Years spent by Taranaki couple Caroline and Calvin Campbell in ultimately unsuccessful negotiations with Heartland Bank over payment due on a guaranteed debt saw them liable for $101,800 increased enforcement costs.
The Bank’s contractual indemnity entitling it to recover all enforcement costs extended to legal costs incurred reviving what would otherwise have become a statute-barred debt, the High Court ruled.
Long-term commercial contracts typically include indemnity clauses holding debtors liable to pay in full any enforcement costs; justified as having the defaulter pay for costs of default.
Courts are wary of lawyers chucking the kitchen sink at indemnity cost recoveries, padding bills. Indemnity costs claimed must be reasonable.
The Campbells’ legal difficulties followed a failed 2012 investment in New Plymouth commercial property by their family company. A forced sale left a $910,000 shortfall; payment guaranteed by the Campbells.
Enforcement of this guarantee was delayed years whilst the Campbells first complained unsuccessfully to the Banking Ombudsman about manner of the forced sale, and then later after they pleaded for time, saying they planned to subdivide their residential property to generate cash.
With time running out for Heartland Bank as a Limitation Act deadline loomed, deeming the guarantee unenforceable after a six year delay, the Bank went to the High Court getting special permission for enforcement beyond six years.
The Campbells claimed this extra court application went beyond normal recovery procedures; they should not be liable to reimburse these Bank costs, they argued.
Back in the High Court, Justice Gardiner ruled these costs were included in the Bank’s indemnity clause as costs ‘connected’ with ‘protecting or enforcing’ its rights.
Having reviewed lawyer’s invoices paid by the Bank and finding costs charged reasonable, she ordered the Campbells pay Heartland Bank a further $101,800.
Heartland Bank v. Campbell – High Court (11.06.26)
26.175