Smartpay Limited v Kumar
[2025] NZHC 2409
•25 August 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-002098
[2025] NZHC 2409
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Manas Dharmendra Kumar
BETWEEN
SMARTPAY LIMITED
Judgment Creditor
AND
MANAS DHARMENDRA KUMAR
Judgment Debtor
Hearing: 20 August 2025 Appearances:
D Chisholm KC and J Ryan for the Judgment Creditor Judgment Debtor in person
D Chisholm KC and J Ryan for 4468440 Limited (in liquidation) as creditor in support
Judgment:
25 August 2025
JUDGMENT OF ASSOCIATE JUDGE GELLERT
This judgment was delivered by me on 25 August 2025 at 10:00 am.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Date ………………….
Solicitors:
Claymore Partners, Auckland David Chisholm KC, Auckland
SMARTPAY LTD v KUMAR [2025] NZHC 2409 [25 August 2025]
Introduction
[1] The judgment creditor, Smartpay Ltd (Smartpay), applies for the judgment debtor, Mr Kumar, to be adjudicated bankrupt. This application is supported by the liquidators of 4468440 Ltd (in liquidation) (formerly Optimizer Corporation Ltd) (OCL).1 Smartpay’s bankruptcy notice claimed $86,452.14. OCL says it is owed
$1,121,412.29 plus accruing interest.
[2] Mr Kumar opposes the application on the principal basis that the court does not have jurisdiction to hear the matter because leave was not granted properly in the first instance to serve the bankruptcy notice overseas. As a consequence there was no act of bankruptcy and no basis for the adjudication proceedings to be issued. Alternatively, Mr Kumar says that, even if leave was granted to serve the bankruptcy notice and adjudication proceedings overseas and proper service of those documents was effected, the court should nevertheless exercise its discretion to stay, halt, or refuse Smartpay’s application for adjudication.
[3]In essence, this proceeding turns on the following issues:
(a)Was leave granted to serve the bankruptcy notice overseas?
(b)Was the bankruptcy notice property served on Mr Kumar?
(c)Was leave granted to serve the bankruptcy proceedings overseas?
(d)Were the bankruptcy proceedings properly served on Mr Kumar?
(e)If the bankruptcy proceedings were properly served, should the Court exercise its discretion to refuse, stay, or halt the application to adjudicate Mr Kumar bankrupt?
1 Although OCL has since been renamed 4468440 Ltd (in liquidation), I will use the former name, as previous Courts have done in previous proceedings involving OCL.
Preliminary issues
[4] As a preliminary matter, Mr Kumar attempted to file a further affidavit at 3.56 pm on Friday, 15 August 2025. He explained that he believed this was permitted because it was three working days prior to the scheduled hearing. He further explained that he sought to file the evidence because it addressed matters in the submissions filed on behalf of Smartpay.
[5] Mr Kumar’s evidence in support of his opposition to the adjudication was required to be filed and served together with his notice of opposition, under r 24.18 of the High Court Rules 2016 (HCR).2 The parties had subsequently sought timetable orders by consent for the filing of reply evidence. No timetable orders were made permitting the filing of additional evidence by either party.
[6]Following receipt of Mr Kumar’s affidavit, Smartpay:
(a)at 7.29 pm on 18 August 2025, issued a Notice to Cross Examine Mr Kumar at the hearing; and
(b)at 4.56 pm on 19 August 2025 filed an affidavit Ms Monica Paez which totalled 70 pages including annexures.
[7] Mr Kumar filed written memoranda objecting to his cross examination (among other reasons on the basis that his affidavit did not include any new material) and as to the filing of Ms Paez’s affidavit.
[8] At the beginning of the hearing I heard from Mr Kumar regarding whether he wished to make an oral application for leave to file his affidavit out of time, noting that such an application was required. It was explained to Mr Kumar that if I was persuaded that leave was appropriate, then it would likely follow that any application by Smartpay for leave to file a notice to cross examine out of time and for further evidence would be considered favourably to address any prejudice that Smartpay might suffer from the late filing of his affidavit.
2 In this case, the deadline was 1.00 pm on the last working day before 22 May 2025.
[9] After consideration, including on the basis that his further affidavit did not contain any material new information, Mr Kumar confirmed that he did not wish to seek leave. Accordingly, the affidavit of Mr Kumar affirmed on 14 August 2025 and the affidavit of Ms Paez affirmed on 19 August 2025 were not accepted for filing. It followed that Smartpay did not seek to cross examine Mr Kumar.
Background
[10] Mr Kumar was the major shareholder and director of companies within a group comprising a parent company, Optimizer HQ Ltd (in liquidation) (HQ); and two wholly owned subsidiaries, Odev Ltd (in liquidation) (Odev) and OCL.
[11] On 10 December 2015, OCL was put into liquidation. As a creditor of OCL, Smartpay subsequently bought proceedings against Mr Kumar under s 301(1)(b)(ii) of the Companies Act 1993 for breaching his duties to OCL.
