Oceanic Palms Ltd v Kiwi Rail Ltd

[2018] NZHC 679

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-200 [2018] NZHC 679

BETWEEN

OCEANIC PALMS LIMITED

Plaintiff

AND

KIWI RAIL LIMITED Defendant

Hearing:	16 April 2018
Appearances:	H Haynes and B Hubbard for Plaintiff M L Campbell and S J Thomson for Defendant
Judgment:	16 April 2018
Reissued:	18 April 2018

ORAL JUDGMENT OF JAGOSE J

Solicitors:

Russell McVeagh, Wellington

Party:

Plaintiff

OCEANIC PALMS LTD v KIWI RAIL LTD [2018] NZHC 679 [16 April 2018]

Introduction

[1]      The applicant (“Oceanic Palms”) seeks interim orders under s 15 of the

Judicial Review Procedure Act 2016 (the “Act”):1

(a)to prevent the respondent (“KiwiRail”) from removing any of Oceanic Palms’ property from premises formerly leased by Oceanic Palms from KiwiRail (the “premises”);

(b)to require KiwiRail to permit Oceanic Palms access to the premises for four or five hours once or twice a week to care for its property on the premises, and to remove its property from the premises; and

(c)      to stay KiwiRail’s proceeding to put Oceanic Palms into liquidation.

Background

[2]      Oceanic  Palms  grows  and  transplants  mature  palm  trees.  It  did  so  from premises leased from KiwiRail since 1 March 2010, initially at an annual (and expressly concessionary) rent of $34,000 per annum. Under the lease, on its renewal by Oceanic Palms, KiwiRail was entitled to review the rent to market rates. KiwiRail took up that entitlement, to review the rent to $123,200 per annum from 1 March 2015, which Oceanic Palms was required to pay until a new rent was determined or agreed.

[3]      Oceanic Palms did not agree with that rent, or to joint valuers’ recommended rent of $100,000 per annum (at which rate KiwiRail invoiced Oceanic Palms, despite its entitlement to levy rent at the higher figure), and continued to pay the original rent. Oceanic Palms was not prepared to engage in arbitration, because it doubted that process would result in an acceptably low rent, bearing the view that arbitrations tended to benefit the landlord.  Despite arbitration being the contractual process for

determination of rent, and that rent contractually defined as “the current market rent

1      This judgment, issued previously on 16 April 2018, was recalled to amend errors at paras [20] and [27] referring to the dismissal of Oceanic Palms’ ‘application for review’ rather than ‘application for interim orders’. Only the latter was before me for decision, and was dismissed.

of the Leased Land, based on the highest and best use of the Leased Land, as at the

Rent Review Date”.

[4]      In late 2015, KiwiRail gave notice of its intention to cancel the lease unless Oceanic Palms paid the outstanding rent. Oceanic Palms sought relief from forfeiture of its lease, which was refused by Justice Fogarty in the High Court on 20 May 2016.2

Oceanic Palms appealed the Judge’s decision, both substantively and by way of judicial review. The latter challenge relied on grounds of KiwiRail’s contended bad faith and unreasonableness in reviewing the rent to market rates.

[5]      The appeal was dismissed on 4 July 2017, the Court of Appeal recording “Oceanic Palms’ belated attempt to broaden the scope of the appeal by adding judicial review as a ground does not assist its case”.3  In August 2017, the Court declined Oceanic Palm’s application for stay pending further appeal to the Supreme Court, noting both the application for leave to appeal lacked any merit, and Oceanic Palms had failed to take reasonable steps to preserve its position in the interim.4 In October

2017, the Supreme Court dismissed Oceanic Palms’ applications to stay the High

Court’s judgment, and for leave to appeal to that Court.5

[6]      This Court subsequently made enforcement orders recovering possession of the premises to KiwiRail. Oceanic Palms’ application to stay that order was too late, as the order had been executed. In declining the application to stay that order on

20 December 2017, Justice Hinton noted nothing in Oceanic Palms’ circumstances approached the “substantial miscarriage of justice” threshold for such stay.6 Oceanic Palms, she said, had already had months to relocate since the Court of Appeal’s ruling, and she recorded it was “at the end of the road”. Nonetheless, the Judge noted KiwiRail’s ex gratia provision to Oceanic Palms of supervised access on reasonable notice to remove its property by 31 January 2018, extendable at KiwiRail’s discretion, subject to “real progress [being] made”. Oceanic Palms made a further application to

stay the enforcement order, this time for its appeal against Justice Hinton’s decision.

