20 May 2016

SOEs: Hubbard v. Kiwirail

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