[12] On 12 May 2022, Downs J delivered a judgment finding that Mr Kumar had breached his director duties under ss 131, 135, and 136 of the Companies Act 1993 and was accordingly liable for $1,121,412.29.3 Additionally, Downs J ordered Mr Kumar to pay Smartpay costs and disbursements totalling $86,452.14.4
[13] Mr Kumar did not pay Smartpay the costs ordered by Downs J. As a result, this Court issued a issued a bankruptcy notice based on the unpaid costs order. Smartpay claimed that it had served this notice on Mr Kumar on 26 July 2023.
[14] On 26 September 2023, Smartpay filed its first application for Mr Kumar to be adjudicated bankrupt (first application). By this point, Mr Kumar had left New Zealand and was in India.
[15] On 30 July 2024, Associate Judge Gardiner (as she then was) delivered a judgment on the first application. In brief, she dismissed the application on the basis
3 Smartpay Ltd v Kumar [2022] NZHC 997. Mr Kumar’s appeal against this judgment was dismissed by the Court of Appeal on 31 August 2023. Mr Kumar’s subsequent application for leave to appeal to the Supreme Court was also dismissed on 19 February 2018.
4 Smartpay Ltd v Kumar [2023] NZHC 314.
that while Smartpay obtained orders for substituted service by email, it had not obtained leave to serve Mr Kumar overseas as required by HCR 6.30 and s 17(3) of the Insolvency Act 2006. Consequently, Mr Kumar was found not to have committed an act of bankruptcy and, therefore, Smartpay did not have standing to bring its application.5
[16] As Associate Judge Gardiner observed, the practical effect of her judgment was that Smartpay needed to issue another bankruptcy notice and then make another application. To facilitate this process, she:
(a)granted Smartpay leave under HCR 6.30 to issue and serve any future bankruptcy notice and certified judgment on Mr Kumar outside New Zealand;6
(b)granted Smartpay leave to issue and serve any subsequent creditor’s application for adjudication and summons to debtor on Mr Kumar overseas;7 and
(c)ordered Mr Kumar to provide an address within five working days for personal service of the bankruptcy notice on him in India, and in the event that he did not provide such an address, ordered that service could be effected on Mr Kumar of the bankruptcy notice and subsequent proceedings by email at [Redacted].8
[17] On 13 August 2024, Smartpay requested that the Court issue a bankruptcy notice against the judgment debtor pursuant to the leave granted by Associate Judge Gardiner’s orders made on 30 July 2024.
[18] Mr Kumar provided an address for service. However it was not an address at which he could be served personally. The address was for Siddhartha Koley, at [Redacted], India. Mr Koley appears to be Mr Kumar’s lawyer.
5 Smartpay Ltd v Kumar [2024] NZHC 2088. For a discussion of the law concerning applications to set aside a bankruptcy notice, see [26]–[35] below.
6 Smartpay Ltd v Kumar, above n 5, at [47].
7 At [47].
8 At [50].
[19] Smartpay unsuccessfully attempted to serve the bankruptcy notice on Mr Koley. The efforts taken to serve Mr Koley are detailed in the affidavit of service of Ms Biswas. The affidavit outlines Ms Biswas’ numerous attempts to serve documents on Mr Koley as well as her inability to verify the details of Mr Koley at the Alpore Court, the place where Mr Koley says he is practicing. Ms Biwas states that, in her opinion, Mr Kumar has continued to avoid service of the documents.
[20] On 21 October 2024, Smartpay emailed the sealed order and bankruptcy notice to [Redacted]. This was, strictly speaking, in compliance with the orders as to service made by Justice Gardiner on 30 July 2024.
[21] Mr Chisholm KC, counsel for Smartpay, explained that, out of an abundance of caution, Smartpay then applied for substituted service orders permitting service on Mr Kumar by email out of the jurisdiction, in reliance on HCR 6.30. That application was made without notice on 4 February 2025.
[22] On 11 February 2025, Associate Judge Britain granted Smartpay’s substituted service application in a minute dated 11 February 2025. Specifically, orders were made for Smartpay to serve the bankruptcy notice and any subsequent bankruptcy proceedings on Mr Kumar out of jurisdiction, via email.9
[23] On 13 February 2025, Smartpay’s solicitors served the bankruptcy notice on Mr Kumar in accordance with these orders. This is confirmed in the affidavit of service of Mr Gregor Barclay.
[24] On 9 April 2025, Smartpay’s solicitors also served the creditor’s application and summons to debtor on Mr Kumar in accordance with those orders.
Legal Principles — Leave to serve bankruptcy notice and subsequent adjudication proceedings outside of New Zealand
[25] Section 13 of the Insolvency Act 2006 (the Act) prescribes when a creditor may apply for a debtor to be adjudicated bankrupt:
9 I note that these orders were made after Associate Judge Brittain’s minute was recalled and reissued.
13 When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[26] Where a debtor is overseas, s 17(3) of the Act applies. That section provides that a bankruptcy notice must be served on a debtor in New Zealand, unless the court gives permission for service outside New Zealand. In addition, leave is required under HCR 6.30 to serve the bankruptcy notice outside New Zealand, because a bankruptcy notice is a “document other than an originating document” which is required to be served on the judgment debtor, and so falls within that rule.