2      Hubbard v Kiwirail Ltd [2016] NZHC 1061.

3      Hubbard v Kiwirail Ltd [2017] NZCA 282 at [29].

4      Hubbard v Kiwirail Ltd [2017] NZCA 375 at [12]-[13].

5      Hubbard v Kiwirail Ltd [2017] NZSC 153.

6      Hubbard v Kiwirail Ltd CIV-2015-404-003145, 20 December 2017 (Minute of the Court).

Having no better foundation to stay executed orders than Justice Hinton, in February

2018, Justice van Bohemen declined this further application.7

[7]      In the meantime, Oceanic Palms filed the present proceeding. At its first case management conference, Justice Fitzgerald recorded KiwiRail’s offer of further holding arrangements, on which she exhorted Oceanic Palms to engage. That does not appear to have given rise to any alternative acceptable to Oceanic Palms.

The law

[8]      Section 15 of the Act provides:

15  Interim orders

(1)At any time before the final determination of an application, the court may, on the application of a party, make an interim order of the kind specified in subsection (2) if, in its opinion, it is necessary to do so to preserve the position of the applicant.

(2)The interim orders referred to in subsection (1) are interim orders— (a)       prohibiting a respondent from taking any further action that

is, or would be, consequential on the exercise of the statutory power:

(b)       prohibiting or staying any proceedings, civil or criminal, in connection with any matter to which the application relates:

(c)declaring that any licence that has been revoked or suspended in the exercise of the statutory power, or that will expire by the passing of time before the final determination of the application, continues and, where necessary, that it be deemed to have continued in force.

…

(4)      An order under subsection (2) or (3) may—

(a)be made subject to such terms and conditions as the court thinks fit; and

(b)be expressed to continue in force until the application is finally determined or until such other date, or the happening of such other event, as the court may specify.

[9]      It is important to note, under s 15:

7      Hubbard v Kiwirail Ltd CIV-2015-404-003145, February 2018 (Minute of the Court).

(a)first, interim orders are only available if, in the Court’s opinion, they are “necessary … to preserve the position of the applicant”; and

(b)second,   interim   orders   are   limited   to   prohibitions,   stays,   and declarations relating to exercise of a challenge to statutory power.

[10]     The position for preservation is that in which the applicant would have been, but for the decision the subject of the application for review.8 It is long understood, where there is no arguable or justiciable issue raised for judicial review, there can be no position to preserve.9   There must be “a legal and factual position to preserve”.10

Further, ‘necessary’ means just that – “reasonably necessary” – and we are cautioned not to add any further gloss.11

[11]     My initial consideration is thus for the applicant’s substantive case – that it raises “plausible allegations which, if substantiated at the trial, will demonstrate that the decision was not reached in accordance with law”.12  Only if that threshold is crossed can the requisite necessity then be considered. And, even if necessity is established, there is then a range of factors to consider in exercising my discretion to grant the relief sought. They include the applicant’s and respondent’s respective positions, including the strength of their respective cases, and the positions of potentially affected third parties, including the public.

Analysis

[12]     Oceanic  Palms’  application  for  review  contends  KiwiRail’s  decision  on

24 January 2018 not to allow Oceanic Palms’ continued access to the premises after

31 January 2018 was unreasonable. The unreasonableness is said to be KiwiRail’s expectations Oceanic Palms could make significant progress in removing its property

8      Douglas Bayly Ltd v Minister of Internal Affairs HC Wellington CIV-2003-485-2465, 1 December

2003 at [29].

9      Whale Watch Kaikoura Ltd v Transport Accident Investigation Commission [1997] 3 NZLR 55 (HC), (1997) 10 PRNZ 481 at 488.

10     New Zealand Maori Council v Attorney General [1996] 3 NZLR 140 (CA) at 151 [“Radio Assets

Case”].

11     Minister of Fisheries v Antons Trawling Company Ltd [2007] NZSC 101, (2007) 18 PRNZ 754 affirming Carlton & United Breweries v Minister of Customs [1986] 1 NZLR 423 (CA) at 430 per

Cooke J.

