Husheer v Campbell [2025] NZHC 222 (20 February 2025)

Husheer v Campbell [2025] NZHC 222 (20 February 2025) Home | Databases | WorldLII | Search | Feedback High Court of New Zealand Decisions You are here: NZLII >> Databases >> High Court of New Zealand Decisions >> 2025 >> [2025] NZHC 222 Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help Husheer v Campbell [2025] NZHC 222 (20 February 2025) Last Updated: 4 March 2025 IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE CIV-2024-441-028 [2025] NZHC 222 BETWEEN ELIZABETH ANN HUSHEER Judgment Creditor AND KEVIN MURRAY CAMPBELL Judgment Debtor Hearing: On the papers Appearances: D O’Connor for Judgment Creditor P Ross for Judgment Debtor Judgment: 20 February 2025 JUDGMENT OF ASSOCIATE JUDGE SKELTON [Costs] [1] In my judgment dated 3 December 2024 (Judgment),1 I declined to exercise my discretion to refuse an order for adjudication under s 37 of the Insolvency Act 2006 (the Act) or to halt the application for adjudication under s 38. However, I granted a temporary halt of the judgment creditor’s application for adjudication for ten working days to give the judgment debtor a final opportunity to pay the outstanding debt. The judgment debtor paid the debt in full, within ten working days, and the costs and disbursements claimed in the summons. [2] The judgment creditor has now advised by way of a memorandum dated 15 January 2025 that she no longer seeks an order for adjudication as the debt has been paid. Accordingly, leave is granted to withdraw the application for adjudication under s 15 of the Act. 1 Husheer v Campbell [2024] NZHC 3643. HUSHEER v CAMPBELL [2025] NZHC 222 [20 February 2025] [3] However, the judgment creditor now seeks indemnity costs in the sum of $27,386.15 and disbursements in the sum of $1,471.22.2 The judgment debtor opposes the application for costs, submitting that they should lie where they fall or in the alternative, be reduced. Legal principles — costs [4] Costs are ultimately a matter of the court’s discretion, the overall objective being to achieve an outcome that best meets the interests of justice.3 However, that discretion is qualified by the applicable costs rules, contained in pt 14 of the High Court Rules 2016 (the Rules). The primary principle applying to the determination of costs is that costs follow the event, meaning that a party who is unsuccessful pays costs to a party who is successful.4 Costs are usually assessed against the schedule by applying the appropriate daily recovery rate to the time considered reasonable for each reasonably required step in relation to the proceeding or interlocutory application.5 [5] Rule 14.7 sets out the bases on which the court can decline or reduce costs, including: 14.7 Refusal of, or reduction in, costs Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if— ... (f) the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by— ... (ii) taking or pursuing an unnecessary step or an argument that lacks merit; or ... 2 See Smith and Partners (a firm) v Laurenson [2014] NZHC 389 at [16]. High Court Rules 2016, r 14.1; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7]; Glaister v Amalgamated Dairies Ltd [2004] NZCA 10; [2004] 2 NZLR 606 (CA) at [21]–[24] and [28]; Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt Ltd) [2002] NZCA 277; (2002) 16 PRNZ 662 (CA) at [27]; and Kinney v Pardington [2021] NZCA 174 at [1]. 4 Rule 14.2(1)(a). 5 Rule 14.2(1)(c). [6] Inversely, increased costs may be awarded “where there is a failure by the paying party to act reasonably”.6 The Court may order a party to pay increased costs where that party has contributed unnecessarily to the time or expense of the proceeding (or a step in it).7 Examples include failing to comply with the Rules or taking or pursuing an unnecessary step or argument that lacks merit.8 [7] The Court may also award the actual costs reasonably incurred by a party (indemnity costs).9 Indemnity costs may be awarded where a party has behaved either badly or very unreasonably.10 For example, indemnity costs may be ordered if the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or step in a proceeding.11 Misconduct, to justify indemnity costs, must be flagrant.12 [8] Applications to depart from a standard award of costs based on the schedular approach are discouraged unless there is a clear basis for such departure in accordance with the Rules.13 Discussion [9] In this proceeding, the judgment creditor was the successful party and the debt was paid after issue of the Judgment. [10] Usually, in the context of bankruptcy proceedings, the judgment creditor would be entitled to 2B scale costs, which in this case the judgment creditor has calculated at $4,063.00.14 Both parties consider that I should depart from the scale in the circumstances. 6 See Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27]. 7 Rule 14.6(3)(b). 8 Rule r 14.6(3)(b)(i) and(ii). 9 Rule 14.6(1)(b). 