Harborow v Deliu [2024] NZCA 138 (29 April 2024)

Last Updated: 6 May 2024

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA422/2022 [2024] NZCA 138

	BETWEEN	MARK HARBOROW AND NICK FLANAGAN Appellants
	AND	FRANCISC CATALIN DELIU Respondent

Hearing:	4 March 2024
Court:	Courtney, Venning and Dunningham JJ
Counsel:	N F Flanagan for Appellants Respondent in Person
Judgment:	29 April 2024 at 10 am

JUDGMENT OF THE COURT

A The appeal is allowed. The decision of the High Court is set aside.

2. The sum of $10,958.50 held in trust at the High Court is to be paid to the appellants in partial satisfaction of the costs awards made against Mr Deliu in Deliu v Chapman [2020] NZHC 2100, Deliu v Johnstone [2021] NZCA 337, Deliu v Johnstone [2021] NZCA 488 and Deliu v Johnstone [2021] NZCA 646.

100. The respondent must pay the appellants costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Courtney J)

Introduction

• [1] Mr Deliu, the respondent, is the subject of costs orders totalling $11,105 made against him in favour of the appellants, Mr Harborow and Mr Flanagan, in this proceeding (the 1098 proceeding) by both the High Court and this Court.^[1] The orders were made in 2020 and 2021. Mr Deliu has not paid any of the amounts owing. He now lives overseas. His only known asset in New Zealand is a sum of $10,958.50 held to his account by the High Court Registry in unrelated proceedings (the 2150 proceeding).^[2]
• [2] The appellants applied under r 7.48 of the High Court Rules 2016 for an order that the funds be paid to them in partial satisfaction of the costs award.^[3] Harland J declined the application because she did not consider an order was appropriate where the proceedings in which the funds were held were unrelated to the proceedings in which the costs orders were made.^[4]
• [3] The Judge granted leave to appeal her judgment.^[5] Mr Deliu has filed a notice of intention to support the judgment on other grounds. These include the Judge’s failure to adjudicate on Mr Deliu’s “Notice of Protest to Jurisdiction” dated 31 October 2021.^[6]
• [4] The decision to decline the application under r 7.48 involved the exercise of a discretion. As a result, this Court will only interfere if satisfied that the Judge made an error of law or principle, took into account an irrelevant consideration, failed to take into account a relevant consideration or was plainly wrong.^[7] The appellants’ essential complaint is that the Judge erred in declining the application on the basis that the current proceeding is not closely interrelated with the 2150 proceedings. If this was an error by the Judge, it would be an error of law and would justify this Court considering the matter afresh.^[8]
• [5] Mr Deliu argued, however, that the appeal was being advanced on grounds that were beyond the scope of the leave granted and beyond the scope of the grounds identified in the notice of appeal. We do not accept either argument. The application for leave to appeal was made on the basis that the scope of r 7.48 is broader than the Judge recognised and, specifically, that the lack of a relationship between the 1098 and 2150 proceedings should not preclude an order being made. Leave was not granted on limited terms and, in any event, the notice of appeal reflected the argument advanced in the leave application. The argument advanced on the appeal was well within the scope of the grounds identified in the notice of appeal.

Background

The funds held in the 2150 proceedings

• [6] The 2150 proceedings were brought against the police in 2016 and related to the execution of a search warrant at an office connected to Mr Deliu. Duffy J held that Mr Deliu had been unlawfully detained. She made an order for public law compensation of $3,000 and a written apology.^[9] An order followed for costs and disbursements in Mr Deliu’s favour totalling $10,958.50.^[10]
• [7] The police appealed. Pending determination of the appeal, the parties agreed that the police would pay $10,958.50 into court on the basis that: if the appeal was dismissed or discontinued the funds would be released to Mr Deliu; if the appeal was allowed all the money would be released to the police; and, if the appeal was allowed in part and dismissed or discontinued in part, the parties would make submissions to the Court as to the disposition of the funds. A joint consent memorandum to this effect was filed on 19 July 2021 and Jagose J made an order that the funds would be held on this basis.
• [8] The police later amended the grounds of appeal, abandoning the challenge to Duffy J’s finding of unlawful detention. At this point, the police submitted that the High Court costs order in Mr Deliu’s favour would stand. The appeal against the remedies granted by the Judge was allowed, and the award of damages and requirement for the written apology were both set aside.^[11]
• [9] The appellants brought their application under r 7.48 in October 2021. To avoid the funds held in the 2150 proceeding being disbursed before the application had been determined, Brewer J made an order on 12 November 2021 that the funds be retained and not disbursed until further order of a Judge. Counsel for police and its associated defendants filed a memorandum on 15 February 2021 advising “Police confirm that it no longer holds an interest in the money held on [trust] for the purposes of that proceeding”.