[27] The accepted approach to considering applications for leave to serve a bankruptcy notice outside New Zealand under s 17(3) of the Act and HCR 6.30 was set out by Associate Judge Bell in Westpac New Zealand Ltd v Bolton, (and subsequently applied in Commissioner of Inland Revenue v Raynal):10
[14] On applications for leave to serve a bankruptcy notice out of New Zealand I generally apply the test under r 6.28(5) of the High Court Rules, but with a modification. Because a bankruptcy notice is not a civil proceeding, I look ahead to any future bankruptcy application by the creditor relying on non-compliance with the bankruptcy notice. I consider whether leave should be granted under r 6.28(5) for that bankruptcy application. I also consider whether it is appropriate for any bankruptcy of the debtor to be administered in New Zealand. If so satisfied, I generally give leave for the bankruptcy notice and the bankruptcy application at the same time.
[15] When leave is granted to serve a bankruptcy notice out of New Zealand, the court must fix time to comply with the notice under s 17(4)(b) of the Insolvency Act. For service of a bankruptcy notice in Australia, generally 20 working days is fixed, although that may be extended if substituted service is ordered, to allow extra time for the notice to come to the actual knowledge of the debtor.
10 Westpac New Zealand Ltd v Bolton [2014] NZHC 693; subsequently applied in Commissioner of Inland Revenue v Raynal [2023] NZHC 1664.
[28] If the bankruptcy notice is not complied with, an act of bankruptcy occurs which entitles the judgment debtor to issue the bankruptcy proceedings under s 13 of the Act. The bankruptcy proceedings are a civil proceeding for the purposes of HCR 6.28, for which leave is also required to serve the originating document out of New Zealand. Associate Judge Bell explained this:11
[16] A bankruptcy application, on the other hand, is an originating document. Leave to serve a bankruptcy application out of New Zealand is therefore required under r 6.28. While it is an originating document, it does not come within any of the gateways under r 6.27(2). Specifically, it is not a proceeding to enforce any judgment or arbitral award under r 6.27(2)(m) because the creditor in a bankruptcy application does not need to have a judgment for the debt (although they commonly do).
[17] Unless the court has extended the time under r 1.19, a creditor’s application must be served on a debtor at least 10 working days before the hearing of the application. That applies to debtors served both inside and outside New Zealand.
[29] The accepted process is for a judgment creditor to seek leave to a bankruptcy notice and any subsequent adjudication application overseas, in the same application. That is appropriate, because the court considers the factors in HCR 6.28(5) when faced with an application for leave to serve the bankruptcy notice, so it secures the just, speedy, and inexpensive determination of the proceeding to also consider granting leave in relation to the adjudication application at the same time.
[30] It is not uncommon for an application for substituted service to be brought after leave has been granted to serve a bankruptcy notice or adjudication proceedings overseas, or shortly thereafter. That application requires different considerations, including that the proposed methods of service will bring the documents to the attention of the debtor.12
Legal principles regarding adjudication
[31] Relevantly, s 17 of the Act provides that “an act of bankruptcy” includes the following:
17 Failure to comply with bankruptcy notice
11 Westpac New Zealand Ltd v Bolton, above n 10.
12 High Court Rules 2016, r 6.8.
(1)A debtor commits an act of bankruptcy if—
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b)execution of the judgment or order has not been halted by a court; and
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the time limit specified in subsection (4),—
complied with the requirements of the notice; or
(ii) satisfied the court that he or she has a cross claim against the creditor.
(2)The form that the bankruptcy notice must take is set out in section 29.
(3)The debtor must have been served with the bankruptcy notice in New Zealand, unless the court gave permission for the service of the notice on the debtor outside New Zealand.
(4)The time limit referred to in subsection (1)(d) is, —
(a)if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service; or
(b)if the debtor is served outside New Zealand, the time specified in the order of the court permitting service outside New Zealand.
…
[32] If the requirements under s 13 of the Act are established, the starting point is that the creditor is prima facie entitled to an adjudication order.13 However, whether the court makes an adjudication order is a matter of discretion which the court exercises under ss 36 and 37 of the Act:
36Court may adjudicate debtor bankrupt
The court may, at its discretion, adjudicate the debtor bankrupt if the creditor has established the requirements set out in section 13.
37Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a)the applicant creditor has not established the requirements set out in section 13; or
13 Mainzeal v Yan [2019] NZHC 3145 at [10].
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[33] Additionally, s 38 of the Act provides the court with a general discretion to make an order halting a creditor’s application on the terms and conditions (if any) that the court thinks appropriate.
