Body Corporate 183119 v Bader

[2024] NZHC 3347

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1520

[2024] NZHC 3347

UNDER

AND

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of TAREQ YASER SHUKRI BADER

BETWEEN

BODY CORPORATE 183119

Judgment Creditor

AND

TAREQ YASER SHUKRI BADER

Judgment Debtor

Hearing:	3 October 2024
Appearances:	Y Meshulam-Veiss for the Judgment Creditor Mr Bader, Judgment Debtor in Person
Judgment:	12 November 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

(Costs)

This judgment was delivered by me on 11 November 2024 at 10 am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Grove Darlow & Partners, Auckland

BODY CORPORATE 183119 v BADER [2024] NZHC 3347 [12 November 2024]

Introduction

[1]                 This matter was called in the bankruptcy list on Thursday, 3 October 2024. By the time the matter was called the debt of $3,040 that was the subject of the bankruptcy notice had been paid but costs could not be agreed.

[2]                 The judgment creditor seeks an order for indemnity costs of $5,470.55 on the grounds that in failing to pay the original debt the judgment debtor had failed to comply with an order of the Court.

[3]                 The judgment debtor opposes costs being awarded as he submits the judgment creditor failed to respond to his wife’s email asking for bank account details leading to delays in paying the debt. The debt was then paid by the judgment debtor prior to proper service on him. This followed an agreement initially being reached that the judgment debtor would pay the $6,498.70 the judgment creditor said was owing in two instalments of $3,249.00. After paying the first instalment, the judgment debtor then refused to pay the second instalment as he said he preferred to attend the court hearing to explain about the unanswered email.

[4]                 As the debt had been paid, the bankruptcy application was discontinued on the basis costs were reserved. I now determine the appropriate costs award.

[5]                 There are a number of issues arising with the judgment creditor’s application which I discuss first before considering the appropriate costs award.

Creditor’s application

[6]  Both the summons to debtor and the judgment creditor’s application for an adjudication order record that the judgment debtor owes the judgment creditor

$6,498.70, described in the latter as “the final amount due as at 1 August 2024”.

[7]This amount is broken down in a table in the creditor’s application as follows:

Description

Amount

Court's Costs Order
Judgment debt as at 15 March 2024

$3,040

Plus Interest

Interest accrues from 15 March 2024 until 6 August 2024 in accordance with the Interest on Money Claims Act 2016 on a daily rate of $0.5

$72

Plus disbursements and indemnity costs on the Bankruptcy Notice (excl GST)
Pursuant to Rule 14.6(1)(b) and Rule 14.6(4)(b) of the High Court Rules 2016, for ignoring or disobeying an order of the Court

filing fee: Certificate of Judgment filing fee: Bankruptcy Notice

disbursements of actual service fee paid to serve the Bankruptcy Notice Actual costs bankruptcy notice

Photocopying Bureau charges

$43.48

$173.91

$377.98

$917.33
$13.60

$25

Plus disbursements and indemnity costs on the Adjudication Application (excl GST)

Pursuant to Rule 14.6(1)(b) and Rule 14.6(4)(b) of the High Court Rules 2016, for ignoring or disobeying an order of the Court.

filing fee: Adjudication Application

disbursement of actual service fee paid to serve the Adjudication Application Actual Costs Adjudication Application

Photocopying Bureau charges

$434.75

$377.98

$998.87

$8.80

$15

TOTAL

$6,498.70

[8]                 There are a number of issues with the amounts claimed, with the overriding issue being that the amount is only supposed to include the “amount owing and particulars of debt including when it is payable”.1 The first amount, the costs award of $3,040 was made on 15 March 2024 following earlier bankruptcy proceedings which were discontinued, falls within this category but not the remaining amounts.

[9]                 No interest award was made in the costs award on 15 March 2024 and no interest is recorded as having been sought by the judgment creditor. In addition, s 25 of the Interest on Money Claims Act 2016 sets out certain requirements for a claimant to meet before interest will be awarded. Those requirements were not met in this case. No interest is therefore payable in respect of the costs award, so interest is not appropriately claimed.2

1      High Court Rules 2016, r 24.11(1) and Form B3.

2      Davern v QBE Insurance (Australia) Ltd [2023] NZHC 3543.

[10]              In addition, the creditor’s application included at paragraph [2](b) costs for filing and serving the bankruptcy notice and costs on an indemnity basis for the creditor’s application. Those costs ought not to be included at [2](b) as, until fixed by the Court, they are not owed. Costs are instead to be included in paragraph [1](b) of the creditor’s application.