The costs orders in the 1098 proceeding

• [10] Mr Deliu commenced the 1098 proceeding in 2019. He sought judicial review and made allegations of misfeasance in public office in relation to an alleged investigation of him by the police and members of the firm of Meredith Connell (of which the appellants were partners). The appellants applied for security for costs. Mr Deliu opposed the application. Palmer J concluded that the claim against the appellants was insufficiently pleaded, lacked the evidential foundation Mr Deliu claimed it had and could not succeed.^[12] He made an order that if Mr Deliu wished to pursue the claim he had to provide security for costs of $5,000.^[13] The Judge awarded costs against Mr Deliu on a 2B basis, which totalled $9,043.^[14]
• [11] Mr Deliu applied unsuccessfully to the High Court for leave to appeal Palmer J’s decision.^[15] His application to this Court for leave to appeal Palmer J’s decision was declined, with costs against Mr Deliu of $1,006.^[16] Mr Deliu applied unsuccessfully to recall that decision and costs were ordered against him of $528.^[17] Mr Deliu then applied unsuccessfully for recall of both judgments of this Court and recusal of the relevant judges, with costs ordered against him of $528.^[18] The sum of costs awarded against Mr Deliu in favour of the appellants therefore comes to $11,105.

Enforcement of interlocutory orders: the purpose and scope of r 7.48

• [12] The High Court Rules make provision for the enforcement of court orders. But it treats orders made in the context of final judgments differently from those made in the context of interlocutory applications. Part 17, which provides for methods of enforcement of court orders, expressly excludes the enforcement of interlocutory orders. Rule 17.2 states:

A court order, except an order made on an interlocutory application, may be enforced in the same way as a judgment in the proceeding to the same effect.

• [13] Relevantly, an interlocutory order:^[19]

(a) means an order or direction of the court that—

(i) is made or given for the purposes of a proceeding or an intended proceeding; and

(ii) concerns a matter of procedure or grants some relief ancillary to that claimed in a pleading; ...

• [14] The commentary in McGechan on Procedure to r 17.2 states that r 7.48 provides for enforcement of an interlocutory order.^[20] We did not understand it to be in dispute that the application for security for costs which produced the costs awards was an interlocutory application (and it clearly is). Costs were sought as part of that application and were awarded by Palmer J in his judgment on that application. The other costs awards were also made on interlocutory applications. The enforcement of the costs orders therefore falls to be considered under r 7.48.
• [15] Rule 7.48 is located in sub-pt 2 of pt 7 of the High Court Rules, which controls interlocutory applications and interlocutory orders. It provides:

7.48 Enforcement of interlocutory order

(1) If a party (the party in default) fails to comply with an interlocutory order or any requirement imposed by or under subpart 1 of Part 7 (case management), a Judge may, subject to any express provision of these rules, make any order that the Judge thinks just.

(2) The Judge may, for example, order—

(a) that any pleading of the party in default be struck out in whole or in part:

(b) that judgment be sealed:

(c) that the proceeding be stayed in whole or in part:

(d) that the party in default be fined, ordered to do community work, or committed to prison under section 16 of the Contempt of Court Act 2019:

(e) if any property in dispute is in the possession or control of the party in default, that the property be sequestered:

(f) that any fund in dispute be paid into court:

(g) the appointment of a receiver of any property or of any fund in dispute.

(3) An interlocutory order may only be enforced by the following (in accordance with subpart 4 of Part 2 of the Contempt of Court Act 2019):

(a) an order imposing a fine or community work:

(b) a warrant committing the person to prison:

(c) a sequestration order.

