ASB Bank Limited v Sgargetta

[2018] NZHC 2066

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-788

[2018] NZHC 2066

BETWEEN

ASB BANK LIMITED

Plaintiff

AND

ELLIOT DANIEL SGARGETTA

Defendant

Hearing:	On the papers, 29 May 2018
Appearances:	A E Simkiss and JJK Spring Defendant in person
Judgment:	14 August 2018

JUDGMENT OF WOODHOUSE J

(Interest and costs)

This judgment was delivered by me on 14 August 2018 at 12:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Solicitors / Parties:

Mr JJK Spring and Ms A E Simkiss, Minter Ellison Rudd Watts, Solicitors, Auckland Mr E D Sgargetta

ASB BANK LTD v SGARGETTA [2018] NZHC 2066 [14 August 2018]

[1]                 Following a defended hearing, summary judgment was entered for the plaintiff, ASB Bank Ltd (ASB), against the defendant, Mr Sgargetta.1 Judgment was entered for $598,340.15. There were further claims for interest and costs. Because I had not received full submissions on interest and costs, leave was reserved to ASB to file a memorandum on those matters and provision was made for a response from Mr Sgargetta, with the issues to be determined on the papers.2 This judgment determines ASB’s claims for further interest and for indemnity costs, both of which have been opposed by Mr Sgargetta.

The claim for further interest

[2]                 The judgment sum of $598,340.15 is for principal outstanding of $588,134.81 and interest calculated to 11 April 2017. ASB seeks further judgment for interest on the principal sum at a default rate of 22.50 per cent per annum from 12 April 2017 and a declaration that interest continues to accrue at the daily default interest rate until the date of payment.

[3]                 Mr Sgargetta’s liability arises under guarantees and indemnities in respect of loans made by ASB to Sleep Overs Ltd (in receivership and liquidation). Relevant background events are recorded in the substantive judgment.3

[4]                 Sleep Overs defaulted under the loan agreements in April and May 2015. Pursuant to the loan documents, and ASB’s General Terms and Conditions BRC06/2010 (the general terms) in particular, on default the total of all principal sums became due and payable. ASB submitted that, pursuant to clause 5.1 of the general terms, the default interest rate was, in consequence, payable on the total of the outstanding principal.

[5]                 Mr Sgargetta challenged ASB’s submission on the basis that clause 5.1 refers to an “unarranged overdraft” and, in essence, the only overdraft facility was for a sum

1      ASB Bank Ltd v Sgargetta [2017] NZHC 3097 (the substantive judgment).

2      The memoranda were filed in February and March 2018 but, inadvertently, were not referred to me until 29 May 2018, when I heard an application by Mr Sgargetta for stay of enforcement of judgment pending an appeal.

3      At [9]-[21].

of $50,000. Mr Sgargetta submitted that, if there is any liability for default interest, which he did not admit, it could only be on the overdraft limit of $50,000.

[6]                 Mr Sgargetta has misconstrued clause 5.1. The only reference to an “unarranged overdraft” in clause 5.1 is, in fact, to a defined term – “Unarranged Overdraft Interest Rate”. This is defined in the general terms as “the interest rate determined by us as our ‘unarranged overdraft interest rate’”. In spite of the circularity the actual rate is readily identified. This defined term does not provide any support for Mr Sgargetta’s submission. Clause 5.1 establishes ASB’s entitlement to default interest on the outstanding principal.

[7]                 Mr Sgargetta submitted that ASB cannot recover interest at a rate of 22.50 per cent per annum because, pursuant to s 87 of the Judicature Act 1908 and the Judicature (Prescribed Rate of Interest) Order 2011, the maximum rate of interest following judgment is five per cent per annum. The Judicature Act has been repealed, but applies to this proceeding.4 Mr Sgargetta also relied on the provisions of r 11.27 of the High Court Rules 2016 applying to this proceeding.5 The rule was as follows:

11.27   Interest on judgment debt

(1)A judgment debt carries interest from the time judgment is given until it is satisfied.

(2)The interest is at the rate prescribed by or under section 87 of the Act or at a lower rate fixed by the court.

(3)The interest may be levied on the judgment under an enforcement process (as defined in rule 17.3).

[8]                 These provisions do not support Mr Sgargetta’s argument because s 87 of the Judicature Act and r 11.27 do not apply when payment of interest is governed by a contract between the parties.6

4      Section 87 of the Judicature Act 1908 was repealed, as from 1 January 2018, by s 182(4) of the Senior Courts Act 2016. The interest on Money Claims Act 2016 now applies.

5      Rule 11.27 as applies to this proceeding was replaced, as from 1 January 2018, by s 29 of the Interest on Money Claims Act 2016 to record: “Interest must be awarded in a money judgment in accordance with the interest on Money Claims Act 2016”.

6      Alington Group Architects Ltd v Attorney-General [1998] 2 NZLR 183 (CA) at 188-189. This principle is now reflected in ss 22 and 23 of the Interest on Money Claims Act 2016.

