KRUKZIENER V HANOVER FINANCE LTD HC AK CIV-2007-404-002896 [2009] NZHC 172 (19 February 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                           CIV-2007-404-002896



              BETWEEN                            ANDREW MARK KRUKZIENER
                                                 Judgment
Debtor

              AND                                HANOVER FINANCE LIMITED
                                               
 Judgment Creditor


Appearances: No appearance for Judgment Debtor
             L A O'Gorman for Judgment Creditor

Judgment:  
  19 February 2009 at 3:30 pm


                  RESERVED JUDGMENT OF COURTNEY J




                         This judgment was
delivered by Justice Courtney
                                 on 19 February 2009 at 3:30 pm
                            pursuant
to R 11.5 of the High Court Rules

                                   Registrar / Deputy Registrar
                             
     Date.............................




Solicitors:    Buddle Fndlay, P O Box 1433, Auckland
               Fax: [phone]
               Chapman Tripp, P O Box 2206, Auckland 1140
               Fax: [phone] ­ S A Hodge


KRUKZIENER V HANOVER FINANCE
LTD HC AK CIV-2007-404-002896 19 February 2009

[1]       Hanover Finance Ltd has a judgment against Mr Krukziener for
$4,159,386.61,
which has remained unpaid since being entered in April 2007.
Hanover has applied for an order that the judgment attract post-judgement
interest at
the contractual rate and for an order that Mr Krukziener be adjudicated bankrupt.
Mr Krukziener had applied for a stay
of the adjudication proceedings.               On
17 February, when these applications were to be heard, Mr Krukziener did not
appear.
Ms O'Gorman, for Hanover, handed me a joint memorandum signed by her
and by Mr Krukziener's attorney, Ms Hodge.           The memorandum
advised that
Mr Krukziener withdrew his application for stay and sought to have Hanover's
application for adjudication adjourned
for two weeks because of ongoing
negotiations. The parties anticipate that at the end of that period either Hanover will
discontinue
its application for adjudication or that the application will proceed
unopposed.

[2]       I adjourned the application for adjudication
to the Duty Judge list 4 March
2009 at 11:45 am. This left Hanover's application for an order for post-judgment
interest at the contractual
rate from the date of judgment down to the date of
payment. There was no opposition and the joint memorandum was silent on the
point.

[3]       The judgment debt arose under a contract between Mr Krukziener and
Hanover that imposed a default rate of interest of
18% per annum compounding
monthly. The summary judgment order in favour of Hanover included interest at the
contractual rate to the
date of judgment but the rate at which interest should be
payable from the date of judgment was left to be dealt with at a later
date.


[4]       Rule 11.27 High Court Rules (the equivalent of the former R 538) provides
that a judgment debt carries interest
from the time judgment is given until it is
satisfied, with interest to be at the rate either prescribed by s 87 Judicature Act 1908
or at a lower rate fixed by the Court. However it is clear from IFC Securities
Limited v Sewell1 that if a party is entitled to interest
under a contract from the date
of judgment until payment then that provision will be enforced, notwithstanding the
terms of R 11.27,
unless to do so would be unconscionable.              I note that in


1
     [1990] 1 NZLR 177;  (1989) 3 PRNZ 181

Nottingham v Registered Securities Limited (in liquidation)2 the Court of Appeal
varied an order made in the context of a summary
judgment for interest at a
contractual rate to run on until the date of payment, requiring interest at the rate then
prescribed under
s 87 to be substituted. However, the Court did observe that the
judgment creditor was not necessarily precluded from making a fresh
claim for the
interest at the contractual rate with any such claim needing independent
consideration.

[5]     In the present environment,
18% per annum might be regarded as a high rate.
However, rates have not been at that level throughout the period that the debt has
remained unpaid and the rate might arguably be regarded as unconscionable only in
light of changes to bank rates over the last few
months. Further, I do not consider
that, in the context of a default rate on commercial lending, the rate prescribed in the
contract
should be regarded as unconscionable.

[6]     There is, however, one aspect of the application that requires further
consideration.
Hanover sought to have interest paid at the contractual rate from the
date of the judgment down to the date of payment. I was not
addressed on the
possible effect of s 94(2) Insolvency Act 19673. Section 94 provides that:

        (1)     Unless authorised by
an enactment or rule of law, no interest shall be
        included in any proof of debt unless -

                 (a)     It has
been allowed by a court in entering judgment; or

                 (b)      The claim is based on an agreement which provided for
the
                          paying of interest.

        (2)      Where interest may be so included, it shall be calculated only
up to
                 the date of adjudication.

[7]     This provision was considered in UDC Finance Limited v P J Bradey
Limited4
in the context of a winding up. Ongley J held that s 94(2) implied that
interest of a kind properly claimable under s 94(1) may only
be claimed up until the
date of adjudication, being the date of the court order adjudging a person to be
bankrupt. Given the indication
to me that Hanover's application will either be


2
   (1998) 12 PRNZ 625 (CA)
3
  This proceeding still being dealt with under the Insolvency Act 1967, having been on foot prior to
the commencement of the
Insolvency Act 2006
4
   [1983] NZLR 481

discontinued within the next two weeks or that its application for adjudication will
proceed unopposed it seems to me to be necessary,
in making an order for the
payment of post-judgment interest, to recognise the effect of s 94(2).

[8]    I therefore make the following
order: interest is to be payable on the principal
amount of the judgment debt at the rate of 18% per annum, compounding monthly,
from the date of judgment down to the date of payment or, in the event of
Mr Krukziener being adjudicated bankrupt before payment
of the judgment sum,
down to the date of adjudication.

[9]    I was not addressed on the issue of costs and make no order.





                                                            ____________________


                                             
               P Courtney J