Kiwicare Services Limited (in liquidation) v Arachchilage
[2025] NZHC 2852
•30 September 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001754
[2025] NZHC 2852
UNDER the Companies Act 1994 and the High Court Rules 2016 IN THE MATTER
of an application for summary judgment
BETWEEN
KIWICARE SERVICES LIMITED (IN LIQUIDATION)
First Plaintiff
CARE BUDGET SERVICES LIMITED (IN LIQUIDATION)
Second PlaintiffAND
KAPILA WIJERATNE MAHAVITHANA ARACHCHILAGE
Defendant
JOHN SAGARA RANASINGHE PETHIYAGODA
Third Party
Hearing: 29 September 2025 Appearances:
B C McLeish and A Teng for Plaintiffs
No appearance by or on behalf of Defendant
Judgment:
30 September 2025
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 30 September 2025 at 3.30 pm pursuant to r 11.5 of the High Court Rules 2016.
Solicitors:
Waterstone, Auckland
………………………………
Registrar/Deputy Registrar
KIWICARE SERVICES LTD (in liq) v ARACHCHILAGE [2025] NZHC 2852 [30 September 2025]
Introduction
[1] The defendant, Mr Kapila Arachchilage, is the sole shareholder and director of the plaintiff companies (Kiwicare and Care Budget respectively). Both plaintiffs are in liquidation.
[2] The plaintiffs seek judgment against Mr Arachchilage for repayment of his overdrawn shareholder or director’s current accounts for transactions from 4 August 2018 totalling $749,104.00 (Kiwicare Current Account) and $279,783.81 (Care Budget Current Account) plus interest. There is no appearance by or on behalf of the defendant.1
Procedural background
[3] Initially, Mr Arachchilage actively defended the plaintiffs’ claim by instructing counsel and filing a statement of defence. The plaintiffs subsequently filed an application for their claims to be determined by summary judgment. This was withdrawn after engagement with Mr Arachchilage and assurances that he would provide documents and evidence to defend the claim. Further documents and evidence were never produced.
[4] The defendant went into voluntary bankruptcy on 28 April 2025. Leave was required to continue the proceeding against him,2 which was granted by Mount J on 11 June 2025.3
Approach
[5] This matter was set down for a proceeding by way of formal proof pursuant to r 15.9 of the High Court Rules 2016. However, that rule applies where a defendant does not file a statement of defence, which is not the case here.
1 The Registry had received communications from Mr Arachchilage’s former counsel indicating that there may be an appearance by or on his behalf. However, there no such appearance transpired.
2 Insolvency Act 2006, s 76(2).
3 Kiwicare Services Ltd (in liq) v Arachchilage HC Auckland CIV-2021-404-1754, 11 June 2025.
[6] Rather, r 10.7 of the High Court Rules applies. This provides that where the plaintiff appears at trial and the defendant does not, the plaintiff must prove the cause of action so far as the burden of proof lies on the plaintiff. It follows from the wording of this rule that the plaintiffs need not prove:4
(a)matters admitted in Mr Arachchilage’s statement of defence;
(b)allegations not denied in the statement of defence and therefore treated by r 5.48(3) as being admitted; and
(c)any matters Mr Arachchilage has raised by way of affirmative defence.
[7] The plaintiffs have filed comprehensive affidavits supporting their claim. These have been filed on behalf of the plaintiffs by Mr Damien Grant, a joint liquidator of Kiwicare and Care Budget, who has personal knowledge of the matters to which the brief relates. There has been no indication that Mr Grant was required for cross-examination. At the outset of the trial, I made an order that the evidence of Mr Grant be given by affidavit.5
[8] I am grateful for the comprehensive written and oral submissions by Ms McLeish, counsel for the plaintiffs, whose measured approach enabled me to test the plaintiffs’ claim in the absence of the defendant.
Factual background
[9] Kiwicare was incorporated on 30 September 2014. Care Budget was incorporated on 16 August 2016. The companies operated businesses specialising in commercial cleaning services prior to being placed into liquidation. Mr Arachchilage has been the sole director and shareholder since each was incorporated.
4 Jessica Gorman and others (ed) McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR10.7.0]. This is similar to an application for formal proof (Ferreira v Stockinger [2015] NZHC 2916 at [35]), but the requirement under r 15.9 is that on the affidavit evidence the claim be established to the Court’s satisfaction.