[9]                 The contractual provisions binding on Mr Sgargetta entitle ASB to interest at the default rate of 22.50 per cent on the principal sum outstanding both before and after judgment, with that interest rate payable on any principal balance outstanding until payment is made.

[10]              The daily interest payment on the principal sum of $588,134.81 at 22.50 per cent per annum is $362.55 per day. The total additional sum owing for interest calculated from 12 April 2018 to 14 August 2018 (125 days) is $45,381.75. ASB is also entitled to recover further interest from the date of this judgment until the date of payment in accordance with the Facility Agreements and clause 5.1 of the general terms.

Costs

[11]              ASB seeks an order that Mr Sgargetta pay $136,872.22 for legal costs and disbursements, being the total sum incurred by ASB with its solicitors to 1 February 2018.

[12]              ASB relies on provisions in the guarantee from Mr Sgargetta (and others) dated 17 October 2014, applying to all liabilities, and on provisions in ASB’s general terms and ASB’s General Security Deed Standard Terms and Conditions, both of which are binding on Mr Sgargetta. The contractual documents establish liability to pay all legal expenses on a solicitor and own client basis. The contractual provisions also provide that interest is payable on costs.

[13]              Mr Sgargetta submitted that ASB is not entitled to the total claimed for costs and disbursements because that sum is “excessive, iniquitous, unconscionable, and exorbitant, hence, contrary to morals, if not against the law”. The submissions in support of that sweeping contention relied on some of the general rules relating to costs contained in Part 14 of the High Court Rules 2016, the daily rates prescribed in Schedule 2 of the Rules, the time allocations prescribed in Schedule 3, the general principles stated by the Court of Appeal in Bradbury v Westpac Banking Corp in relation to increased and indemnity costs recoverable under r 14.6,7 and r 14.7 which

7      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.

is directed to circumstances in which the Court may refuse to make a costs order in favour of, or reduce the costs otherwise payable to, a successful party.

[14] The rules and principles relied on by Mr Sgargetta, apart from r 14.7, have no application when there is a contractual entitlement to recover legal fees and disbursements actually incurred (indemnity costs).8 And 14.7 has no application in this case to ASB’s claim for costs.

[15]              Rule 14.6(1)(b) is applicable. This provides, in effect, that indemnity costs sought pursuant to a contractual obligation must be expenses reasonably incurred.9 Mr Sgargetta’s submissions, in reliance on the general rules, do not provide any support for an argument that the indemnity costs sought by ASB, in whole or in part, were unreasonably incurred.

[16]              I am satisfied that the indemnity costs sought by ASB were reasonably incurred.

[17]                ASB’s claim is supported by an affidavit from a solicitor employed by ASB’s solicitors. This includes a spreadsheet, running to six pages in hard copy, which has narrations for each activity from 20 September 2016 to 31 January 2018, together with the hourly rate, the time engaged, and the resulting total for each activity for different lawyers. Some narrations have been redacted to protect privileged information, but the essence of the activity remains sufficiently clear.

[18]              In addition to the information contained in the affidavit, I am familiar with the procedural history of this proceeding, as well as the extent of ASB’s task in advancing its application for summary judgment faced with the opposition from Mr Sgargetta as a litigant in person and without legal training. What I am referring to in that regard is outlined in the substantive judgment.10 I am satisfied from these matters that the way in which Mr Sgargetta conducted his defence, and the way in which he failed to

8      ANZ Bank Group (NZ) Ltd v Gibson [1986] 1 NZLR 556 (CA); Beecher v Mills [1993] MCLR 19 (CA); Black v ASB Bank Ltd [2012] NZCA 384 at [77]-[99].

9      See the discussion in Black v ASB Bank Ltd, above n 8, at [77]-[80].

10     At [3]-[6].

comply, and in some cases at all, with Court directions, have added reasonably substantially to the costs that ASB might otherwise have been incurred.

[19]There is one issue I have with the quantum of costs sought. The total of

$136,872.20 includes GST. Unless a party entitled to costs notifies the Court that GST is not recoverable, an award of indemnity costs should not include the GST component. It seems most unlikely that the GST component of these legal expenses will not have been recovered by ASB as a GST input credit. In consequence, the order is for the net sum, excluding GST. In the unlikely event that ASB is not entitled to claim a GST input credit, leave is reserved to apply for a variation of the order.

Result

[20]              There is judgment for the plaintiff in a sum of $45,318.75 for interest calculated from 12 April 2018 to 14 August 2018.

[21]              There is a declaration that interest continues to accrue on the principal sum outstanding from time to time, inclusive of legal costs and disbursements, at the “Unarranged Overdraft Interest Rate” as defined in ASB’s General Terms and Conditions BRC06/2010 and in accordance with clause 5.1 of the General Terms and Conditions BRC06/2010 and the Facility Agreements binding on the defendant as guarantor.

[22]              There is an order that the defendant pay the plaintiff $119,019.30 for legal costs and disbursements.

[23] Leave is reserved to ASB to apply for variation of the quantum of the costs order in respect of the matters referred to at [19] above.

Woodhouse J