12     Mercury Energy Ltd v Electricity Corp of New Zealand Ltd [1994] 2 NZLR 385 (PC) at 388.

from the premises during the Christmas/New Year period until mid January, and its “arbitrary shortening” of the period for assessment of progress made. In submissions, Oceanic Palms said “it was unreasonable of KiwiRail … to make their decision without taking into account the progress made between 25 and 31 January”.

[13]     In submissions, Oceanic Palms also identified a second, different, decision for review. It also asks me to review KiwiRail’s June 2015 decision to set Oceanic Palms’ rent at $100,000 per annum, ratifying the joint valuers’ recommendation. While noting the Court of Appeal’s decision KiwiRail had not acted unreasonably in relying on that recommendation in setting the rent, Oceanic Palms now says:

Kiwirail offered leases to the other tenants at what amounts to a substantially lower rate, despite land values having increased in the meantime. This is unreasonable. There may be ulterior motives involved, which we will not know until KiwiRail produces the documents showing the policies behind these inconsistent decisions.

In oral submissions today Mr Hubbard said he additionally sought interim orders to obtain those documents.

[14]     Oceanic Palms offers no evidence for that submission at all. It appears to rely on an expansion to its claim, contained in its application for interim orders, for substantive orders “the rent should be reset at a substantially lower rate”. The facts pleaded in support of that expansion are that Oceanic Palms’ tenants were offered tenancies in December 2017 at the same rate as was offered to Oceanic Palms from 1

March 2015, when property values have increased since that time. Mr Hubbard and Mr Haynes both emphasise that the smaller sub-tenancies ought to be paying a higher rate than the larger single tenancy on a square meterage basis. The allegation has no bite: the valuers’ recommendation was of an annual rental for the whole of the five- year term from 1 March 2015, which a tenancy commencing in December 2017 is well within.

[15]     Judicial review is only of the process by which statutory and public powers are exercised. The Court does not itself exercise those powers, even if the process engaged has been found wanting in a judicially reviewable sense. The fact such powers are

exercised by an entity created by statute is also not enough to engage the Court’s jurisdiction, even when a State-owned enterprise, such as KiwiRail is involved.13

[16]     The most recent statement of the relevant law is in The Attorney-General v Problem Gambling Foundation of New Zealand,14  where the Court of Appeal drew together principles derived from Mercury Energy and subsequent cases, to conclude:

In a commercial context, judicial review will normally only be available where there is fraud, corruption or bad faith, or in analogous situations. A broad- based probity-in-public-decision-making review is not to be applied.

[17]     The Court of Appeal acknowledged the majority decision of the Supreme Court in Ririnui v Landcorp Farming Ltd, which noted “even if that proposition is to be accepted, it does not necessarily apply to all contracting decisions made by state- owned enterprises”.15 The Court of Appeal considered the majority in the Supreme Court saw their case as “falling outside the general proposition because it was not an ordinary commercial transaction”.16

[18]     There can scarcely be a more ordinary commercial transaction than a landlord cancelling a lease in circumstances in which a tenant refuses to pay the contracted rent, and making arrangements for the tenant’s exit. The Court of Appeal has already noted KiwiRail’s extensive accommodation of Oceanic Palms “in many ways throughout their tenancy, including in connection with the rent review process”, and KiwiRail’s “considerable patience” in seeking resolution with Oceanic Palms. Recognition of that patience is echoed by Justice Hinton, who identified Oceanic Palms was now “entirely dependent on the goodwill of KiwiRail”; and by Justice Fitzgerald, who endorsed for consideration KiwiRail’s further offers to Oceanic Palms.

[19]     As  the  Court  of Appeal  said  “A  broad-based  probity-in-public-decision- making review is not to be applied”. Oceanic Palms’ suggestion of KiwiRail’s ‘ulterior motives’ adds nothing to its claim for review. Indeed, had Oceanic Palms had legal representation (which is a point to which I will return), such an allegation – necessarily

13     Attorney-General v Problem Gambling Foundation of New Zealand [2016] NZCA 609, [2017]

2 NZLR 470 at [30].

14     At [34](d).

15     Ririnui v Landcorp Farming Ltd [2016] NZSC 62, [2016] 1 NZLR 1056 at [65].

16     Problem Gambling, above n 13, at [38].

of fraud, corruption, or bad faith – could not have been made on such an unfounded basis without breaching professional ethics. And Oceanic Palms has no basis to claim any reduction in rent, because it has no lease.