[11]              The costs claimed in the creditor’s application and the updated indemnity costs calculations in the costs memorandum also do not match up. The “actual service fee paid” was recorded as $377.98 in the creditor’s application but in the costs memorandum is included as $473.20. There was also a change in the filing fee claimed apparently as a result of the increase in filing fees applying from 1 July 20243 but with no explanation for the judgment debtor.

[12]              The judgment creditor’s approach is likely to have caused considerable confusion and pressure on the judgment debtor both through including costs yet to be fixed at paragraph [2](b) and where those costs changed. Counsel is to ensure that paragraph 2(b) only includes amounts already owing in this paragraph in future.

[13]I now move on to consider the appropriate costs award.

Relevant legal principles

[14]              The starting point in any costs decision is that costs are at the discretion of the Court.4 Although the discretion is a wide one, it is not unfettered. Rule 14.2 of the High Court Rules (HCR) sets out the general principles, which include:5

(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:

(b)an award of costs should reflect the complexity and significance of the proceeding:

…

(g)so far as possible the determination of costs should be predictable and expeditious.

3      High Court Fees Amendment Regulations 2024, regulation 4 amending the filing fee for a creditor’s application from $500 to $650, both inclusive of GST.

4      High Court Rules 2016 [HCR], r 14.1.

5      HCR, r 14.2(1).

[15]              Rules 14.3 to 14.5 provide for the categorisation of proceedings, appropriate daily recovery rate, and the determination of the reasonable time for each step.

[16]              Increased and indemnity costs are provided for in r 14.6. As summarised by the Court of Appeal in Bradbury v Westpac Banking Corp:6

(a)standard scale applies by default where cause is not shown to depart from it;

(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[17]              Rule 14.7 provides for a number of express circumstances where the Court may refuse to make an order for costs or reduce the costs otherwise payable, including where:

(f)the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or a step in it by—

(i)failing to comply with these rules or a direction of the court; or

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

…

(g)some other reason exists which justifies the Court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.

What is the appropriate award?

[18]              Costs in a bankruptcy application are usually awarded on a 2B basis. Nearly all bankruptcy applications rely on the failure to pay a judgment debt, so that in itself is not a basis for claiming indemnity costs.

[19]              By the time of the hearing in this case, the judgment creditor accepted $3,249 had been paid by the judgment debtor on 6 September 2024 in respect of a costs order

6      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

of $3,040. The judgment creditor however was claiming $5,470.55 in indemnity costs, including $101 in interest.

[20]              The judgment debtor’s position is that the costs award of $3,040 was initially not paid because his wife had asked the judgment creditor for bank details by email and had not received a response. An affidavit has been filed by Ms Jaques, who is an administrative assistant employed by Boutique Body Corporate Limited (BBCL) which provides secretarial services to the judgment creditor. Ms Jaques’ evidence is that an email was not received from the judgment debtor’s wife. However the annexures to Ms Jaques’ email show that the email referred to by Mr Bader had been sent by Mr Bader but for unknown reasons the connection was rejected so it could not be read by BBCL.

[21]              As set out above, the creditor’s application should not been filed in the form in which it was filed as interest was not appropriately claimed and indemnity costs should not have been included as an amount already owing. Furthermore, the changing amounts would have made it difficult for the judgment debtor to understand the amount owing.

[22]              After considering the circumstances, in my view no costs award ought to be made as the judgment creditor has failed to comply with the HCR in drafting the creditor’s application and has demanded both interest and indemnity costs in a situation where they are not justified. As referred to above, r 14.7 expressly provides that the Court may refuse an order for costs where a party has contributed unnecessarily to the time or expense of the proceeding by failing to comply with the HCR or pursuing an argument that lacks merit. In my view these are the circumstances here.

Result

[23]              The judgment creditor’s application for indemnity costs is declined. No order for costs is made in the circumstances.

Associate Judge Sussock