Kumar v Smartpay Limited - [2023] NZCA 410

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA427/2022
[2023] NZCA 410

BETWEEN	MANAS DHARMENDRA KUMAR Appellant
AND	SMARTPAY LIMITED Respondent

Hearing:	25 July 2023
Court:	Collins, Lang and Woolford JJ
Counsel:	Appellant in person D J Chisholm KC and J D Ryan for Respondent
Judgment:	31 August 2023 at 9.30 am

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellant is to pay the respondent costs for a standard appeal on a band A basis together with usual disbursements. We certify for two counsel.

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REASONS OF THE COURT

(Given by Collins J)

Introduction

Mr Kumar’s appeal challenges two judgments of the High Court in which Downs J concluded Mr Kumar is liable to pay $850,427 to the liquidators of Optimizer Corporation Ltd (OCL).[1] This was the loss claimed by Smartpay Ltd (Smartpay), a creditor of OCL, arising from what the High Court found were Mr Kumar’s breaches of three sections of the Companies Act 1993 (the Act) when he was a director of OCL.[2]
[1]Smartpay Ltd v Kumar [2022] NZHC 997 [Interim judgment]; and Smartpay Ltd v Kumar [2022] NZHC 2685 [Quantum judgment].
[2]Interim judgment, above n 1, at [42].
The three sections of the Act that Mr Kumar was found to have breached, are:
(a)Section 131, which concerns the duty of a director to act in good faith and in what the director believes to be the best interests of the company.
(b)Section 135, which prohibits a director from allowing a company to carry on business in a manner likely to create a substantial risk of serious loss to the company’s creditors.
(c)Section 136, which provides a director must not agree to the company incurring obligations unless he or she reasonably believes at the time that the company will be able to perform its obligations when required to do so.

We will explain these and other provisions of the Act in further detail at [35] to [66].

In addition to disputing that he breached the Act, Mr Kumar maintains the High Court miscalculated the amount of Smartpay’s losses.

Background

The litigation focuses upon three companies:
(a)OCL, which was incorporated on 5 June 2013 and placed into liquidation on 10 December 2015.
(b)Odev Ltd (Odev), which was incorporated on 21 January 2005 and also placed into liquidation on 10 December 2015.
(c)Optimizer HQ Ltd (HQ), which was incorporated on 11 April 2013 and placed into liquidation on 27 November 2020.

Together, these three companies shall be referred to as the group of companies.

At all relevant times Mr Kumar was the managing shareholder of HQ, the sole director of Odev, and a director of OCL. When OCL was incorporated it issued 1,000 shares at $1 per share. All of OCL’s shares were owned by HQ.
Odev developed a product called Swipe HQ, which was a debit and credit card system that enabled merchants to process Eftpos transactions through a mobile Eftpos terminal.
Two agreements are central to the dispute.

Spark…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Kumar v Smartpay Limited

Details

AGLC: Kumar v Smartpay Limited [2023] NZCA 410
Case: [2023] NZCA 410
Decision Date: 31 August 2023 at 9.30 am

CaseChat Overview and Summary

In Kumar v Smartpay Limited, the Court of Appeal of New Zealand dismissed the appeal brought by Manas Dharmendra Kumar against the judgments of the High Court, which held Kumar liable to pay $850,427 to the liquidators of Optimizer Corporation Ltd (OCL). The appeal centred on Kumar's breaches of three sections of the Companies Act 1993 when he was a director of OCL. Kumar argued that he acted in good faith and in the best interests of the group of companies, not just OCL, and that OCL was not insolvent. The Court of Appeal found Kumar failed to discharge his responsibilities as a director of OCL, leading to its insolvency and the inability to meet its obligations to Smartpay. The Court rejected Kumar's claims, affirmed the High Court's findings, and dismissed the appeal, ordering Kumar to pay Smartpay the amount owed plus costs.

Orders