[20]     Oceanic Palms has no plausible allegations KiwiRail’s impugned decisions were unlawful. I will dismiss the application for interim orders.

[21]     I therefore do not need to consider whether the interim orders sought are necessary  to preserve Oceanic  Palms’ position.  However,  if  I  am wrong  in  my assessment of the substance of Oceanic Palms’ case, I still would not have granted any of the relief it seeks. Because the lease has terminated, Oceanic Palms has no right to keep its property on KiwiRail’s land, or (even if I have power to grant mandatory interim orders under the Act) to obtain access to that land to maintain its property. Any stay of liquidation would be better determined in that proceeding. And I have no power at all to determine the rent for lease of KiwiRail’s property.

Representation

[22]     Justice Fitzgerald granted Oceanic Palms leave to be represented on its interim orders application by its directors, Harley Haynes and Peter Hubbard. She was plainly influenced by their representation of the company throughout the other proceedings against KiwiRail, and their expectation that would continue. The Judge observed “[t]hat is somewhat unorthodox, and an indulgence to them, given the very clear default position that a corporation must be represented by counsel”. She noted the directors’ continued representation on the substantive judicial review application remained “a live issue, and it should not be assumed that they necessarily will be permitted to do so”.

[23]     It is a well-established rule a company has no right to be represented in Court by other than a practising lawyer. The benefits of securing limited liability carry with them a range of obligations, of which the requirement to obtain legal representation in Court proceedings is one. The rule’s rationale is to ensure proceedings are appropriately pleaded and managed, including by counsel with primary obligations to this Court. That is in part to ensure the company’s and shareholders’ interests are properly represented in any decision to participate in litigation.

[24]     The Court retains discretion nonetheless to allow non-lawyers to appear on behalf of companies in exceptional circumstances.17 But those exceptional circumstances are generally to be regarded:18

… as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the court or where it would be unduly technical or burdensome to insist on counsel.

[25]     The present application is not an emergency situation; neither is it or the substantive proceeding straightforward; nor would the instruction of counsel be unduly technical or burdensome – to the contrary, it would likely have been singularly constructive. The claim is poorly drafted; the interim orders lack legal foundation, and are besides the subject of belated and unnecessary enhancement; the submissions expand beyond their permissible extent, both in terms of subject matter and evidence; conduct of the proceeding generally has exceeded reasonable obligations on KiwiRail

as a respondent; and there is no indication the company’s directors had any regard for Justice van Bohemen’s commendation of legal advice if judicial review was to be pursued. It is a measure of KiwiRail’s continuing accommodation of its former tenant that it has not objected to the company’s representation.

[26]     If Oceanic Palms intends to continue to be represented by its directors, I direct

it to make formal application for such representation, with explicit reference to this section of my judgment.

Result

[27]     Oceanic Palms’ application for interim orders is dismissed.

17     Re G J Mannix Ltd [1984] 1 NZLR 309 (CA) at 311. See also Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [25]-[34]; Kai Iwi Tavern Ltd v New Zealand Guardian Trust Company Ltd [2013] NZCA 199 at [6]-[8]; and Dreamtech Designs & Productions Pty Ltd v Clownfish Entertainment Ltd [2015] NZCA 491 at [8]-[10].

18     Re G J Mannix, above n 17, at 314.

Costs

[28]     I have not heard from the parties on costs. (Indeed, I have not heard from KiwiRail at all.) In principle, the unsuccessful party is liable to contribute to the successful party’s legal expenses.19

[29]     In my preliminary view, Oceanic Palms should pay KiwiRail costs calculated on 2B scale, uplifted by 30 per cent to reflect the meritless nature of its application, and actual and reasonable disbursements as certified by the Registrar. I include in those disbursements  KiwiRail’s  preparation  of  the  common  bundle,  as  directed  by Justice Fitzgerald.

[30]     If my preliminary view is not accepted by either party, and costs cannot otherwise be agreed between them, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:

(a)      KiwiRail within ten working days of the date of this judgment;

(b)Oceanic Palms within five working days of service of KiwiRail’s memorandum; and

(c)       KiwiRail  strictly  in  reply  within  five  working  days  of  service  of

Oceanic Palms’ memorandum.

—Jagose J

19     High Court Rules, r 14.2(1)(a).