5 High Court Rules 2016, r 9.56.
[10] The plaintiffs were placed into liquidation by special shareholder resolution on 4 August 2020.6
[11] During the liquidators’ investigations into the affairs of the plaintiffs, including an analysis of the plaintiffs’ bank statements, it became apparent that Mr Arachchilage has an overdrawn director’s or shareholder’s current account owing to each company.
[12] The liquidators interviewed the defendant under oath pursuant to s 261 of the Companies Act 1993 (the Act). When questioned about the management of the plaintiff companies and the overdrawn current accounts, Mr Arachchilage denied knowledge of this, claiming that he was only the director on record and that John Sagara Ranasinghe Pethiyagoda (Mr Sagara) was the controlling mind of the plaintiffs.
[13] The liquidators made demand for payment of the current accounts by letters of 15 July 2021 (in respect of the Kiwicare Current Account) and 17 July 2021 (in respect of the Care Budget Current Account). The defendant did not respond and these proceedings were issued on 8 September 2021. I have already outlined the material aspects of the procedural history above at [3] and [4].
Legal principles
[14] A director’s or shareholder’s current account is a running account of payments between the director/shareholder and the company. Generally, advances made by a company to its shareholders through drawings on their current account are debts owed by the shareholders to the company and repayable on demand.7 As Muir J observed in Mizeen Painters Ltd (in liq) v Tapusoa:
[25] In the absence of an explanation, [company] drawings must be treated as advances from the company to the shareholders that are repayable on demand. They remain as repayable advances unless and until a company resolution classifies them otherwise. When the company’s accounting records provide no explanation for the drawings in the shareholders current account, they must be treated as advances from the company to the shareholders. The onus is on the defendants as directors and fiduciaries of the company to account to it for funds and establish the legitimacy of
6 Damien Grant and Adam Botterill are the current joint liquidators.
7 Mizeen Painters Ltd (in liq) v Tapusoa [2015] NZHC 826, [2016] NZAR 423 at [24] and cases cited therein.
any funds taken from the company; in other words, to explain what has become of company property in their hands.
[15] Payments from a current account may comprise salary or wage payments to a director. However, that requires compliance with s 161 of the Act, which stipulates the necessary authorisation and certification of remuneration or the provision of benefits to a director.
Factual analysis of the claim for repayment of overdrawn current accounts
[16] I have considered the affidavit evidence, exhibited documents and admissions by the defendant. I find that the liquidators’ claims for the amounts claimed are established on the balance of probabilities as outlined in my analysis below.
[17] The liquidators say that neither of the plaintiff companies appear to have had annual accounts finalised for any financial year.8 During their investigations into the affairs of the plaintiffs, the liquidators constructed the current accounts for the plaintiff companies from 4 August 2018.9 They have determined that Mr Arachchilage has an overdrawn shareholder’s or director’s current account (for the period from 4 August 2018)10 owing to the Kiwicare in the sum of $749,104.00, and to Care Budget in the sum of $279,783.81. Ms McLeish took me through the various transactions identified, which I summarise below.
[18]The Kiwicare Current Account of $749,104.00 comprises the following:
(a)between 4 August 2018 to 26 June 2019, payments totalling $57,611.78 were made for the defendant’s personal use and benefit;
(b)between 5 August 2018 and 16 June 2019, payments totalling $8,942.22 for fuel expenses were made for the defendant’s personal use and benefit;
8 There are draft unsigned accounts for Kiwicare for the year ended 31 March 2019.
9 As occurred in Mizeen Painters Ltd (in liq) v Tapusoa, above n 7.
10 The plaintiffs reserve their position for the period prior to the start date of the liquidators’ investigation.
(c)between 5 August 2018 and 10 June 2019, payments totalling
$366,220.00 were withdrawn from Kiwicare by ATM withdrawal;
(d)between 14 August 2018 and 2 September 2019, payments totalling
$329,380.00 were transferred from Kiwicare to Mr Arachchilage’s personal ASB account (the personal ASB account); and
(e)between 6 August 2018 and 8 March 2019, payments totalling
$13,050.00 were made from the personal ASB account to Kiwicare. These contributions have been deducted from the current account, leaving $749,104.00.
