In Kiwi Best Realty Ltd (In Liquidation) v Kashkari, the sole director of a failed real estate business was ordered to pay compensation for breaching his duties under ss 131, 135 and 136 of the Companies Act 1993.
Kiwi Best Realty was liquidated in September 2014, with over $600,000 owing to the IRD. The High Court noted that the company had been balance-sheet insolvent from year end 2012.
Mr Kashkari defended his failure to address the debt, explaining he had decided to prioritise trade creditors to keep the company running, and therefore give the real estate market time to improve in the wake of the GFC. The Court was not satisfied with this 'head in the sand' approach, calling his priority decision and his failure to file returns for an extended period a serious error of judgement.
In assessing the quantum of compensation payable by Mr Kashkari, the Court noted his behaviour went well beyond blind faith or muddle-headedness, and the default period was lengthy. On the other hand, the fact that the IRD had inexplicably delayed the liquidation petition for so long despite the company's serial failure to provide returns justified a 25% reduction in the compensation. Mr Kashkari was ordered to pay the total debt owed to IRD less 25%.
See Court decision here.