McKay Shipping wins $1.6m damages from IT supplier

Avanti Systems ordered products from distributor Express Data and on-sold these for prices "well in excess of a reasonable market price', writes Judge

Auckland’s High Court has ordered Jimmy Min Ying Miu and Yuen Ling Fung of Avanti Systems and Avanti System Integration, to pay more than $1.62 million in damages to Auckland-based McKay Shipping.

Avanti Systems, which has no connection with technology solutions provider Avanti Solutions, ordered products from distributor Express Data and on-sold these to McKay Shipping for prices “well in excess of a reasonable market price for the items”, writes associate Judge John Faire in a judgment issued in September.

Avanti Systems also invoiced McKay Shipping for products not required, and products never supplied, according to the judgement.

Avanti Systems was a supplier to McKay from 2000-2006, says the judgment.

McKay Shipping’s chief executive Craig Harris could not comment on the case.

“It’s got a long way to go yet. I can’t give you any opinion, the reason being it is still in legal hands at this point in time,” he says.

Avanti Systems mainly bought software licences from Express Data, which it then sold to McKay Shipping, says Paul Plester, general manger of Express Data.

The Court ordered Express Data to provide information regarding the transactions, says Plester. He adds that Express Data screens its resellers to make sure they are genuine, but the company can’t act as a police force. His understanding is that Avanti Systems had been a reseller with Express Data for at least two or three years, and that the company also had been supplying other customers, besides McKay.

“It’s a shame, because the vast majority of our resellers operate on a very high degree of trust with their customers,” he says.

Many are even considered part of their customers’ companies, he says.

Plester says he wouldn’t know how common this type of situation is. This is the first time Express Data has been served with a court order to produce documents, he says.

To avoid paying an over-price for software, Plester’s advice to end-users is to check the recommended retail price for software licensing on vendors’ websites.

The High Court brought in an independent IT consultant, CJ Craig, to assess McKay’s losses. Craig looked at 90% of the invoices from Avanti Systems to McKay Shipping during the period 2005-2006, and compared these to the equipment and software McKay had received. Craig’s investigation found that 77.3%, or $665,075.83, of what McKay had spent with Avanti Systems during that period was an overpayment, writes Judge Faire.

For the period 2000-2004, Craig did a sample analysis of actual transactions, which found that McKay had paid Avanti Systems a total of $337,033.62 for products, when McKay should have paid $137,020.10 for these products.

Craig then applied the percentage of overpayment in 2005-2006, at 77.3%, to the total amount McKay spent with Avanti Systems in 2000-2004, finding that the payments that should not have been paid in that period amounted to $963,061.23.

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