• [16] The leading authority on the scope of r 7.48 is the decision of this Court in Kidd v Van Heeren.^[21] Mr Kidd, who had obtained an interim order against Mr van Heeran for the payment of a large sum on the basis that he was bound to recover at least that amount at trial, applied for an order under r 7.48 that receivers be appointed to a company whose assets were said to be partnership assets owned equally by Mr Kidd and Mr van Heeren. Mr Kidd proposed that after the division of the partnership assets, the amount of the interim order be paid to him from Mr van Heeren’s share.
• [17] Gilbert J explained the purpose and scope of r 7.48 in these terms:^[22]

[41] ... The Court has broad powers to make such orders as may be required in the interests of justice where its orders are not complied with. Were it otherwise, respect for the rule of law would be seriously undermined. As Lord Neuberger observed in Global Torch Ltd v Apex Global Management Ltd (No 2):^[23]

The importance of litigants obeying orders of court is self‑evident. Once a court order is disobeyed, the imposition of a sanction is almost always inevitable if court orders are to continue to enjoy the respect which they ought to have.

[42] Rule 7.48 is wide in scope — the judge may make any order the judge thinks just. The examples listed are just that, they do not limit the type of order that can be made. ...

...

[44] ... Ultimately, the Court’s power must be exercised in such a way as to best meet the requirements of justice in the particular case.

...

[46] ... As noted, r 7.48 provides the judge with very broad powers to make such orders as may be necessary in the interests of justice to ensure that interlocutory orders of the Court are complied with. ... Public confidence in the administration of justice would be damaged if the Court was now to accept [the] submissions that there is no effective remedy available to enforce the Court’s order with the result he can ignore it with impunity. The Court’s powers to require compliance with its orders are not so constrained and are not to be defeated by the narrow reading of the High Court Rules urged upon us.

• [18] It is apparent from these statements that the task of a Judge considering an application under r 7.48 is to identify the factors that would bear on the interests of justice in the particular case, having regard to the purpose of the rule and the facts of the case. It is not possible to identify the factors that will arise in any particular case. As a general observation, however, we see as likely relevant factors the means of enforcement otherwise available to an applicant, the practicality of those means, any prejudice to the respondent and any adverse effect on third parties.

Did the Judge err?

• [19] The Judge considered Kidd v Van Heeren but distinguished it on its facts because both the proceedings in which the application was made under r 7.48 and the receivership proceedings involved substantially the same parties. In comparison, the applicants in the 1098 proceeding, in which the r 7.48 application was made, were not parties to the 2150 proceeding either directly or through another entity in which they had an interest. The Judge concluded that:^[24]

This is not a case where it could be said that the two proceedings are closely interrelated even if technically distinct. For these reasons, even though the jurisdiction to do so may exist, this is not a case where I am persuaded that the Court should make the order.

• [20] Mr Flanagan, for the appellants, argued that the Judge had made an error by reaching her decision on the basis that the two proceedings were not “closely interrelated” and that the appellants were not parties, directly or indirectly, in the 2150 proceeding. As a result, she had failed to properly analyse the interests of justice, which was the ultimate test for an order under r 17.48.
• [21] We accept this submission. It is evident from this Court’s comments in Kidd v Van Heeren that for the Court to accept an order being ignored with impunity, even though no other effective remedy exists to enforce it, would risk damaging public confidence in the administration of justice. The Judge’s approach did not acknowledge that the objective of r 7.48 is maintaining public confidence in the administration of justice by ensuring compliance with court orders. We think that the focus on the facts of Kidd v Van Heeren led to insufficient consideration of this aspect and of any other factors that might be relevant to the interests of justice. We therefore consider the question afresh.

Should an order under r 7.48 be made?

