Entrepreneur Doug Bartlett was ordered to pay $361,000 damages following a 2015 restructuring of his nascent ‘Fun Cart’ business manufacturing shopping trollies which saw control of business assets shifted across to a new company without payment.
His commercial dream was to have major retailers across the United States use his product; a plastic moulded trolley, allowing a child ensconced inside to be separately entertained whilst an adult roamed supermarket aisles loading produce onto the upper deck.
The High Court was told his company Aisleworx Ltd needed further equity finance in 2015 after initial capital was chewed up dealing with production problems and remedying faults in the carts’ electronics.
In receivership for two years from 2017, and in liquidation since 2020, insolvency specialists have been struggling to unravel Aisleworx’ finances.
Evidence was given of Aisleworx flying on a wing and prayer; dependent almost entirely on Mr Bartlett’s entrepreneurial zeal, manufacturing contacts and business connections.
Proper financial reporting was all but non-existent, with management accounts later being reworked by Aisleworx’ liquidators in an attempt to identify the company’s financial position.
A claim by initial investor PG Admin Ltd to be owed USD 3.4 million was disallowed by Aisleworx’ liquidator. She accepted PG’s claim in the liquidation for USD 284,000 only.
PG is controlled by Auckland-based Kerrin Harrison.
PG Admin spearheaded High Court litigation in 2023 claiming Mr Bartlett was personally liable to pay USD 3.4 million, alleging breaches of a multitude of director’s duties.
All claims were dismissed.
In an unusual move, Justice Jagose kept the case open, suggesting PG Admin reformulate its claim to concentrate on what he called the ‘real controversy:’ Aisleworx’ 2015 restructuring which saw control of Aisleworx’ assets pass to a newly-formed US subsidiary, without payment.
In evidence, Mr Bartlett admitted that at time of the 2015 restructuring Aisleworx was insolvent. It had run out of money and was unable to meet its payroll.
New investors in 2015 demanded a separate corporate vehicle be set up to continue the now re-capitalised business.
Mr Bartlett breached his duties to Aisleworx by transferring control of business assets, both tangible and intangible, across to this new company, without payment, the High Court held.
To determine appropriate compensation, Justice Jagose indicated the best he could do is rely on the much-criticised accounting information in existence at 2015.
Mr Bartlett was ordered to pay $361,100.
Justice Jagose ruled this compensation be paid to Aisleworx Ltd, now in liquidation, insolvent. In addition, Mr Bartlett is liable for interest payable from 2015 to date payment is made.
McKay v. Bartlett – High Court (22.12.23 & 17.04.25)
25.108