[34] The general principles as to the exercise of the court’s discretion were summarised by Associate Judge Bell in Re Commissioner of Inland Revenue, ex parte Brown:14
[14] Even when a creditor satisfies the requirements under s 13 of the Insolvency Act, adjudication does not follow automatically. The court has a discretion under ss 36 and 37 whether to adjudicate the debtor bankrupt. A leading authority on the exercise of the court’s discretion is the Court of Appeal’s decision in Baker v Westpac Banking Corporation:
The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Ellis v NZI Finance Limited and McHardy v Wilkins & Davis Marinas Limited (in receivership). It is proper for the court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt’s affairs and the disqualifications that go with bankruptcy. In the end the Court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[15] Mr Brown’s counsel referred to Associate Judge Faire’s decision in Re Fontein, ex parte Bank of New Zealand. I regard what Associate Judge Faire said there as being consistent with the principles laid down in Baker v Westpac Banking Corporation:
[8] In Eide v Colonial Mutual Life Assurance Society Ltd the general principles involved in the exercise of the discretion under the
14 Re Commissioner of Inland Revenue, ex parte Brown [2016] NZHC 1232.
then Insolvency Act 1967, s 26 (now the Insolvency Act 2006, s 37) were analysed. The important matters were the following:
1)“A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made.” McHardy v Wilkins & Davies Marinas Ltd (Court of Appeal, Wellington, CA 54/93, 7 April 1993) at p 3.
2)“. . . in the exercise of the discretion under s 26 it is proper for the Court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.
3)In determining whether an order should be made, the wider public interest must be taken into account to determine whether adjudication is “conducive or detrimental to commercial morality and the interests of the general public.” Re Nisbett, ex parte Vala [1934] GLR 553 at p 556.
4)“. . . on a bankruptcy petition the Court must have regard to public interest in a way which transcends the interest of the immediate parties to the proceeding. The public interest in exposing and
controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.” Re Fidow [1989] 2 NZLR 431 at p 444.
5)Absence of assets is a factor but:
“. . . even the undoubted absence of assets will not necessarily preclude an order, for the circumstances may be such that the debtor ought in the public interest to be visited with the disqualifications that go with bankruptcy.” McHardy v Wilkins & Davies Marinas Ltd (supra) at p 3.
6)Another matter:
“. is the potential for further investigation.
A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means.” Re Fidow (supra) at p 444.
7)There is a need:
“. . . for the Court to balance the various considerations relevant to the case, and to determine whether in the end the debtor has succeeded in showing that an order ought not to be made”. McHardy v Wilkins & Davies Marinas Ltd (supra) at p 4.
[9] To the above summary I add that the oppressive use of the bankruptcy process may be a ground for refusing an order: Baker v Westpac Banking Corporation.
[16] I find it useful in exercising the discretion to take into account five features of bankruptcy. I take those into account because bankruptcy is only one possible response to a debtor’s insolvency. For further elaboration on these five elements see my decisions in Re Cribb, ex parte Evia Rural Finance Ltd and Darby v Official Assignee. The five elements are these:
(a)Bankruptcy allows the affairs of the debtor to be brought under the independent control of the Official Assignee so that assets can be realised for the benefit of creditors. That aspect is very much in the interests of creditors
(b)Bankruptcy may be imposed as a punishment on some debtors, (and this case arises very rarely) because of the recklessness with which they have run up credit.
(c)Bankruptcy may be imposed to promote accountability.
(d)Bankruptcy may provide a measure of protection to the public because of the disabilities imposed on the debtor – in particular, there are restrictions on the debtor incurring credit and carrying on business.
(e)Bankruptcy entails a release for the debtor from liabilities which he is unable otherwise to manage. That is the rehabilitative aspect to bankruptcy in that it enables the debtor, once discharged from bankruptcy, to resume a normal life.
(Footnotes omitted)
Submissions
Applicant’s arguments
[35] Mr Kumar applies to set aside the bankruptcy notice on the basis that leave was not granted under s 17(3) of the Act and HCR 6.30 for the bankruptcy notice to be served outside New Zealand. He says that leave to serve the bankruptcy notice outside of New Zealand is a gateway issue. In the absence of leave being granted, there was no proper service of the notice or subsequent act of bankruptcy, meaning that the court does not have jurisdiction to consider the application for adjudication.
[36] He says that the requirement for leave to be granted should not be conflated with the separate consideration as to whether service has been properly effected on him in accordance with rules as to service overseas.
[37] Mr Kumar went on to say that the bankruptcy notice and bankruptcy proceedings were not validly served. Specifically, Mr Kumar says that there were three defects which rendered the service invalid:
(a)First, he says that Smartpay has not complied with Gardiner J’s orders regarding the method of service, and that Associate Judge Brittain’s minute dated 10 February 2025 did not grant leave under HCR 6.30.
(b)Secondly, he says that the service did not comply with HCR 6.32(4) on the basis that it was contrary to Indian law governing the service of documents.
(c)Thirdly, he says that the service did not comply with HCR 6.31 because it did not inform him of the information prescribed in that rule.
[38] Mr Kumar was clear that his key and primary argument is that this is an application concerned with a jurisdictional issue. He emphasised that his awareness of the proceedings did not amount to effective service by the judgment creditor, or constitute a submission to the jurisdiction. He referred to Commerce Commission v
Viagogo AG for the proposition that jurisdiction is not a technicality and that the court cannot proceed to determine a matter in the absence of jurisdiction.15
[39] Mr Kumar said that there is no basis for the court to consider its discretions in ss 37 and 38 of the Act, because there is no jurisdiction to hear the adjudication application. Alternatively, Mr Kumar says that even if leave was properly granted and service of the relevant documents was valid, the court should nevertheless exercise its discretion to set aside or refuse the adjudication preceding. Mr Kumar says that it is not just and equitable to adjudicate him bankrupt because as there is no real prospect that creditors will be able to recover anything (as he has no assets in New Zealand) and there is also no public interest in adjudicating him bankrupt.