[19]The Care Budget Current Account of $279,783.81 comprises the following:
(a)between 22 October 2018 to 31 December 2018, payments totalling
$6,213.81 were made to various accounts for the defendant’s personal use and benefit;
(b)between 6 August 2018 and 4 June 2019, payments totalling
$283,560.00 were withdrawn from Care Budget by ATM withdrawal;
(c)between 19 October 2018 and 12 November 2018, payments totalling
$4,000.00 were transferred from Care Budget to the personal ASB account; and
(d)between 6 August 2018 and 10 December 2019, payments totalling
$13,990.00 were made from the personal ASB account to Care Budget. These contributions have been deducted from the current account, leaving $279,783.81.
[20] I find on the balance of probabilities that these amounts are drawings on Mr Arachchilage’s current accounts having regard to the following:
(a)It can be seen from the above that a large proportion of the overdrawn current account funds totalling $333,380 were applied to Mr Arachchilage’s personal ASB account.11
(b)Analysis of the statements of the personal ASB account shows:
(i)a number of the transfers were almost immediately withdrawn as cash from an ATM, predominately at ASB Lunn Ave;
(ii)there were some small payments from this account for expenditure such as McDonalds and other fast foods, Animates, BP, Super Liquor, and supermarkets/food stores (commonly New World Stonefields and Fruitworld); and
(iii)every month, there was a deduction from the account that appears to relate to insurance in Mr Arachchilage’s name.
(c)Transactions totalling $329,380 (for Kiwicare) and $283,560 (for Care Budget) related to cash extracted from the plaintiffs’ accounts at ATM machines. Mr Arachchilage is the sole authorised signatory on these accounts. I infer he is the person issued with, and therefore responsible for, the ATM card(s) associated with them. Consistent with the pattern of use of the personal ASB account, the withdrawals were commonly from ASB Lunn Ave.12 That supports a conclusion that these are Mr Arachchilage’s transactions.
(d)Regular payments totalling $4,455 were received by Ms Manel Sagarika Watawala Kankanamge, a person that I accept has been correctly identified by the liquidators to be Mr Arachchilage’s partner. The notations on this suggest that they did not relate to legitimate company operations.13
11 This comprises $329,380 from Kiwicare and $4,000 from Care Budget.
12 Mr Arachchilage through counsel requested CCTV footage of ATM transactions from the ASB. In a follow-up enquiry by the liquidators requesting this in April 2025, Mr Arachchilage’s solicitor advised that there had been no response as far as he knew. No footage was provided subsequently.
13 There are references to “Sagi”, “sagiloan” and similar phrases.
(e)Personal expenses identified from the plaintiffs’ accounts included payments to Animates, New World, Super Liquor, Fruitworld and Unichem. There is a considerable overlap with retailers whose transactions appear on the personal ASB account, suggesting both that these are his transactions and that he had control of the card over the transaction period. There are also considerable sums spent on fuel, primarily at BP Lunn Ave. Mr Arachchilage has not explained this expenditure.
[21] Mr Arachchilage said by his statement of defence that the company funds were not received by him or for his benefit. The above analysis is to the contrary. More recently, in his bankruptcy, Mr Arachchilage has declared the full Kiwicare Current Account and Care Budget Current Account as owing by him personally.14 In essence, he has now acknowledged his indebtedness.
[22] Mr Arachchilage admitted by his statement of defence that he did not authorise any remuneration or benefits from the plaintiff companies, as would be required by s 161(1) of the Act. Nor has he provided any evidence to refute the plaintiffs’ claims against him or the quantum of the overdrawn current accounts.
[23] The Kiwicare Current Account and Care Budget Current Account advances to him are therefore immediately payable to the plaintiffs by the defendant under s 161(6) of the Act.
[24] I find that Mr Arachchilage is liable to the plaintiffs for the value of the Kiwicare Current Account and Care Budget Current Account under s 161(5) of the Act.
Defences
[25] While I strictly do not need to consider any affirmative defences, in deference to the submissions I received — and to the extent there is a level of overlap to establishing the claimed level of the current accounts — I address these briefly.
14 In fact, the Kiwicare Current Account figure acknowledged is overstated, as it includes the Care Budget Current Account figure.
[26] Mr Arachchilage’s position by his statement of defence is that Mr Sagara should instead be liable for the current accounts on the basis that he was a deemed director. It appears that Mr Sagara is (or was) an undischarged bankrupt who Mr Arachchilage claims was the true person operating the plaintiff companies.
