UWA and the WA Institute of Medical Research Inc have won control of a new $18 million research trust after fighting off a legal challenge by one of the university’s former staff, Dr Bruce Gray, and the company he founded, Sirtex Medical Ltd.
The University of WA and the WA Institute of Medical Research Inc have won control of a new $18 million research trust after fighting off a legal challenge by one of the university’s former staff, Dr Bruce Gray, and the company he founded, Sirtex Medical Ltd.
The $18 million windfall flowed from a much larger legal dispute between UWA, Sirtex and Dr Gray, which will determine who owns about $64 million worth of Sirtex shares.
The main dispute has been fought out in the Federal Court, racking up 50 days of hearings and an estimated $10 million in legal bills.
It emerged during the court case that UWA and Dr Gray have been involved in legal and contractual disputes for nearly a decade, with the university taking the extraordinary step in 1999 of getting the Anti Corruption Commission (the predecessor of the Corruption and Crime Commission) involved in its inquiries.
The dispute was made public in 2004, when UWA claimed it was the rightful owner of intellectual property allegedly developed by Dr Gray during his time at the university.
Dr Gray’s inventions are currently being commercialised by Sydney-based Sirtex, which listed on the Australian Securities Exchange in 2000.
Sirtex has achieved notable international success in the past year.
Its latest accounts, for the half year to December 2006, showed that sales revenue jumped 34 per cent to $14.7 million.
However, its net profit was a modest $887,000, in large part because it incurred $1.7 million in legal fees.
The company’s commercial success has led to an increase in its share price, raising the stakes in the legal dispute.
Dr Gray’s counsel, Lavan Legal’s Martin Bennett, has claimed that UWA’s legal action was triggered by the potential to profit from Sirtex’s rising share price.
He told the Federal Court last month that a 2003 takeover bid “made the university aware that there might be some profit”.
UWA has claimed ownership of all of the Sirtex shares held by Dr Gray (a 31 per cent stake worth $64 million) and the Cancer Research Institute Inc (an 8.5 per cent stake worth $18 million).
UWA also wants to gain the rights and titles to Sirtex’s core technology.
While the main matter proceeded in the Federal Court, UWA negotiated a settlement with the Cancer Research Institute (CRI), a research body established by Dr Gray during his time at the university.
The settlement involved establishing a new Cancer Research Trust that would be administered by the prestigious Nedlands-based WA Institute for Medical Research.
This was contrary to Dr Gray’s plans; he wanted CRI to be wound up and its assets transferred to another highly regarded research group, the Melbourne-based Walter and Eliza Hall Institute for Medical Research (WEHI).
Dr Gray and Sirtex challenged the settlement before the Full Court of the Federal Court, but their appeals were thrown out last Thursday.
RSM Bird Cameron partner Mark Conlan, who is CRI’s court-appointed receiver, has been caught in the middle of the feuding parties.
He is keen to see CRI focus on its original goal.
“CRI is a charitable trust,” Mr Conlan told WA Business News.
“Its role is to spend money on cancer research and education.
“If it can extract itself from the (court) case and continue those objectives, then that is a good outcome.”
Mr Conlan was appointed receiver last October because of the dysfunctional state of CRI, which had been inactive for several years.
The divisions at CRI have been highlighted by the on-again off-again negotiations with UWA.
In April last year, CRI wrote to UWA saying it wanted to transfer its assets to WEHI.
Three months later, UWA negotiated a settlement with three long-serving CRI directors, but not Dr Gray.
Legal advice by Tottle Partners and Fairweather & Lemonis suggested there was some doubt about the standing of the settlement.
In September last year, a meeting of CRI members purported to appoint three new directors; Dr Gray, his sister Beth Daebritz, and Lavan Legal partner David Sanders.
One month later, the Federal Court appointed Mr Conlan to verify the membership of CRI and convene a meeting. He concluded that was not possible, therefore he was appointed as receiver.
Following mediation with all of the parties to the dispute in February, Mr Conlan gained federal court approval for a modified settlement.
A key issue was the governance arrangement for the new trust, which will gain control of CRI’s assets, including its Sirtex shares.
The trust’s inaugural chair will be jointly selected by CRI, which effectively means Mr Conlan, UWA and WAIMR.
WAIMR will nominate two directors, UWA will nominate one director and CRI will nominate one director, who may be a representative of WEHI.
The trust will be administered by WAIMR, which is an independent incorporated association with close links to UWA.
The university was one of WAIMR’s founding partners and its vice-chancellor Professor Alan Robson is deputy chairman of the institute.
Meanwhile, the Federal Court’s Justice French has reserved his decision on the substantive legal dispute involving UWA’s claim against Dr Gray and Sirtex.
The case is likely to turn on Justice French’s assessment of Dr Gray’s employment arrangements, prior to the establishment of Sirtex in 1997.
Sirtex has commenced a cross-claim against Dr Gray, alleging it was misled by Dr Gray when he purported to assign the relevant inventions to the company.
Dr Gray was chairman of Sirtex until August last year and has since had a falling-out with his former board colleagues.
