Liable for reckless trading, Auckland company director Manas Kumar was ordered to pay $850,400 compensation to Smartpay an unpaid creditor of his company Optimizer Corporation Ltd left high and dry with Optimizer having no assets and no income from the day it started trading.
The High Court was told Mr Kumar established Optimizer in 2013 to exploit a software product called Swipe HQ. It allowed retailers to process debit and credit card transactions. When allied with a mobile EFTPOS terminal, transactions could be processed wirelessly. In 2014, Optimizer signed a deal giving Spark the right to market and sell Swipe HQ. Optimizer was responsible for supplying the EFTPOS terminals. On behalf of Optimizer, Mr Kumar hired terminals from Smartpay Ltd with an upfront hire charge, monthly rentals for each terminal and an obligation to pay Smartpay 0.35 per cent of transactions processed. Evidence was given of Optimizer immediately falling behind in payments due to Smartpay. One year on, Spark had terminated its contract and Optimizer was in liquidation. Optimizer kept no proper accounting records. It had received no income; revenue was instead channelled to its holding company. Payments made by Optimizer to Smartpay were sourced from other companies under Mr Kumar’s control.
Justice Downs ruled Mr Kumar was in breach of his statutory duties as director of Optimizer by trading whilst insolvent. His company had no assets, had no income, and had no legally enforceable promises of financial help from related companies.
Mr Kumar was held personally liable to pay Optimizer’s unpaid Smartpay debt of $850,400 for unpaid fees and lost terminals. The court was told Smartpay supplied Optimizer with just over 2100 terminals; 1002 were recovered.
Smartpay Ltd v. Kumar – High Court (13.05.22 & 19.10.22)
22.176