Hubbard v Kiwirail Limited

[2016] NZHC 2719

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-3145 [2016] NZHC 2719

BETWEEN

PETER BRENT HOME HUBBARD

AND HARLEY HAYNES First Applicants

AND

OCEANIC PALMS LIMITED Second Applicant

AND

KIWIRAIL LIMITED Respondent

Hearing:	10 November 2016
Appearances:	Applicants in person E Martin for Respondent
Judgment:	14 November 2016

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 14 November 2016 at 3.30 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Hubbard v Kiwirail Limited [2016] NZHC 2719 [14 November 2016]

[1]      On  20 May 2016,  Fogarty J  delivered  a  judgment  between  the  parties dismissing applications by the first and second applicants for orders preventing Kiwi Rail from increasing the rent on a lease of commercial premises, and preventing Kiwi Rail from re-entering and terminating the lease.   The application was made under sub-part (6) of the Property Law Act 2007.1

[2]      After  setting  out  his  reasoning,  Fogarty J  dismissed  the  applications  and made a costs order in the following terms:

[65]      For these reasons the applications by the lessees are dismissed, with two qualifications:

(a)       That is, that the lessees have one calendar month from the date of delivery of this judgment to pay the arrears of rental at the new rate. If not, having given notice, see [21] above, Kiwirail may cancel the lease. It is likely that the lessees will appeal this judgment to the Court of Appeal. That will not affect the judgment of the High Court as to cancellation of the lease.

(b)       Second, in place of the remedy of cancellation of rent, the lessees have one calendar month to formally dispute the rent, so that the dispute be then submitted to arbitration in Auckland, see cl 2.2(b) of the lease.

[66]      I have explained to the lessees that if they wish to avoid cancellation of the lease alongside appealing to the Court of Appeal they will need to lodge their appeal from this judgment well within the one month allowed and also apply to the Court of Appeal, not to this Court, for any restraint they seek to be imposed on Kiwirail, pending the hearing of their appeal.

[67]     Kiwirail Ltd is entitled to costs having successfully opposed the application.  Costs are awarded on a 2B basis.

[3]      On 16 June 2016, the first applicants filed an urgent interlocutory application for a stay of Fogarty J's judgment pending the results of an appeal to the Court of Appeal, notice of appeal having been filed on 14 June 2016.  Mr Hubbard's affidavit in support of the stay application asserted that if Kiwirail was allowed to re-enter the leased property the result would be the end of the applicants' ability to keep running their business and pursue the appeal.

[4]      The  respondent  filed  a  memorandum  of  counsel  in  response.    counsel informed the Court that Kiwirail was prepared in the circumstances to agree not to

1      Hubbard & Anor v Kiwirail Limited [2016] NZHC 1061.

re-enter the property until the Court of Appeal decision had been delivered, on the understanding that Kiwirail had a right to possession of the leased land under s 244 of the Property Law Act [    ].  It accordingly requested an order that the applicants should deliver possession of the leased premises to Kiwirail pursuant to s 244 but staying that order pending determination or other resolution of the appeal.

[5]      I observe that neither Mr Hubbard's affidavit nor the memorandum of counsel for Kiwirail made any reference to the costs order contained in Fogarty J's judgment. It is clear, in my view, that the focus of the parties so far as the stay is concerned was on agreeing that Kiwirail had a right to re-enter but would refrain from exercising it until after disposition of the appeal.

[6]      In a Minute issued on 20 June 2016, following an appearance before him, Muir J noted Kiwirail's agreement to a stay and by consent ordered:

(a)       That  the  applicants  deliver  possession  of  the  leased  premises  to

Kiwirail pursuant to s 244 of the Property Law Act 2007; but

(b)      Staying  such  order  pending  determination  or  other  resolution  of

Oceanic Palms's appeal in CA272/2016.

[7]      The Judge also reserved leave to Kiwirail to apply to vacate the stay in the event that the appeal was not prosecuted with due diligence.

[8]      On 8 July 2016, counsel for the respondent filed a memorandum quantifying the costs ordered to be paid by Fogarty J in his judgment.  They sought scale costs of

$16,502 and other costs and disbursements.

[9]      I was informed from the Bar by Ms Martin, who had a copy of the relevant email, that a copy of the costs memorandum had been sent by email to an email address used by the applicants.  Mr Hubbard and Mr Haynes both say that they did not receive or, at the very least, did not see the costs memorandum.