10 Bradbury v Westpac Banking Corp, above n 6, at [27]–[29] and Prebble v Awatere Huata (No. 2) [2005] NZSC 18, [2005] 2 NZLR 467 at [6]. 11 High Court Rules, r 14.6(4)(a); Bradbury v Westpac Banking Corp, above n 6, at [29]; Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR14.6.03(1)(c)] [McGechan]. 12 Bradbury v Westpac Banking Corp, above n 6, at [28]. 13 Lepionka & Company Investments Ltd v Gibson Sheat [2023] NZHC 2745 at [3] and [7]. 14 This calculation excludes scale costs of $1,434 for filing the application for adjudication (item 45) because the judgment debtor has already paid these costs. Should costs lie where they fall or be reduced? [11] The judgment debtor cites the following “unusual features” meriting the Court declining or reducing costs: [4] ... (a) Despite the costs judgment of the District Court being given on 8 December 2022, no steps were taken by the judgment creditor for more than a year. (b) On or about 13 March 2024, more than sixteen months later, the only communication concerning the matter was sent to counsel, without even a prefatory enquiry as to whether counsel still held instructions. There was no mention of sealing the order. (c) On 13 March 2024, the costs order was sealed. Despite District Court rule 11.11(5) which requires service upon every other party who has given an address for service and anyone else affected by the order, the sealed judgment still has not been served. [It was annexed to the bankruptcy notice, but to this day it has not been served in accordance with the mandatory provisions of this rule.] (d) It appears that when the email was sent about payment the costs order has been sealed but no notice was given of that fact. (e) A bankruptcy notice was filed immediately. [5] The judgment debtor could, and did pay the judgment sum. He was not legally obligated to do so until the order was sealed and he was not given the notice that was expected prior to the issue of a bankruptcy notice. Had that occurred, he would have been properly on notice that an enforceable judgment debt existed and he had to satisfy it. [6] The judgment debtor did have legitimate concerns about the creditor’s capacity to repay the judgment debt in the event that he prevailed upon appeal. Had the matter been approached in a more conventional way, he could have had discussions about this in a rational way. [12] The judgment debtor contends that the use of the bankruptcy procedure in these circumstances was “oppressive” and “unnecessary” as, in his submission, there were no reasons to believe the judgment debtor was unable to pay his debts. He contends that the judgment creditor’s failure to comply with the usual procedure meant that no legally enforceable demand could be made. [13] Drawing on Morrell v World Solar Ltd, the judgment debtor submits that it is appropriate to decline costs.15 In Morrell, the Court emphasised that applicants are first expected to explore informal resolution of disputes, through a “non-litigious approach” or less costly form of proceeding.16 Failure to do so may be a basis for a reduction in costs. In particular, the judgment debtor submits that the judgment creditor’s actions, in not complying with the standard procedure, failing to make demand properly and not giving reasonable time for a response, put him to unnecessary and additional cost. [14] I do not consider that there is any basis for finding that costs should lie where they fall or that costs otherwise payable to the judgment creditor under rr 14.2 to 14.5 should be reduced. The judgment debtor raised the issues set out above at [11] and [12] at the hearing of the application for adjudication. I found that these matters did not constitute oppression or abuse of process such that I should refuse adjudication.17 For the same reasons, I do not consider that these issues constitute oppression or abuse of process for the purposes of declining or reducing costs otherwise payable. [15] With regard to exploring resolution informally, counsel for the judgment creditor sent a demand for payment on 13 March 2024, a month before the bankruptcy notice was issued on 15 April 2024 and two months before it was served on 16 May 2024. As I found in the Judgment,18 the demand appears to have been sent for the purpose of reminding the judgment debtor that the costs award had not been paid for 14 months and requesting payment to avoid the need to take formal steps to enforce the judgment. Even after the bankruptcy notice was issued, the judgment debtor had ample opportunity to have discussions with the judgment creditor and attempt to resolve the matter before proceedings were issued on 5 July 2024 and before the substantive hearing on 30 October 2024. Indeed, there was an exchange of emails between the solicitors for the judgment debtor and counsel for the judgment creditor on 23 May 2024 indicating that the judgment debt was to be paid, but payment was not made. Instead, on 28 May 2024, the judgment debtor filed an application to set aside the bankruptcy notice which was out of time. 15 Morrell v World Solar Ltd [2018] NZHC 518. 