[40] Overall, Mr Kumar emphasised that the submissions made by Smartpay regarding his business interests, assets, and commercial behaviour are not relevant. He explained that this is not a hearing which concerns his morality, but rather it concerns Smartpay’s own inability to follow correct court procedures and service requirements, which are not technicalities. In his view this application by Smartpay is disproportionate, as it relies on costs orders in the amount of $86,452.14, and any complaints about legal cost and time spent are matters of Smartpay’s own making. He says this is not a matter of public interest.
[41] Mr Kumar says that the only appropriate outcome is that this application should be summarily dismissed.
Respondent’s submissions
[42] Mr Chisholm submits that: leave was granted to issue and serve the bankruptcy notice overseas by both Associate Judge Gardiner and Associate Judge Brittain; Mr Kumar was properly served with the bankruptcy notice; and he has plainly committed an act of bankruptcy by failing to comply with the notice within the statutory timeframe. It follows that the adjudication proceeding was properly brought.
15 See Commerce Commission v Viagogo AG [2019] NZCA 472 at [98].
[43] Regarding Mr Kumar’s argument that the service of the bankruptcy notice and other documents were invalid, Mr Chisholm says these claims are untenable for the following reasons:
(a)Smartpay complied with Associate Judge Gardiner’s orders for service as to the bankruptcy notice and made all reasonable attempts to personally serve Mr Kumar. In contrast, Mr Kumar failed to comply with Associate Judge Gardiner’s orders by not providing an address where he could be personally served.
(b)Smartpay has complied with every order of the Court and has obtained further orders to ensure that Mr Kumar is made aware of the bankruptcy proceedings and has a fair chance to respond in these proceedings.
(c)It is clear by Mr Kumar’s engagement in these proceedings (including filing of documents and correspondence with counsel and the court) that he has received the relevant documents and correspondence and is aware of the proceedings.
[44] As to Mr Kumar’s arguments that the court should exercise its discretion to stay or halt the proceeding, Mr Chisholm says that there is no good reason for the court to make such an order. In support, Mr Chisholm submits that:
(a)Mr Kumar has failed to establish that a miscarriage is probable (rather than possible), particularly given his failure to provide any financial information in support of his applications and his failure to prove that service has not been effected.
(b)The relevant factors in the present case point away from the court exercising its discretion to halt the proceeding, namely that:
(i)there will not be a substantial miscarriage of justice by Mr Kumar losing business opportunities;
(ii)Smartpay and other third parties will be prejudiced by a halt; and
(iii)Mr Kumar’s serious breaches of director duties and the failure to provide disclosure of his financial position mean that there is a significant public interest in adjudicating him bankrupt.
Discussion
Was leave granted to issue the bankruptcy notice overseas?
[45] As Mr Kumar correctly identified, under s 17(3) of the Act and HCR 6.30, the leave of the court is required to serve a bankruptcy notice overseas. In the absence of such leave, the bankruptcy notice has not been properly issued. No act of bankruptcy can transpire where there is no valid bankruptcy notice.
[46] However in this case, there is no question that leave has been granted by this court after a careful consideration of the factors. Associate Judge Gardiner expressly considered that leave was required to serve the bankruptcy notice overseas, applied the test in HCR 6.28, and referred to HCR 6.30. Nothing more was required in order for Smartpay to be permitted to request that the Court issue the bankruptcy notice and serve the bankruptcy notice outside of New Zealand.16
Was the bankruptcy notice properly served?
[47] A separate consideration is whether the bankruptcy notice was properly served on Mr Kumar in accordance with a compliant method of service. That is because if Mr Kumar can establish that he was not served with the notice, then the time for complying with the bankruptcy notice did not begin to run.
[48] The method of service on Mr Kumar was also addressed by Associate Judge Gardiner, when she ordered that Mr Kumar provide an address for personal service and if he did not, that he could be served by email.17
16 [43]–[50].
17 [50].
[49]Mr Kumar did not appeal that judgment.
[50] Mr Kumar did not comply with Associate Judge Gardiner’s order to provide an address at which he could be served personally, and instead provided Mr Koley’s address to Smartpay. Even though Mr Kumar did not provide an address in accordance with the Court’s directions, Smartpay did attempt to serve the bankruptcy notice personally on Mr Koley. Those attempts were ultimately unsuccessful. Because Mr Kumar did not comply with Associate Judge Gardiner’s order, it follows that service of the bankruptcy notice on Mr Kumar overseas could be undertaken by email. Smartpay served Mr Kumar with the bankruptcy notice on 2 December 2024, in accordance with that order. This was confirmed in the affidavit of service of Ms Paez, affirmed on 19 May 2025.
[51] It was not necessary for Smartpay to seek further orders as to substituted service of the bankruptcy notice or any subsequent bankruptcy proceedings on Mr Kumar outside of New Zealand. Nevertheless, it filed an application in this proceeding for orders as to substituted service at a different email address. Those orders were granted on 11 February 2025 and complied with on 13 February 2025.