• [22] Mr Flanagan submitted that, not only is the jurisdiction under r 7.48(1) wide and unconstrained by matters of form, the payment of funds into court is expressly contemplated by r 7.48(2) and the power to direct the disbursement of funds paid into court is therefore implicit. Further, directing the disbursement of the funds held in the 1098 proceeding would be analogous to the exercise of the power the court has in respect of substantive judgments under r 17.53(b)(iii), which permits the issuing of a charging order over funds in the possession of a court officer standing to the credit of a liable party.
• [23] Mr Flanagan argued that the interests of justice required an order to be made because: Mr Deliu has failed to pay four costs awards made in 2020 and 2021 (and appears intent on not doing so); he has no other known assets in New Zealand; and, there are no other practical means of enforcing the orders.
• [24] Mr Deliu does not accept that an order under r 7.48 is either available or, even if it is, that it ought to be made in this case. First, Mr Deliu does not accept that he is a party in default for the purposes of r 7.48(1) because demand has never formally been made for payment of the costs order, with details as to the method of payment. It is clear, however, that demand was not required for the obligation to pay the costs to arise. There are specific provisions in pt 14 of the High Court Rules relating to costs on interlocutory applications and r 14.8(1)(b) provides that costs on an opposed interlocutory application “become payable when they are fixed”. Mr Deliu is therefore, unquestionably, a party in default.
• [25] Second, Mr Deliu characterises the proposed order as a collateral attack on the order made by Jagose J as to the terms on which the payment by police into the High Court is held. We do not accept that. Jagose J’s order (made in response to a consent memorandum) was clearly intended to be effective until the determination of the appeal, at which time the parties were to make submissions as to the disposition of the funds. However, the effect of the order was superseded by the police’s memorandum confirming that it no longer claimed an interest in the money held on trust. There were only ever two parties interested in the funds and, once the police had disclaimed any interest in them, they became, beneficially, Mr Deliu’s funds.
• [26] We did not understand Mr Deliu to resist that he was the beneficial owner of the funds. He sought only to draw a distinction between the legal ownership of the funds by the Registrar trustee and himself as a beneficiary. It is therefore incontrovertible that the funds are those of Mr Deliu and, were it not for Brewer J’s order, Mr Deliu would be entitled to them immediately. However, the funds are now held subject to Brewer J’s order pending the determination of the r 7.48 application and appeal.
• [27] The fact that Mr Deliu alone is interested in the funds also addresses his next argument that making the order sought would permit a non-party to intervene in a proceeding. The appellants applied for an order in the 1098 proceeding to enforce the costs orders made in that proceeding. The effect of the order would be to require funds held for Mr Deliu to be disbursed to meet his obligations in the 1098 proceeding. The fact that the funds are held by the High Court is of no significance. The position would be the same if the funds were held by any other independent third party. The 2150 proceedings, which are effectively at an end, will not be affected in any way.
• [28] Fourth, Mr Deliu submitted that the methods of enforcement permitted under r 7.48 were limited to those contained in r 7.48(3) (namely, an order imposing a fine or community work, a warrant committing to prison or a sequestration order). Disobeying a court order constitutes a contempt of court and r 7.48(3) provides the means by which the court itself can coerce compliance with its interlocutory orders, as permitted by s 16 of the Contempt of Court Act 2019. It does not limit the power of the court conferred by r 7.48 to make orders that enable a party to enforce an interlocutory order.
• [29] Fifth, Mr Deliu argued (though not strongly) that, although he had been properly served in the context of the 2150 proceeding, because his interest in the fund held in the 1098 proceeding was in issue, he should have been served afresh with the application for the order under r 7.48. That is plainly incorrect. The application was being made in proceedings to which Mr Deliu was a party and in which service by email was accepted. Had there been other parties with a continuing interest in the funds then service on them could have been required but that was not necessary in Mr Deliu’s case because he was fully and properly on notice of the application.
• [30] Our view of the factors affecting the interests of justice in this case are as follows. Mr Deliu has, for some time, failed to meet costs orders against him. It is reasonable to infer that he does not intend to do so. There are very limited means by which the appellants can enforce the orders. While we accept that an interlocutory order, upon sealing, would become a debt which could found bankruptcy proceedings, that course is not practical because of Mr Deliu’s overseas residency status and his lack of assets in New Zealand (other than the funds held in court). The cost of commencing and serving a bankruptcy proceeding, given the amount at stake, would be disproportionate. Further, no third parties would be adversely affected by an order requiring the funds to be disbursed for the purpose of meeting the costs orders.
• [31] Finally, public confidence in the administration of justice would be served by demonstrating that the Court can and will take steps to ensure compliance with its orders. Conversely, the failure of the Court to make an order, thereby allowing Mr Deliu to avoid paying the costs orders when the court itself holds funds that could be applied to satisfy them would reflect poorly on the administration of justice and undermine public confidence in it.
• [32] We consider that an order should have been made. There are, however, two further issues that Mr Deliu raised that we need to address, and which would, if accepted, affect the amount of the funds that would be disbursed. Mr Deliu argued that because r 7.48 is directed towards interlocutory orders made by the High Court, the High Court had no jurisdiction to make an order that would have the effect of enforcing compliance with orders made by this Court. However, as Mr Flanagan pointed out, the Judge correctly identified that s 58 of the Senior Courts Act 2016, which allows an order of this Court to be enforced by the High Court as if it had been made by the High Court, meant that the Judge had the power to make an order under r 7.48 that encompassed the costs orders made in this Court.
• [33] Mr Deliu also submitted that because one of the three applicants in the High Court had abandoned his appeal, leaving only two appellants in this Court, any order ultimately made under r 7.48 could only be made to the extent of two-thirds of the costs order. We do not accept that proposition. The three original applicants were named as defendants in the 1098 proceeding and conducted a joint defence and advanced their application for security for costs jointly. Under r 14.15, the Judge was required to only allow one set of costs for the security for costs application. The applicants were entitled to those costs on a joint and several basis. They made the r 7.48 application jointly and the fact that one has elected not to advance his appeal does not alter the joint and several entitlements of the remaining appellants.