16 At [22]. 17 At [32]-[36]. 18 At [34]. [16] The judgment debtor contends that he could, and ultimately did pay the judgment sum, but he was not legally obliged to pay until the judgment was sealed, and he was not given the notice of sealing he expected prior to issue of the bankruptcy notice. However, sealing a judgment is required as a precursor to enforcement when the judgment has not already been complied with. Here, an order for indemnity costs was made on 8 December 2022, and a demand for payment was sent on 13 March 2024 in an attempt to avoid the need to take formal steps to enforce the judgment, but was ignored by the judgment debtor. Even after the judgment debtor had notice of sealing on 16 May 2024 (when the bankruptcy notice was served), he did not pay the judgment debt but sought to set aside the bankruptcy notice and opposed an order for adjudication. [17] The judgment debtor submits he had concerns about the judgment creditor’s ability to repay the judgment debt if he prevailed on any appeal, and that if the matter had been approached in “a more conventional way, he could have had discussions about this in a rational way”. However, as noted above, after the demand for payment was issued and after the bankruptcy notice was served, the judgment creditor did not take steps to discuss his concerns about the judgment creditor’s ability to repay “in a rational way” or at all. Rather, he sought to set aside the bankruptcy notice and opposed the application for adjudication. Given his concerns, it was open to the judgment debtor to pay the money into his solicitor’s trust account or an independent trust account prior to the hearing, and to adduce evidence of the funds being held on trust. However, he did not do so.19 Indemnity costs? [18] Meanwhile, the judgment creditor claims indemnity costs in the sum of $27,386.15. [19] The reasons for the judgment creditor’s claim for indemnity costs are: [6] Reasons for increased costs and indemnity costs: (a) Mr Campbell acted vexatiously, frivolously, improperly or unnecessarily. 19 Above n 1 at [46]. “The allegations against Ms Husheer seem to me to lack substance” (judgment, para 42). “In the circumstances, I am not satisfied that Mr Campbell genuinely proposes to pursue the alleged claim against Ms Husheer” (judgment, para 43). “I am not satisfied on the evidence before me that the alleged claim is a genuinely triable claim against Ms Husheer, that is, that there is a claim of true substance which Mr Campbell genuinely proposes to pursue” (judgment, para 40). Mr Campbell deposed in an affidavit sworn on 28 May 2024 that “I do wish to proceed with the appeal and will shortly be filing an application to stay the underlying judgment so the appeal can progress expeditiously”. In a further affidavit sworn on 17 September 2024, he deposed “it is my intention to bring the appeal (at least) on so that it is in progress by the date this application is heard” and “it may take slightly longer to get the cross claim underway”. Despite these sworn statements, Mr Campbell has not taken any further steps to progress the appeal of either judgment (judgment, para 30). “I would have expected Mr Campbell to have done more since December 2022 to pursue appeal of the judgments and I would have expected him to comply with his own sworn statements in the evidence before me” (judgment, para 31). (b) As at the date of this memorandum, Mr Campbell has done nothing to pursue appeal of judgments or a claim against Ms Husheer. He is not bona fide. (c) The judgment debt is for indemnity costs. Ms Husheer should not be left out of pocket by having to incur further legal fees to make Mr Campbell pay a judgment for indemnity costs otherwise this defeats the purpose of an award of indemnity costs. (d) Mr Campbell contributed unnecessarily to the time and expense of the proceeding. He filed a 23 page affidavit (excluding exhibits). Irrelevant material. Failed to disclose key emails. (e) Mr Campbell failed to comply with HCR. Application set aside bankruptcy notice struck out. Failed to file application within 10 working days after bankruptcy notice issued. (footnotes omitted) [20] Overall, I do not consider that this is a case where indemnity costs are warranted.20 In the context of the bankruptcy proceedings: (a) The judgment debtor has not made any false or irrelevant allegations of fraud. (b) There has not been particular misconduct causing material loss of time. The bankruptcy notice was issued on 15 April 2024, the substantive application for an adjudication order was filed on 5 July 2024 and was heard on 30 October 2024. The bankruptcy notice could have been issued earlier. The judgment debtor lodged an appeal against the underlying judgments in December 