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Smartpay Limited v Kumar

Smartpay Limited v Kumar

Case [2024] NZHC 2088 30 July 2024

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-001015 [2024] NZHC 2088

BETWEEN
SMARTPAY LIMITED

Judgment Creditor

AND

MANAS DHARMENDRA KUMAR

Judgment Debtor

Hearing: 17 June 2024

Appearances:

D Chisholm KC for the Judgment Creditor Judgment Debtor in Person

Judgment:

30 July 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 30 July 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Claymore Partners Ltd, Auckland D Chisholm KC, Auckland

SMARTPAY LTD v KUMAR [2024] NZHC 2088 [30 July 2024]

Introduction

[1] The judgment creditor (Smartpay) applies for the judgment debtor (Mr Kumar) to be adjudicated bankrupt. Mr Kumar opposes the bankruptcy application on the grounds that the bankruptcy notice was not properly served upon him and, alternatively, that the Court should exercise its discretion to refuse adjudication as bankruptcy would be oppressive and punitive.

[2] Mr Kumar was the major shareholder and director of companies within a group of companies comprising a parent, Optimizer HQ Ltd (HQ), and two wholly-owned subsidiaries, Odev Ltd (Odev) and Optimizer Corporation Ltd (OCL). OCL was put into liquidation on 10 December 2015.

[3] Smartpay is a creditor of OCL. It brought proceedings against Mr Kumar under s 301(1)(b)(ii) of the Companies Act 1993 for breach of his director duties owed to OCL. In a judgment delivered by His Honour Justice Downs on 13 May 2022, Mr Kumar was found to have breached ss 131, 135 and 136 of the Companies Act, and failed to understand his duties as a director of OCL.1 Mr Kumar was ordered to pay $850,427.43 (plus interest) to OCL by way of compensation.2 The Court of Appeal dismissed Mr Kumar’s subsequent appeal.3

[4] Additionally, Downs J ordered Mr Kumar to pay Smartpay, the party which incurred the costs in bringing the action against Mr Kumar, 2B costs and disbursements totalling $86,452.14.4 Mr Kumar did not pay Smartpay the costs. This Court issued a bankruptcy notice based on the unpaid costs order which Smartpay purportedly served on Mr Kumar on 26 July 2023. Mr Kumar applied to set aside the bankruptcy notice but later withdrew that application.

[5]Smartpay’s bankruptcy application is supported by the liquidator of OCL.

1      Smartpay Ltd v Kumar [2022] NZHC 997.
2      Smartpay Ltd v Kumar [2022] NZHC 2685.
3      Kumar v Smartpay Ltd [2023] NZCA 410.
4      Smartpay Ltd v Kumar [2023] NZHC 314.

[6] Mr Kumar originally sought, in the alternative to his opposition to the bankruptcy application, a halt of the application pending his application for leave to appeal to the Supreme Court. However, that application was dismissed on 19 February 2024.5 With that, there is no basis for a halt and this part of Mr Kumar’s application did not receive any attention at the hearing.

[7]The issues for determination are:

(a)Was the bankruptcy notice properly served…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Smartpay Limited v Kumar

Details

AGLC: Smartpay Limited v Kumar [2024] NZHC 2088
Case: [2024] NZHC 2088
Decision Date: 30 July 2024

CaseChat Overview and Summary

The matter involves Smartpay Limited, the judgment creditor, seeking to have Manas Dharmendra Kumar, the judgment debtor, adjudicated bankrupt. Mr Kumar opposes the bankruptcy application on the grounds that the bankruptcy notice was not properly served upon him and, alternatively, that the Court should exercise its discretion to refuse adjudication as bankruptcy would be oppressive and punitive. Smartpay, a creditor of OCL, brought proceedings against Mr Kumar for breach of his director duties owed to OCL, resulting in a judgment debt of $850,427.43 plus interest and costs of $86,452.14. A bankruptcy notice based on the unpaid costs order was served on Mr Kumar by email on 26 July 2023. Mr Kumar opposed the bankruptcy application, arguing that the notice was not properly served as it was sent while he was in India and Smartpay did not obtain the leave of the Court to serve him overseas. Smartpay submitted that the Court had the authority to order substituted service under r 6.8 of the High Court Rules 2016 and that Mr Kumar was deemed to have been served in New Zealand when Smartpay sent the notice to him by email. The court found that Smartpay's approach to service was orthodox, but Mr Kumar was not deemed to have been served in New Zealand when Smartpay sent the notice to him by email while he was in India. The court concluded that Smartpay did not have permission to serve Mr Kumar outside New Zealand as required by s 17(3) of the Insolvency Act 2006 and r 6.30 of the High Court Rules 2016. Consequently, Mr Kumar had not committed an act of bankruptcy, and Smartpay did not have standing to bring an application for Mr Kumar to be adjudicated bankrupt. The court granted Smartpay leave to serve any future bankruptcy notice and certified judgment on Mr Kumar outside New Zealand and dismissed Smartpay's application for an order adjudicating Mr Kumar bankrupt. Smartpay was ordered to pay Mr Kumar's reasonable disbursements.

Orders