Commercial
tenants on Kiwirail land were told by the High Court to settle a rental dispute
by using arbitration provisions in their lease.
Complaints to the court that Kiwirail as an SOE should charge below
market rates were to no avail.
Brent Hubbard and Harley Haynes sell
palms for landscaping on 4.9 hectares of industrial land leased from Kiwirail
in Onehunga, Auckland. Their lease began
in 2009 with an annual rental of $34,300 plus GST; a rental Kiwirail described
at the time as being a concessionary rate, below market rent. At the first rent review after five years,
annual rent jumped to $123,200 plus GST.
Messrs Hubbard and Haynes refused to pay any more than a fifty per cent
uplift in rent. They admitted their business
could afford to pay a higher rate.
There were inconclusive negotiations between
Kiwirail and its aggrieved tenants before Kiwirail gave notice threatening to
cancel the lease. Hubbard and Haynes sued in the High Court complaining that since
Kiwirail is a state-owned enterprise it must show a sense of social
responsibility and have regard to the interests of the local community when
setting rentals. Justice Fogarty said
the whole point of state-owned enterprises is to have enterprises formerly run
by government departments put on a business footing. They can charge commercial rents for their
property. There is no suggestion
Kiwirail has deliberately imposed an unjustified rent in order to destroy
Hubbard’s and Haynes’ business, he said.
Justice Fogarty urged them to use
arbitration provisions in the Kiwirail lease for disputing rental increases,
rather than taking further court action.
Hubbard
v. Kiwirail – High Court (20.05.16)
16.087