2022. However, this was not pursued and did not prevent the judgment creditor from enforcing the judgment. Although the judgment debtor filed an application to set aside the bankruptcy notice on 28 May 2024, this was not pursued as it was out of time. It had the same first call date as the application for adjudication so it did not materially delay determination of the substantive application. (c) The judgment debtor did not oppose the application for adjudication for any apparent ulterior motive; he was entitled to oppose an application to adjudicate him bankrupt. (d) Even though I found against the judgment debtor, I do not consider that the judgment debtor acted in wilful disregard of known facts and law. I also do not consider that the judgment debtor’s defence of the bankruptcy proceedings can properly be characterised as a “hopeless case” and “bound to fail”. The judgment debtor raised a number of issues with regard to the underlying judgments which warranted consideration despite the fact that the appeals had not been pursued. He advanced arguments about abuse of process and oppression by the judgment creditor arising from the delay in the enforcement of the debt Bradbury v Westpac Banking Corp, above n 6, at [29]; McGechan, above n 11, at [HR14.6.03(1)(c)]. which also warranted consideration. The judgment debtor additionally contended that he was able to pay his debts which merited attention. [21] I do not agree with counsel for the judgment creditor’s submission that the judgment creditor should “not be left out of pocket by having to incur further legal fees to make [the judgment debtor] pay a judgment for indemnity costs otherwise this defeats the purpose of an award of indemnity costs”. The issue of whether the judgment creditor is entitled to indemnity costs for the application for adjudication depends on the judgment debtor’s conduct in the bankruptcy proceedings. [22] However, I consider that an award of increased costs is appropriate in this case. It seems to me that the judgment debtor has contributed unnecessarily to the time and expense of the proceeding or a step in it, by taking or pursuing an unnecessary step or an argument that lacks merit.21 In particular: (a) The alleged claims against the judgment creditor lacked substance and the allegation of tortious interference was belatedly raised to attempt to provide a defence to the bankruptcy proceeding. (b) The judgment debtor did not put forward any draft statement of claim or give any firm indication as to when any claim against the judgment creditor would be commenced. (c) The judgment debtor contended that he was able to pay his debts but without putting forward sufficient evidence to substantiate this claim. It was open to him to pay the outstanding amount into a trust account prior to the hearing and to put forward evidence of the funds held on trust, but he did not do so. (d) The judgment debtor failed to comply with the Rules in purporting to make an application to set aside the bankruptcy notice which was out of time. This application had to be addressed at the first call on 5 September 2024. 21 Rule 14.6(3)(b)(ii). [23] Another reason for awarding increased costs is the fact that the judgment debtor deposed that he would progress the appeals of the underlying judgments by the time of the hearing, but he did not do so. 22 [24] The judgment creditor has calculated 2B scale costs for the bankruptcy proceedings in the sum of $4,063, including case management. I accept this calculation, except that it should also include $1,434 for filing the application for adjudication (item 45). This was not included in the calculation by the judgment creditor because the judgment debtor has paid this cost. Therefore, 2B scale costs should be $5,497. In the circumstances, I consider that a 100 per cent uplift on 2B scale costs is warranted. This should then be reduced by $1,434 to account for the costs already paid by the judgment debtor. This results in a sum of $9,560. [25] The judgment creditor has also claimed disbursements in the total sum of $1,471.22. This figure is comprised of $832 for the scheduling fee, $481 for counsel’s travel costs from Napier to Wellington for the hearing, and $158.22 for counsel’s hotel accommodation in Wellington. The judgment creditor resides in Napier and engaged solicitors and counsel in Napier. Counsel necessarily had to travel to Wellington for the hearing. I consider the claimed disbursements are reasonable. Result [26] Leave is granted to withdraw the application for adjudication under s 15 of the Insolvency Act 2006. [27] The judgment creditor is entitled to costs in the sum of $9,560 and disbursements in the sum of $1,471.22. Associate Judge Skelton Solicitors: Heaphy & Co, Hastings for Judgment Creditor Cathedral Lane Law, Napier for Judgment Debtor 22 Rule 14.6(3)(d). NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.nzlii.org/nz/cases/NZHC/2025/222.html