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Smartpay Ltd v Kumar

Smartpay Ltd v Kumar

Case [2022] NZHC 997 13 May 2022

Corporate Law & Governance

Insolvency Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001775 [2022] NZHC 997

IN THE MATTER OF the liquidation of 4468440 Limited (previously known as Optimizer Corporation Ltd)

BETWEEN

SMARTPAY LIMITED

Plaintiff

AND

MANAS DHARMENDRA KUMAR

Defendant

Hearing: 2 – 5 May 2022

Counsel:

DJ Chisholm QC and J Ryan for Plaintiff

MA Corlett QC and M Taylor-Cyphers for Defendant

Judgment:

13 May 2022

INTERIM JUDGMENT OF DOWNS J

This judgment was delivered by me on Friday, 13 May 2022 at 12 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:
Claymore Partners Ltd, Auckland. Haigh Lyon, Auckland.
DJ Chisholm QC, Auckland. MA Corlett QC, Auckland.
M Taylor-Cyphers, Auckland.

SMARTPAY LTD v KUMAR [2022] NZHC 997 [13 May 2022]

The case

[1] Optimizer Corporation Ltd1 was placed in liquidation 10 December 2015. Smartpay Ltd2 is one of OCL’s creditors. Smartpay contends Manas Kumar, OCL’s director, breached his duties to OCL causing it (and Smartpay) loss. The essence of Smartpay’s case is that Mr Kumar allowed OCL to assume obligations it could never meet because OCL had neither assets nor income, and no legally enforceable means of securing financial help from related companies.

[2] Mr Kumar denies breaching his duties to OCL. He says a viable business existed across OCL and two related companies: Odev Ltd3 and Optimizer HQ Ltd.4 Together, the three companies formed this group:5

Background

[3]Little contest attaches to the background.

[4] Odev developed software products for small businesses. A key product was Swipe HQ. Swipe HQ was an online debit and credit card programme that allowed merchants to process related transactions. Swipe HQ could be allied with a

1      OCL.
2      Smartpay.
3      Odev.
4      HQ.
5      The group.

mobile EFTPOS terminal. If so, small businesses could process EFTPOS transactions wirelessly, without the need to do anything more. Therein lay Swipe HQ’s potential.

[5]Mr Kumar became a director of Odev 21 September 2011.

[6]Odev’s parent, HQ, was incorporated 11 April 2013.

[7]Odev’s sibling, OCL, was incorporated 5 June 2013.

[8]Mr Kumar was a director or sole director of each.

[9] On incorporation, OCL issued 1,000 shares, each for $1. HQ owned all. OCL had no assets beyond the $1,000 presumably paid for its shares.6

[10] Once the group existed, Odev’s business was carried out by HQ, or perhaps HQ and Odev together. No contemporaneous documentation explains why.

[11]On 28 May 2014, OCL and Spark entered an agreement.7 The agreement:

(a)Gave Spark the right to market and sell Swipe HQ.

(b)Required OCL to supply Spark mobile EFTPOS terminals with Swipe HQ.

(c)Presupposed OCL would gain revenue from Spark’s clients by OCL charging them directly for the technology. No fee was payable by Spark to OCL for the technology.

(d)Was for one year.

[12]Mr Kumar signed the Spark agreement on behalf of OCL.

6 Mr Kumar said OCL owned a licence to “commercialise the technology and the intellectual property … being developed” by the group. No…

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 Smartpay Ltd v Kumar

Details

AGLC: Smartpay Ltd v Kumar [2022] NZHC 997
Case: [2022] NZHC 997
Decision Date: 13 May 2022

CaseChat Overview and Summary

The case of Smartpay Ltd v Kumar was heard in the High Court of New Zealand from 2 to 5 May 2022, and the interim judgment was delivered on 13 May 2022. The plaintiff, Smartpay Ltd, is a creditor of Optimizer Corporation Ltd (OCL), which was placed in liquidation on 10 December 2015. Smartpay contends that Manas Kumar, the director of OCL, breached his duties to OCL, causing it, and Smartpay, loss. Kumar denies the allegations and asserts that a viable business existed across OCL and two related companies. The primary legal issue in the case is whether Kumar breached his duties to OCL under the Companies Act 1993. The court found that Kumar unquestionably breached sections 131, 135, and 136 of the Companies Act. The court held that OCL was insolvent from near inception, and Kumar failed to consider OCL's interests independently, instead prioritising the interests of the group. The court also rejected Kumar's causation argument, finding that his breaches of duty to OCL caused OCL loss. The court excluded the evidence of an expert witness called by Kumar, Damian Grant, on the grounds that he lacked the requisite expertise to provide opinion evidence on solvency and that his evidence was not substantially helpful. The court declined an application for an adjournment to allow Kumar to find an alternative expert, finding that an adjournment would not be commensurate with the interests of justice. The quantum of compensation will be addressed in a subsequent hearing.

Orders