[10]     On 19 August 2016, Fogarty J delivered a costs judgment "on the papers" in which he directed payment of the $16,502 in costs and filing fees in the sum of $160,

but rejected Kiwirail's other costs claims.  I am satisfied on the basis of the order that that was as favourable a view of the present applicants' costs liability as could have been  given, even  if the  applicants had  responded to the costs memorandum by making submissions.

[11]     Kiwirail sought to enforce the costs order and in response the applicants filed the present application asking the Court to uphold the stay of execution ordered by Muir J and order that payment of costs in the proceeding were stayed pending the outcome of the appeal.

[12]     The grounds upon which the applicants seek an order preventing execution of the costs judgment are that, during the discussions over the stay of the substantive judgment, nothing was brought up by Kiwirail about costs.   They argue that it is implicit in a stay of judgment that costs are likewise stayed and that there is nothing in the wording of Muir J's Minute to indicate otherwise.

[13]     Kiwirail accepts that nothing was discussed between the parties about the costs which Fogarty J had ordered to be paid on a Category 2B basis, but disputes that the consent orders made by Muir J include by implication the order for costs which was made several months after the substantive judgment and the consent stay orders.

[14]     In support of the stay application Mr Hubbard and Mr Haynes, representing themselves and their company, reiterated claims they made in the substantive proceedings and have made several times subsequently about the way in which Kiwirail has approached the lease arrangements between it and the applicants.  As I understand it, the appeal will be based in part upon Kiwirail's approach.  They say that although they are in arrears in the payments of the increased rent which is the subject of the appeal, they have valuable stock which could be sold, at a discount if necessary, in order to meet any financial liability to Kiwirail for rent and the amount of the costs ordered.

[15]     I regard the agreement between the parties upon which Muir J's consent orders  were  made  to  be  a  contract.    It  is  susceptible  to  the  usual  approach  to

contractual interpretation.    That means that the subjective intentions or understandings of the parties about what they agreed to and why must give why to an objective interpretation of the terms used considered in light of the background circumstances.

[16]     As I have observed, nothing in the material put before Muir J makes any reference to costs and it is clear that the Judge did not order a stay of the whole of Fogarty J's decision.

[17]     The decision made by Fogarty J was that Kiwirail could cancel the lease if the applicants had not, by 20 June 2016:

(a)      paid the arrears of rental at the new rate of $123,300 plus GST per annum (at the date of judgment, that sum amounting to $103,106 plus GST); and

(b)formally  disputed  the  rent  and  proceeded  to  arbitration  under clause 2.2(b) of the lease.

Because neither step was taken and Kiwirail was then entitled to cancel the lease, the stay application addressed that issue alone.

[18]     I am satisfied that Muir J's judgment similarly addressed the substantive effects of the judgment and did not, and was not intended by the Judge, to extend to the order for payment of costs.

[19]     I have considered whether, notwithstanding the limited scope of Muir J's order,   I  should   stay   the   payment   of   the   costs   ordered   by   Fogarty   J   on

19 August 2016.

[20]     Applying  the  ordinary  principles  applicable  to  an  application  for  a  stay pending an appeal under r 2.10 of the High Court Rules, I am satisfied that there is no good reason to deprive Kiwirail of the fruits of the costs judgment in its favour.  I am not persuaded that if a stay is not granted the appeal rights of the applicants

would be rendered nugatory.2   Kiwirail is in a position to repay any costs paid by the applicants pursuant to an order which may be set aside if the appeal succeeds.   I understand the applicants to say that payment of the costs will impose a burden on them, but that is inevitable.

[21]     For these reasons I dismiss the application for a further stay order in relation to the costs judgment.

[22]     Kiwirail having succeeded in its opposition to the application is entitled to costs.   If costs on the application are sought, Kiwirail shall file and serve a memorandum  on  or before  25 November 2016.   Any memorandum  in  reply on behalf of the applicants should be filed and served by 9 December 2016.  Costs will then be dealt with on the papers unless the Court directs otherwise.

....................................

Toogood J

2      Philip Morris (NZ) Limited v Liggett & Myers Tobacco Co. (NZ) Limited [1977] 2 NZLR 41 (CA).