The two other secret lawsuits against education firm Crimson

Crimson Education chief executive Jamie Beaton when he was 18. Photo / File

Crimson Education faced two other High Court lawsuits in the past two years, but their settlements have meant there has been no public information on them until now.

The high-profile education start-up, which is currently fighting former joint venture suitor Eurekly in the High Court at Auckland, also faced suits from the University of Auckland and Princeton Limited.

Both cases never made it to trial but were settled privately.

Crimson has gone to great lengths to keep the media from reporting litigation it is involved in against it, including going to the Court of Appeal in 2018 to fight the NZ Herald and NBR.

That effort was to keep secret a dispute with former employee Samantha Berry, and her business UniTutor which Crimson acquired. The company and its co-founder Jamie Beaton declined to comment for this piece.

More recently the company launched Crimson Global Academy and in May obtained a Ministry of Education licence to teach online courses to overseas students.

It has received millions in capital from foreign investors including Julian Robertson and an associated investment vehicle as well as Hong Kong-based CTF Education Group. Locally IceHouse Ventures and Stephen Tindall's K1W1 have tipped money into the firm. Former Prime Minister John Key also has a small take in the company.

Crimson was acquisitive in its formative years, purchasing UniTutor, MedView and Ivy+ Education, all of which are parties in court cases BusinessDesk has knowledge of. Crimson also announced the purchase of well-regarded social entrepreneur Anne Gaze's Campus Link in early 2016, but company shares issued to Gaze on Feb. 13 of that year were removed two months later.

Crimson's path to growth has involved multiple disputes, as the unearthed documents reveal.

Intellectual property case

The University of Auckland suit centred around Crimson subsidiary MedView, a tutoring system which calls itself "the leading online medical school preparation provider." It had been owned by Thomas Wong, John Newland, and Chen Luo, but was sold to Crimson as a going concern in 2014.

The university started legal proceedings against Crimson and MedView as well as Beaton and co-founder Shandre Kushor in December 2018.

Court documents show the university accused Crimson of abusing the copyright of its first-year course materials. The university said the education firm removed copyright disclaimers from its texts.

It also said that Crimson had breached its trademark because it used the University of Auckland logo on its teaching materials, suggesting the institution somehow endorsed the company. Crimson argued it was not a breach of copyright law to do this.

Crimson and its directors admitted that it hired university students as tutors and used the texts, and that the tutors uploaded the copies of university course materials onto Google Drive. However Crimson suggested that it could not be held liable for the actions of its tutors.

When BusinessDesk asked to view the file, Crimson sought secrecy over many aspects of its operations claiming they were "commercially sensitive," but Justice Sarah Katz disagreed in a minute issued on April 7 this year, after the case had settled.

Bizarrely, among the aspects of its operations Crimson sought suppression orders over was the fact that it used Google Drive as a platform to disseminate course materials.

Justice Katz said the fact that Crimson used Google Drive, rather than say Dropbox or another data platform is not highly commercially sensitive.

"Google Drive is a very common data-sharing platform (possibly the most common data sharing platform). Crimson Consulting apparently refer on their websites to 'online access to materials' and the use of a 'digital platform'.

"Indeed, all of the hundreds or thousands of students enrolled in Crimson Consulting's courses are presumably aware of how to access the relevant teaching material. The commercial sensitivity of this information is low." The university's general counsel Rebecca Ewert said in an email the dispute had been resolved and it would make no further comment.

Princeton case

A second, separate case was brought by Princeton and its owner Victor Li. This more closely echoes the UniTutor against Crimson as it also involved an entrepreneur entering a business relationship with Beaton.

Like UniTutor's Berry, Li sold his company, and became an employee at Crimson in 2016. The purchase price was before the court but has been redacted in documents Justice Mathew Downs allowed BusinessDesk to view.

Princeton was formerly known was Ivy+ Education and claimed to be the first company in New Zealand to provide SAT and ACT preparation for students hoping to study in the US.

Li filed proceedings against Crimson in April 2019 and like Berry also filed separate Employment Relations Authority proceedings.

Court documents say Li's employment agreement allowed Li to take a shareholding in Crimson after three years. Li resigned after three years, but was told he couldn't get the shares because he breached his employment agreement.

Crimson said Li breached his employment agreement by profiting personally from business opportunities that should have gone to Crimson, by accepting payment into his personal bank account. Princeton denied all of these allegations.

While Crimson also said Li failed to refer students onto Crimson, Princeton said that was allowed as per its agreement with Crimson.

The education company accused Li of taking unauthorised holidays, but this was disputed by Li. Crimson also claimed that Li's creation of the Artemis Foundation, which provides scholarships to university students, acted in competition with it.

The case was settled privately at the end of last year, and Li said in an email "Crimson and I have resolved all outstanding matters and I wish them all the best."

Current suit

Li's case has similarities with Eurekly's $10 million suit against the education company, which is still before the courts.

According to documents released in the case online tutoring firm Eurekly, founded by 39-year-old Austen Clarke, tried to enter a joint venture with Crimson in July 2018 but after October that year when the deal was called off, things quickly soured. Crimson said it changed its mind when Eurekly general manager Noah Maffitt resigned during negotiations.

Eurekly accuses Crimson of stealing its head of product Natalia Rozova, who is also a defendant in the case. Eurekly, which has hired Meredith Connell for its claim, said Rozova then gave confidential information to Crimson.

Eurekly says Crimson met Rozova during the negotiations; Beaton said he met her at SkyCity casino.

After the joint venture deal fell through, Eurekly says Crimson then took steps to hire Eurekly's chief technology officer and developers, citing an email from Crimson's Russian head to the chief technology officer entitled, "opportunities at Crimson."

Crimson said that there were initial discussions but denies ever recruiting the key executives.

In its statement of defence, Crimson said that the information disclosed during the JV discussions as "very generic, basic and much below the quality and level of information the first defendant has already accumulated on its own behalf over a number of years by researching and investigating its own online tutor marketplace including discussions with the founder of tutor.com."

According to its documents in the Eurekly case Crimson hires more than 2,400 tutors around the world.

The NZ Herald reported in November that Crimson raised US$20 million and that it's total funding to date was US$57 million.

In April the Financial Times listed Crimson 41st in its rankings of 500 high-growth companies in the Asia Pacific region. It listed Crimson growing revenue by 1,720 per cent, from $630,000 back in 2015 to $11.29 million in 2018. The report said the company had 213 employees.

- BusinessDesk