[27] This factual premise does not engage with the detailed analysis of expenditure I outlined earlier, which shows expenditure applied for or to Mr Arachchilage’s personal use or to his bank account. Nor does it address the patterns of spending which support that the accounts/cards were in Mr Arachchilage’s custody or control.
[28] The plaintiffs provided evidence that Mr Arachchilage had an appreciation of the risks involved in being a director and made efforts to avoid being viewed as liable.15 Company records also suggest that the business previously operated by Kiwicare may now be operated by KS Services Ltd, a company closely associated with Mr Arachchilage.16 This is inconsistent with Mr Arachchilage’s position that he was not involved with Kiwicare.
[29] When Mr Arachchilage was corresponding with the liquidators, he sought to support his claim that Mr Sagara was operating the company and/or was responsible for company transactions by suggesting that Mr Sagara forged his signature to enter into financing transactions to acquire a number of vehicles.17 However, the suggestion that the reputable car dealers involved did not seek identity verification for such transactions is implausible.18 Further, Mr Arachchilage has now declared debts owed on two of these financing transactions (presumably as guarantor) in documents filed in his bankruptcy, hence acknowledging he was the true signatory. These matters undermine the initial position Mr Arachchilage took with the liquidators and suggests what he says cannot be relied upon.
15 Mr Arachchilage sought assistance from his accountant to provide an affidavit to support that Mr Sagara was the acting director, suggesting a level of appreciation of his potential liability.
16 Ms Kankanamge, Mr Arachchilage’s partner, is the sole director. The company is listed as operating in the cleaning industry. Mr Arachchilage’s email address is given as the contact details.
17 Mr Arachchilage obtained an inconclusive expert report on whether certain signatures of his were forgeries.
18 I do not need to rely on the statement in Mr Grant’s affidavit that certain car dealers demonstrated to the liquidators that they had in fact sought identification verification.
[30] In any event, as the de jure director of the companies, Mr Arachchilage was not entitled to allow Mr Sagara to control the company and its accounts.19 In the circumstances, transactions on the accounts can fairly be attributed to Mr Arachchilage.
Result and orders
[31]The plaintiffs’ claim succeeds for the sums sought.
[32]I make the following orders:
(a)I enter judgment against the defendant in the sum of $749,104.00 for his overdrawn current account with the first plaintiff;
(b)I enter judgment against the defendant in the sum of $279,783.81 for his overdrawn current account with the second plaintiff;
(c)I award interest on the above sums from the date of judgment at the rate prescribed by the Interest on Money Claims Act 2016; and
(d)I make an award of costs on a 2B basis of $36,806, as set out in the attached schedule (sch A), plus disbursements for which proof of payment is provided as fixed by the Registrar.
Anderson J
19 Mason v Lewis [2006] 3 NZLR 225 at [58], [83] and [115].
SCHEDULE A
Step claimed
Daily recovery rate for Category 2
Time allocation
Scale costs
Step 1 Preparing and filing statement of claim
$2,390
3
$7,170
Step 10 Preparation for first case management conference
$2,390
0.4
$956
Step 11 Filing joint memoranda for case management
conference (23 May 2023)
$2,390
0.4
$956
Step 11 Filing joint memoranda for case management
conference (1 August 2023)
$2,390
0.4
$956
Step 20 List of documents for discovery
$2,390
2.5
$5,975
Step 21 Inspection of documents
$2,390
1.5
$3,585
Step 11 filing separate memorandum for case
management conference (8
December 2023)
$2,390
0.4
$956
Step 13 Appearance at case management conference (12
December 2023)
$2,390
0.3
$717
Step 11 Filing joint memoranda for case management
conference (12 April 2024)
$2,390
0.4
$956
Step 11 Filing joint memoranda for case management
conference (12 June 2024)
$2,390
0.4
$956
Step 11 Filing joint memoranda for duty list call (9 September 2024) $2,390
0.4
$956
Step 11 Filing joint memoranda for duty list call (11 June 2025)
$2,390
0.4
$956
Step 11 Filing joint memoranda for duty list call (8 July 2025)
$2,390
0.4
$956
Step 30 Preparation of affidavits
$2,390
2
$4,780
Step 32 Preparation for hearing
$2,390
2
$4,780
Step 34 Appearance at hearing by principal counsel (half day)
$2,390
0.5 (half day)
$1,195
Total
$36,806
0
2
1