[52] In relation to Associate Judge Brittain’s orders as to substituted service, Mr Kumar says that:
(a)The proper procedure would have been to seek a variation of Associate Judge Gardiner’s orders, if he failed to provide a proper address to Smartpay in accordance with her court order.
(b)By making an application for substituted service in this proceeding, Smartpay had “untethered” itself from the leave Associate Judge Gardiner granted under HCR 6.30 to serve the bankruptcy notice, and also the subsequent proceedings outside, New Zealand.
(c)This proceeding stems from Associate Judge Brittain’s orders, which lacked the requisite granting of leave under HCR 6.30.
(d)Associate Judge Brittain’s orders were recalled and reissued by the Registrar without re-consideration by Associate Judge Brittain. A court registrar authorised the amendment to the court order to include the words “out of the jurisdiction”. Only a judicial act can grant leave to serve a bankruptcy notice outside New Zealand. This shows that leave was not properly granted under s17(3) of the Act and HCR 6.30.
(e)The application for substituted service should not have been made without notice.
[53]However these matters can be promptly disposed of:
(a)Orders granting leave to serve the bankruptcy notice and subsequent adjudication application outside New Zealand were made on 30 July 2024 by Associate Judge Gardiner. That judgment was not appealed. As Mr Kumar himself says, the issue of granting leave is not to be conflated with the method of effecting service.
(b)The subsequent issue that arose was as to the method of service of the bankruptcy notice, and subsequent proceedings. That issue arose because of Mr Kumar’s own failure to comply with the court order to provide an address for personal service.
(c)Smartpay did not require further orders as to substituted service, as those orders had also already been made by Associate Judge Gardiner. Smartpay complied with that order when the bankruptcy notice was served by email on 2 December 2025. However Smartpay cannot be criticised for ensuring that there was no procedural irregularity and that it was taking all steps to ensure that the documents did in fact come to the attention of Mr Kumar.
(d)Smartpay properly applied for substituted service orders in this proceeding. It is an administrative matter that this proceeding has a different CIV number allocated to it, than the matter in which Associate
Judge Gardiner’s judgment was issued. It does not alter that leave was properly granted to serve the bankruptcy notice and adjudication application overseas.
(e)The application as to substituted service was not required to seek leave to serve the bankruptcy notice and subsequent proceedings outside New Zealand, as that leave had already been granted. That application only needed to seek alternative methods of service (at best, because I have found the application was unnecessary). Nevertheless, the application seeking orders as to substituted service expressly relied on HCR 6.30.
(f)As leave had been granted to serve the bankruptcy notice overseas, the only issue for consideration by Associate Judge Brittain was the appropriate method of substituted service on Mr Kumar. After consideration, he determined that was by a new email address (being the email address that Mr Kumar had previously supplied to the Supreme Court for communications with him).
(g)The order granted by Associate Judge Brittain as to substituted service also expressly granted leave to serve the proceedings “out of the jurisdiction”. When the initial sealed order (which excluded those words) was recalled and reissued to include those words, this was not an activity undertaken unilaterally by a court registrar. Associate Judge Brittain reviewed Smartpay’s memorandum seeking to recall the order, and he issued a minute granting orders as to the recall and reissue of the sealed order on 11 February 2025.18
(h)Applications as to substituted service of documents are routinely made without notice, as it is just and equitable in circumstances where the party cannot be served personally. It is circular to expect a party to be served when the reason for the application is that they cannot be located
18 It appears that this minute was not copied by the Court to Mr Kumar, which is explicable as the application was made without notice, and he had not yet provided contact details for service on him.
to be served personally or are even actively avoiding service. In this case, Mr Kumar had failed to provide an address to be served personally, despite an express court order that he do so. Mr Koley appeared to be actively uncooperative in relation to attempt to serve the notice. Mr Kumar cannot complain about an application bring brought without notice as a consequence of his own failure to comply with a court order.
[54] I conclude that orders as to substituted service were properly made. Those orders did not affect the prior orders made by Associate Judge Gardiner granting leave to serve overseas the bankruptcy notice and subsequent adjudication proceedings. Even if I am incorrect in finding that Associate Judge Gardiner orders did not subsist, the subsequent orders made by Associate Judge Brittain also granted leave to serve the bankruptcy notice and subsequent proceedings overseas, in addition to prescribing the method of substituted service.
[55] Mr Kumar further said that service of the bankruptcy notice was not effective because service was not compliant with HCR 6.32(4), which provides that no service outside New Zealand is valid if effected contrary to the law of the country where service is effected. Specifically, he says that the Hague Service Convention applies.
[56]In relation to these matters:
(a)HCR 6.32(4) does not apply in relation to a bankruptcy notice. That rule concerns the service of “originating documents” abroad. As a bankruptcy notice is not an originating document,19 this rule does not apply.
(b)Additionally, New Zealand is not a party to the Hague Service Convention. That is an international convention that only operates between its signatory states. As New Zealand is not a signatory state, the convention does not apply.
