backer Ross Palmer from putting $2.5 million into DVI.

But the argument of oppressive behaviour was rejected and the failure to win an injunction has seen the restructuring go through.

DVI was seeking to raise $8 million, $7 million of which was to repay loans forwarded by Tindall's investment company K One W One, which is DVI's main investor.

The rest was to be used as working capital. Power Beat was ordered to cover DVI's legal bills to the tune of $22,500.

Power Beat will now negotiate with DVI at a judicial settlement conference to set a share price at which it can offload its stake in DVI. Tindall's company will be the likely buyer.

But the judgment has another implication for Witehira, who is undertaking a separate action against IT Capital to try to overturn Power Beat's sale of 370,000 DVI shares to IT Capital in May 2000.

Witehira says the sale was made "under false pretences". The restructuring of DVI has seen IT Capital's stake in the company diluted from 41.5 per cent to 19.4 per cent. If successful in winning back the stake from IT Capital, it will now be worth much less to Power Beat.

In correspondence between Tindall and Power Beat read out in court, Tindall said he remained "constant in my belief of this technology" but expressed dismay at Witehira's courting Palmer to invest in Megamantis, an invention that uses light to transmit large amounts of data.

"After all I've done for you, you seem to trust Palmer more than me," Tindall wrote in one exchange.

Reflecting on the relationship with Tindall, Witehira said it started to go wrong when there were differences over Power Beat's request that it derive ongoing royalties from sales of DVI's 3D screen technology.

"Tindall felt that if he bought a licence off us, that would be a drag on [DVI's] profits. That effectively said he wanted the intellectual property for nothing."

Witehira now faces the prospect of turning his back on DVI completely.

But he says he still has much respect for Tindall and would consider doing business with him again, as long as IT Capital did not come along for the ride.

"It depends on how much he is willing to spend and whether or not he continues with IT Capital as a partner.

"I can't bag Stephen Tindall as a businessman, I just didn't like the way things were structured and how we were pushed around."

Tindall said he did not believe Power Beat was ever discriminated against and did not rule out investing in future Witehira projects.

"We've more negotiating to do to tidy things up so it's too early to say."

Power Beat would carry on as what Witehira describes as the "most cost-effective research and development operation in the country".

He said a new invention was soon to be unveiled that incorporates some of the Megamantis development.

Witehira said there were lessons to be learned by any aspiring inventor or artist from the DVI debacle.

He advised entrepreneurs to beware of the time when "big boys come in and put a company under huge financial pressure so that they can manoeuvre control".