Result

• [34] The appeal is allowed. The decision of the High Court is set aside.
• [35] We make an order that the sum of $10,958.50 held in trust at the High Court be paid to the appellants in partial satisfaction of the costs awards made against Mr Deliu in Deliu v Chapman,^[25] Deliu v Johnstone,^[26] Deliu v Johnstone^[27] and Deliu v Johnstone.^[28]
• [36] The respondent must pay the appellants costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Meredith Connell, Auckland for Appellants

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^[1] Deliu v Chapman [2020] NZHC 2100 [HC 1098 costs judgment] at [31(c)(iv)]; Deliu v Johnstone [2021] NZCA 337 [CA 1098 leave judgment] at [15]; Deliu v Johnstone [2021] NZCA 488 [CA 1098 first recall judgment] at [8]; and Deliu v Johnstone [2021] NZCA 646 [CA 1098 second recall judgment] at [6].

^[2] Deliu v New Zealand Police [2021] NZHC 1744 [HC 2150 costs judgment].at [49] and [50].

^[3] Originally, there were three applicants and the appeal was brought in all their names. One, Mr Johnstone (now Johnstone J), has since abandoned his appeal.

^[4] Deliu v Johnstone [2022] NZHC 467 [judgment under appeal] at [38].

^[5] Deliu v Johnstone [2022] NZHC 1893 [HC 2150 costs judgment] at [53].

^[6] Brewer J declined Mr Deliu’s requested that his “Protest to Jurisdiction” be heard in a separate and preliminary hearing and directed that his arguments be made in the hearing of the substantive application.

^[7] Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].

^[8] At [31].

^[9] Deliu v New Zealand Police [2020] NZHC 2506 [HC 2150 substantive judgment] at [298] and [299]. This was later stayed pending appeal, see HC 2150 costs judgment, above n 2, at [47] and [48].

^[10] HC 2150 costs judgment, above n 2, at [49] and [50].

^[11] New Zealand Police v Deliu [2022] NZCA 328 at [68] [CA 2150 appeal judgment].

^[12] HC 1098 costs judgment, above n 1, at [29].

^[13] At [31(a)].

^[14] At [31(c)(iv)].

^[15] Deliu v Johnstone [2021] NZHC 25 [HC 1098 leave judgment] at [16].

^[16] CA 1098 leave judgment, above n 1, at [14] and [15].

^[17] CA 1098 first recall judgment, above n 1, at [7] and [8].

^[18] CA 1098 second recall judgment, above n 1, at [5] and [6].

^[19] High Court Rules 2016, r 1.3 definition of “interlocutory order”.

^[20] Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR17.2.01(3)].

^[21] Kidd v Van Heeren [2019] NZCA 275, (2019) 24 PRNZ 596.

^[22] Emphasis added.

^[23] Global Torch Ltd v Apex Global Management Ltd (No 2) [2014] UKSC 64, [2014] 1 WLR 4495 at [23].

^[24] Judgment under appeal, above n 4, at [38].

^[25] HC 1098 costs judgment, above n 1.

^[26] CA 1098 leave judgment, above n 1.

^[27] CA 1098 first recall judgment, above n 1.

^[28] CA 1098 second recall judgment, above n 1.