19 Heartland Bank Ltd v Wilfred [2022] NZHC 1328 at [5]; and Commissioner of Inland Revenue, ex parte Spicer [2016] NZHC 1344 at [7].
Was leave granted to serve the bankruptcy proceedings overseas?
[57] Following service of the bankruptcy notice on 2 December 2024, an act of bankruptcy occurred on 21 January 2025,20 meaning that Smartpay was entitled to seek leave to serve the bankruptcy proceedings overseas. As a creditor’s application for adjudication is an originating application, leave is required under HCR 6.28 to issue the proceedings overseas.
[58] As set out above, the Court had granted leave for service of bankruptcy proceedings in the event that the bankruptcy notice expired unremedied. This was granted by Associate Judge Gardiner at para [47] of her judgment, after considering the requirements under HCR 6.28 (as detailed at [44]–[46] of her judgment). Leave was again granted by Associate Judge Brittain in his order dated 11 February 2025.
[59] Accordingly, there is no question that leave was granted to serve the proceedings outside New Zealand under HCR 6.28.
Were the bankruptcy proceedings properly served?
[60] The orders as to substituted service granted by Associate Judge Brittain also expressly extended to service of the adjudication proceedings overseas on Mr Kumar.
[61] Service of the bankruptcy proceedings in accordance with the orders as to substituted service took place on 9 April 2025. This is set out in the affidavit of Ms Paez on behalf of Smartpay.
[62] Mr Kumar’s arguments that service was not effective in relation to the bankruptcy notice are not applicable for the reasons set out above.
[63] He raises one further argument in relation to the service of the bankruptcy proceedings, being that HCR 6.31 required that a notice in Form G6 be provided in the memorandum which is included in a notice of proceeding. The requirements as to a notice of proceeding are prescribed in HCR 5.23, and require a memorandum to be
20 If Mr Kumar was not served until 13 February 2025, an act of bankruptcy arose on 13 March 2025.
attached. HCR Form G6 differs in that it provides additional information where a defendant is served overseas.
[64] However, r 6.31 does not apply. HCR 5.24(a) expressly provides that, unless the court so orders, a notice of proceeding need not be filed for an application to adjudicate a person bankrupt. No such court order was made, so the rule does not apply. The creditor’s application and summons to debtor that were served on Mr Kumar are in the form prescribed under the HCR.
[65] In summary, I am satisfied that Smartpay was granted leave to serve the bankruptcy notice overseas under s 17(3) of the Act and HCR 6.30, and leave to serve the subsequent proceedings outside New Zealand under HCR 6.28. Smartpay served all documents in accordance with this Court’s orders as to substituted service. There are no other applicable service requirements which rendered those orders incorrect or inoperative. As a result this application for adjudication has been properly brought by Smartpay. There are no jurisdictional hurdles to the determination of the application for Mr Kumar’s bankruptcy.
Should the Court exercise its discretion to refuse, stay, or halt the application?
[66] Having determined that this application has been properly brought, the final issue is whether the court should exercise its discretion to refuse, halt, or stay the adjudication application. Mr Kumar made comprehensive submissions in relation to the Court’s exercise of its discretion.
[67] Mr Kumar said that there are no real prospects of recovery for creditors. Mr Kumar says his consistent evidence is that he has no assets in New Zealand and he has not resided in New Zealand since 2022. This was in evidence in New Zealand because the Deputy Registrar at the Court of Appeal made a finding that Mr Kumar was impecunious in the Deputy Registrar’s decision dated 24 January 2023 regarding Mr Kumar’s application for waiver of security for costs.21 In addition, evidence of his lack of assets in New Zealand was set out in his affidavit affirmed on 15 September
21 Kumar v Smartpay Ltd CA427/2022, 24 January 2023 at [16].
2023 and filed in the Supreme Court.22 He emphasised that he has no commercial activity here in New Zealand. While he does have some shareholdings, those shareholdings have no real value. His sworn evidence that his family supports him.
[68] He says that to adjudicate him bankrupt in these circumstances “would be to sanction a process that yields no return to creditors and serves only to inflict personal and reputational harm on the debtor”.
[69] Mr Kumar says that the consequences of bankruptcy would be too severe. The bankruptcy proceeding originates from a costs order, and the bankruptcy notice was in the amount of $86,454.14. It is not originated from an act of fraud, theft, or breach of contract and is not related to real property or real estate. In summary, he says that the proceedings are a retaliatory action in response to him filing a claim against the creditor. Mr Kumar says that this context aligns with the outcome in re Taylor, where adjudication was refused on the basis it was unjust and inequitable.23
[70] Finally, Mr Kumar says that his bankruptcy is not a matter of public interest. He says that any public interest arising from the underlying judgment was addressed in the findings in that case, where he was found to have breached duties under ss 131, 135 and 136 of the Companies Act 1993. His prospects of being able to conduct business have been irreparably harmed by that judgment.
