The maths went well beyond any understanding expected of infants at Kumeu Childcare, but Childcare’s interpretation of how rent increases should be calculated was mathematically incoherent, the High Court ruled.
Harinder Bedi’s company A&H (Kumeu) Ltd, trading as Kumeu Childcare, operates in West Auckland. As tenant, it disputed landlord calculations for rent increases post-2022.
Kumeu Childcare argued for a 2.2 per cent rent increase supposedly achieved by calculating a percentage of annual percentage changes in the CPI. The correct calculation required assessment of the percentage increase in raw index figures.
As it turned out, Kumeu Childcare in fact incorrectly applied the incorrect formula it championed; if its incorrect formula was applied as Kumeu Childcare intended, it would be in for a 22 per cent rent increase. This figure is markedly more than the 7.2 per cent increase demanded by its landlord’s correct formula.
Media coverage of price inflation (or rarely, deflation) concentrates on any percentage change in index figures since the last reporting period, be it quarterly or yearly. Left unreported, is the index change; the raw figures representing price changes over the period chosen, be they up or down.
Confusion between the two was at the heart of the Kumeu rent review dispute.
An annual rent review clause in Kumeu Childcare’s lease allowed rent to increase by the ‘amount of the proportionate increase in the consumer price index.’
Their rent dispute went to arbitration, with the arbitrator agreeing with the landlord: prices making up the index had increased over the 2022 year by 7.2 per cent.
In the High Court, Kumeu Childcare argued this calculation was fundamentally wrong. The word ‘proportionate’ in their lease required an assessment of the percentage difference between the published annual percentage change at end of year 2021 (being a 5.9 per cent change over the previous year) with the percentage annual change at end 2022 (being 7.2 per cent).
Not so, ruled Justice Becroft.
The arbitrator’s calculation correctly relied on raw figures in the index, resulting in a new annual rental of some $307,000.
A&H (Kumeu) Ltd v. Kumeu Playschool Ltd – High Court (9.04.25)
25.106