Hubbard v KiwiRail Ltd - [2017] NZCA 282

IN THE COURT OF APPEAL OF NEW ZEALAND

CA272/2016
[2017] NZCA 282

BETWEEN

PETER BRENT HOME HUBBARD AND HARLEY HAYNES
First Appellants

OCEANIC PALMS LIMITED
Second Appellant

AND

KIWIRAIL LIMITED
Respondent

Hearing:	3 May 2017 (further submissions received 10 and 17 May 2017)
Court:	Miller, Gilbert and Katz JJ
Counsel:	First Appellants in person M L Campbell and L M McGlone for Respondent
Judgment:	4 July 2017 at 2.15 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

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

____________________________________________________________________

REASONS OF THE COURT

(Given by Gilbert J)

Introduction

This is an appeal against a judgment of Fogarty J given in the High Court on 20 May 2016 declining an application for relief against forfeiture of a lease for non-payment of substantially increased rent following a rent review.[1] The appellants claim that the proposed rent increase is disproportionate and excessive having regard to the characteristics of the leased land and the terms of the lease, including the lessor’s right to terminate on 24 months’ notice. They claim that the proposed rent is inequitable and amounts to a frustration of the lease. They also claim that the lessor’s decision to increase the rent to such an extent was made in bad faith and was unreasonable. They claim that the decision is judicially reviewable under the Judicature Amendment Act 1972 because the lessor is a state enterprise.

Facts

[1]Hubbard v KiwiRail Ltd [2016] NZHC 1061 [High Court judgment].

Oceanic Palms Ltd has been engaged in palm landscaping since 1989. Its core business is growing and transplanting mature palm trees. Peter Hubbard and Harley Haynes are its directors and shareholders. They state that their aim is to make a significant contribution to the Auckland urban environment. They have been involved in several major projects for Auckland Council, including transplanting mature nīkau palms in Karangahape Road, Queen Street and at Vector Arena.
Oceanic Palms’ nursery and horticulture business is based in Onehunga, Auckland on land it leases from KiwiRail Ltd under a deed of lease dated 28 June 2010. The leased land is held by the Crown on behalf of New Zealand Railways Corporation for railway purposes and is administered by KiwiRail. The land may not be disposed of without the consent of the Minister of State Owned Enterprises who must have due regard to the future development of the railways.[2]
[2]New Zealand Railways Corporation Act 1981, s 24(a).
The lease was negotiated over a nine-month period from about September 2009. At that time, the land had been vacant for a number of years, it was in a bare state and parts of it were prone to flooding. KiwiRail allowed Oceanic Palms to occupy the land rent-free for three months from December 2009 to the commencement date under the lease of 1 March 2010. During this period, Oceanic Palms improved the condition of the land by removing old tyres and other rubbish that…

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: [2017] NZCA 282
Decision Date: 4 July 2017 at 2.15 pm

CaseChat Overview and Summary

The appeal is brought by Oceanic Palms Ltd, its directors and shareholders, Peter Brent Home Hubbard and Harley Haynes, against KiwiRail Ltd, the owner of a parcel of land leased to Oceanic Palms. The appeal concerns a proposed increase in the rental of the leased land. The High Court had declined an application by Oceanic Palms for relief against forfeiture of the lease due to non-payment of the increased rent. The Court of Appeal was asked to consider whether the proposed rent increase was disproportionate and excessive, and whether KiwiRail had acted unreasonably or in bad faith in proposing the rent increase.

The Court of Appeal found that KiwiRail had not acted in bad faith or unreasonably in proposing the rent increase. The lease provided for the rent to be reviewed to the market rate on renewal, and KiwiRail had acted in accordance with the lease terms in proposing the rent increase. The Court of Appeal also found that the rent proposed by KiwiRail was based on valuations by independent experts and was within the terms of the lease. The Court of Appeal dismissed the appeal and ordered the appellants to pay the respondent's costs of the appeal.

Orders