[71] Conversely, Mr Chisholm submitted that there has been no attempt by Mr Kumar to pay the judgment debt owed to Smartpay or the amounts owed to OCL. The total debt owing to Smart and OCL is at least $1,121,412.29, comprised of:
(a)Compensation of $850,427.43 and interest of $173,068.22 to OCL;
(b)Costs and disbursements of $86,454.14 in this Court to Smartpay;
(c)Costs and disbursements of $8,962.50 in the Court of Appeal to Smartpay; and
22 This affidavit was not formally in evidence, but Smartpay was a respondent in that proceeding.
23 Re Taylor (1992) 4 NZBLC 102,875.
(d)Costs and disbursements of $2,500 in the Supreme Court to Smartpay.
[72] The judgment obtained by OCL and the costs order arose out of reckless commercial behaviour, being the breaches of director’s duties confirmed by the Court of Appeal in Kumar v Smartpay.24
[73] While Mr Kumar has given evidence as to his asset position in New Zealand, he has failed to be transparent regarding his asset position worldwide. Smartpay is concerned to ensure that any assets that Mr Kumar beneficially owns worldwide pass into the hands of the Official Assignee under s 101 of the Act. If Mr Kumar is insolvent, that is not a basis for not granting an order of adjudication, so if Mr Kumar is correct in that he has no assets, that is beside the point.
Analysis
[74] The starting point is that Smartpay is entitled to an order of adjudication because the jurisdictional requirements of s 13 of the Act have been satisfied. The notice was properly issued, an act of bankruptcy occurred following non-payment of the amount stated in the bankruptcy notice, and the judgment upon which the notice was based remains unpaid as confirmed by the solicitor’s certificate provided at the hearing.
[75] The onus is on Mr Kumar to satisfy the court as to why an order should not be made. The discretion to refuse adjudication is not a discretion to be exercised lightly. In balancing the various considerations, I have concluded that it is appropriate that Mr Kumar be adjudicated bankrupt. Matters relevant to my decision include that:
(a)The submission that the outcome is disproportionate to the amount stated in the bankruptcy notice is not persuasive. As a starting point, if the amount in the bankruptcy notice was not viewed as significant by Mr Kumar, he has had ample time to pay the underlying judgment debt. The relevant costs order was made on 28 February 2023, but remains unpaid two and a half years later.
24 Kumar v Smartpay, above n 5, at [19].
(b)The total amounts owed by Mr Kumar are significant. Over $1,200,000 is outstanding to Mr Kumar’s creditors and has been since 13 May 2022. There has been no evidence proffered by Mr Kumar as to any ability to meet the amounts owed. To the contrary, he was emphatic in his submission that he is impecunious.
(c)Mr Kumar’s apparent lack of assets in New Zealand is not a basis to not make an order for adjudication. Practically, many bankruptcy applications are brought precisely because a debtor is insolvent. However, Mr Kumar’s financial position is unclear. He referred to shareholdings he has in New Zealand companies. The value of those shareholdings is unknown, but should be assessed by the Official Assignee.
(d)It is also appropriate that the Official Assignee be given the opportunity to investigate Mr Kumar’s financial position overseas. No comprehensive and independently verifiable evidence as to Mr Kumar’s financial position was put before the Court. Even if it had been, as I have indicated above, a lack of assets is unlikely to be persuasive in relation to the exercise of the court’s discretion.
(e)It is conducive to commercial morality and the interests of the general public in New Zealand that bankruptcy be ordered where debts have arisen for breaches of director’s duties, and the debtor remains a director of New Zealand companies. In particular, in this case:
(i)A significant portion of the indebtedness relates to amounts owed for breaches of director’s duties owed as damages to OCL. The amount owed under the judgment is the entire deterioration in value of OCL from the time it entered into a contract with Smartpay. That is because Mr Kumar could not have reasonably believed that OCL could filfil its obligations under that contract.
(ii)Mr Kumar remains the director of other companies in New Zealand. In Smartpay Ltd v Kumar, Mr Kumar continued to assert that he is a New Zealand resident both in court proceedings and annual returns he has filed as a director of three companies.25 The most recent annual returns for Manhattan Global Markets Ltd was filed on 14 May 2024.
(iii)It has been set out by the Court of Appeal that Mr Kumar did not understand his obligations as a director of OCL.26 He operated OCL even though it was insolvent or close to insolvent from the time it started trading.27 He established and ran three companies with “impossible” conflicts of interest.28
[76] This is not a case where the type of unique factors in Re Taylor are relevant. Because this application arises out of a judgment which ordered damages as a consequence of Mr Kumar’s breaches of director’s duties, it is in stark contrast to re Taylor, where among other things, the judgment debtor’s financial position was a consequence of an economic downturn and other matters outside his control, and his age was a relevant factor.
[77] I am therefore not prepared to exercise my discretion to refuse to grant the order for adjudication.
Result
[78]The judgment debtor is adjudicated bankrupt. This order is timed at 10.00 am.
[79] The parties agreed at the hearing that costs on a category 2B basis are appropriate in this proceeding, and are to follow the event. Mr Kumar confirmed that he understood how costs are calculated under the HCR schedules.
25 Kumar v Smartpay [2023] NZCA 410.
26 At [79].
27 At [81]
28 At [86].
[80] On that basis, costs are awarded to the judgment creditor on a category 2B basis together with disbursements as fixed by the Registrar.
Associate Judge Gellert
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