T M Consultants Limited v Morgan - [2025] NZHC 2577

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-570

[2025] NZHC 2577

UNDER the Insolvency Act 2006

IN THE MATTER

of a bankruptcy

BETWEEN

T M CONSULTANTS LIMITED

Judgment Creditor

AND

DANEEN SHEREE MORGAN

Judgment Debtor

Hearing: (On the papers)

Counsel:

S T Cunneen for Judgment Creditor

D N Morgan (self-represented Judgment Debtor)

Judgment:

5 September 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

(on inclusion of debt collector’s fees in judgment by default)

T M CONSULTANTS LIMITED v MORGAN [2025] NZHC 2577 [5 September 2025]

[1] In this proceeding, TM Consultants Limited (TMC), sought an order adjudicating Ms Morgan bankrupt.

[2] TMC issued proceedings in the District Court against Ms Morgan in April 2024. TMC had provided engineering services to Ms Morgan’s business and TMC sought judgment for unpaid invoices under a guarantee given by Ms Morgan.

[3] The value of the invoices included in the statement of claim was $29,908.30. Those invoices were raised between 20 September 2022 and 11 December 2023.

[4] The statement of claim pleads that two payments were made, but dates for those payments are not provided.

[5]There then appears the following pleading:

Debt collection costs were incurred of $7,958.48 and invoiced for on invoice number INV 1268 on 24 January 2024.

[6] TMC’s statement of claim does not identify whether the $7,958.48 is GST inclusive. As TMC could claim the GST on the amount it had been charged, it could only seek recovery of the GST exclusive amount which would have been $6,920.42.

[7]TMC sought judgment for $32,968.53. That amount is calculated as follows:

(a)for the value of the invoices for the services provided: $29,908.30

(b)less the two pleaded payments: $1,698.25 and $3,200;

(c) plus debt collection costs: $7,958.48 giving a total judgment sum of $32,968.53.

[8] Ms Morgan did not file a statement of defence. Judgment by default was entered against her for $33,633.17 which was the $32,968.53 plus interest along with scale costs for the preparation of the statement of claim, the entry of judgment with disbursements (being the filing fee, the sealing fee and a service fee) which

arrived at a total judgment of $36,224.17. Judgment by default was entered on 8 July 2024.

[9] A certificate of judgment was obtained and bankruptcy proceedings commenced.

[10] The bankruptcy proceeding had its first call scheduled for 20 February 2025. A number of adjournments were granted because it had been agreed that Ms Morgan would pay $2,000 per week.

[11] There was a default in the payment plan which resulted in the matter coming before me on 10 July 2025. At that point, I raised the quantum of the debt collection agency fee included in the amount claimed. The Minute I issued said: “Adjourned to 21 August 2025 in order for debt collection agency costs to be reviewed. Expected balance would be paid by 21 August 2025. If any issue about reasonable level of agency costs, that to be reviewed on 21 August…

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.

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Details

Case: [2025] NZHC 2577
Decision Date: 5 September 2025

CaseChat Overview and Summary

In this case, TM Consultants Limited (TMC) sought an order adjudicating Ms Morgan bankrupt, following a default judgment against her for unpaid invoices and associated debt collection fees. The proceedings originated from a guarantee Ms Morgan provided for her business’s unpaid engineering services from TMC. The District Court entered a default judgment against Ms Morgan for the sum of $33,633.17, which included $7,958.48 in debt collection costs. However, TMC did not provide a detailed breakdown of these costs, leading to questions about their reasonableness and legality. The High Court was required to determine whether the debt collection fees were a liquidated sum and if the District Court had the authority to enter a default judgment for these costs.

The court held that the debt collection costs were not a liquidated sum because they were not quantified or precisely calculated based on the contract between TMC and the debt collection agency. Instead, the costs appeared to be based on a flat fee of 25 per cent of the debt amount, which was not supported by a detailed breakdown of the time and activities involved. The court referenced established legal principles that any recovery of costs under an indemnity clause is subject to judicial discretion and must be reasonable. Since the costs were not a liquidated sum, the District Court did not have the authority to enter a default judgment for these fees. The High Court concluded that the District Court had erred in this regard and that the matter should be reconsidered by that court to determine the appropriate level of debt collection costs.

The High Court set aside the portion of the District Court's judgment that included the debt collection costs and directed that the matter be returned to the District Court for reconsideration. The court also noted that TMC’s solicitors should not seek judgment by default for collection costs without formal proof. Furthermore, the court emphasized the importance of providing a detailed breakdown of such costs to ensure they are reasonable and justifiable. This judgment highlights the need for creditors to demonstrate the reasonableness of any indemnity costs claimed, particularly in the context of obtaining default judgments.

Orders