Hubbard v Kiwirail Limited [2016] NZHC 1061 (20 May 2016)

Last Updated: 1 June 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-003145 [2016] NZHC 1061

BETWEEN	PETER BRENT HOME HUBBARD AND HARLEY HAYNES First Applicants OCEANIC PALMS LIMITED Second Applicant
AND	KIWIRAIL LIMITED Respondent

Hearing:	21 April and 16 May 2016
Counsel:	Applicants in person M L Campbell for Respondent
Judgment:	20 May 2016

_{JUDGMENT OF FOGARTY J}

This judgment was delivered by Justice Fogarty on

20 May 2016 at 11.30 a.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

Russell McVeagh, Wellington

HUBBARD AND HAYNES v KIWIRAIL LIMITED [2016] NZHC 1061 [20 May 2016]

Introduction

[1] On 21 December 2015, the first and second applicants applied to this Court for:

(a) an order preventing the respondent from increasing the rent pursuant to a recent rent review by more than 50 per cent;

(b) an order preventing the respondent from re-entering and terminating the lease between it and the applicant in relation to the premises at

44a Alfred Street, Onehunga, pending agreement between the parties or further order of the Court; and

(c) an order that the respondent pay the applicants’ costs of and incidental

to these proceedings.

The application

[2] This application relies on the Property Law Act 2007 (the Act), sub-part 6, which addresses remedies and relief for cancellation of leases. This is a section of the Act which codifies the principle of equity which enables the Court to give relief to tenants or lessees against cancellation of lease.

Description of the lease

[3] The subject of the lease is a large block of land of 4,985 square metres, of somewhat irregular shape, located within a block of land in the suburb of Onehunga. Land to the north of the block is zoned for residential usage, although a large part of it is vacant, whilst to the south of the block it is zoned Business 4 and 5, thereby allowing industrial activity.

[4] The lease commenced on 1 March 2010 for a term of five years with a right of renewal for a further term of five years. This dispute arises out of the rent setting for the second term. However, the five year term has to be read with the second schedule. This schedule contains one clause which is as follows:

The lessor may give Twenty-Four (24) months notice should the land be required for rail purposes. The termination provision will only take effect should the lease be renewed on 1 March 2015.

[5] Part two of the lease deals with rent and outgoings. Clause 2.2 deals with rent review. The rent review date is also 1 March 2015.

[6] The rent review begins by the landlord, known in the lease as “ONTRACK”,

giving notice to the lessee:

Specifying the annual rent, such rent to be determined by ONTRACK to reflect the current market rent of the leased land, based on the highest and best use of the leased land, as at the rent review date.

[7] There then follows a process whereby the lessee can dispute the proposed new annual rent and a disputed rent will be submitted to arbitration if the parties cannot agree on the new annual rent.

[8] There is no provision in the lease requiring the lessor, ONTRACK, to provide to the lessee the basis upon which the new annual rent being proposed has been derived.

[9] Accordingly, the second term of the lease has a maximum duration of five years but, potentially, can be reduced upon notice to two years at any time during that period. There is no right of review after 2020.

Summary of history of rent review

[10] The original annual rental for the first five years was $34,300 plus GST. Before the lease was signed on 29 October, Kiwirail, the respondent, advised that the rate proposed “is not the current market rent and is a concession granted to Oceanic Palms”. The lease was not executed until 28 June 2010.

[11] The initial term was due to expire on 28 February. Oceanic Palms, the second applicant, gave notice of its intent to renew on 26 November 2014, which was accepted although it was out of time. Kiwirail assessed the rent for the land on an unimproved basis at $123,200 per annum, plus GST.

[12] On 20 April 2015, Kiwirail received a valuation prepared for Oceanic Palms which assessed the market rental at $75,000 per annum (excluding GST).

[13] Later the two valuers met and, on 22 June 2015, on an express without prejudice basis, made a joint recommendation of $100,000 (plus GST) “based on their assessment of the market value for the land and excluding improvements”.

[14] The applicant lessees before this Court, Messrs Hubbard and Haynes, were unhappy with that agreement by the two valuers and still protest the size of the rent. They have not invoked arbitration, a right afforded by the lease.

[15] Neither of the original valuations were provided to the Court during the first hearing, nor were the joint recommendation. However, these were provided in the second hearing.

[16] Accordingly, at the first hearing it was not possible to see how the new rentals were assessed. It was not possible to see whether and how the valuers assessed the risk to any incoming lessee of the 24-month notice.

[17] Since the without prejudice agreement by the valuers of the rent, there has been continued default by the applicant lessees in paying the rent. It is not necessary to get into the detail of the correspondence between the parties. There have also been issues as to breaches of the terms of the lease, including an issue of dumping material on an area of surplus land under the lease.

[18] By October/November 2015, Kiwirail’s executives formed the judgment that

the lessee, Oceanic Palms, would not agree to pay a market rent.

[19] Accordingly, on 1 December 2015, Kiwirail issued the Property Law Notice requiring either payment of the assessed rent or agreement to the terms originally proposed in July.

[20] The terms of that notice revert back to the original nominated rent of

$123,200.00, plus GST per annum, pending final agreement with termination of the revised rent. The notice offered two remedy options, paying the full amount of rent

arrears and compensation of $3,000 for costs in preparing and giving the notice, or going back to the proposed settlement rent and, on that basis, remedying the breach of that settlement.

[21] Failing remedy on either of the two bases, notice was given that Kiwirail may seek to cancel the lease in accordance with s 244 of the Property Law Act. And notice was given in that context of Oceanic Palm’s right under s 253 of the Act to apply to a Court for relief against cancellation.

Detail of the application for relief against forfeiture

[22] The applicants have 16 grounds. I set out these grounds in italics with brief comments, with a view to distilling from the 16 grounds propositions which are arguable:

(a) There is an implied term of the Lease agreement based on the dealings between the parties over a period of 15 years, that any increase in rent would not be so great as to make it impossible for the Plaintiff to continue in business and more particularly any rent increase resulting from a rent review would not exceed an increase of 50%.

[23] For a term to be implied, it must be necessary or obvious.¹ This one is not, particularly given the correspondence already referred to in 2009 warning the tenants that the first rental was not at the market rent. I may note that one party saying that does not mean it is not a market rent. That is an assessment for expert valuers.

(b) That the Defendant is intending to increase the rent pursuant to a recent rent review by 170% from $37,000 + GST per annum to $100,000.00 and if we do not sign the lease, they claim the sum owed will be at the rate of $123,200 p.a., an increase of 232%.

[24] As is apparent from the narrative of events to date, it is the quadrupling of the lease, which is at the root of the defendants’ opposition to the rent increase. It is

¹ Attorney-General v Belize Telecom [2009] UKPC 11; [2009] 1 WLR 1988 (PC) at [16].

because the applicants view the new rent to be unjust that they exhibit a strong reluctance to pay that rental while continuing business on that site.

(c) The Defendant as a state-owned enterprise has a social responsibility not to impose rent increases which have the effect of destroying a business.

[25] This is simply not arguable. The whole point of the state-owned enterprises programme is to put enterprises formerly run by governments departments on a business footing. It cannot be suggested on these facts that the state-owned enterprise has deliberately imposed an unjustified rent in order to destroy the applicants’ business.

(d) Section 4(1)(c) of the State Owned Enterprises Act 1986 says (Kiwirail) shall be “an organization that exhibits a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so”.

[26] Again, the fact that Kiwirail is a state-owned enterprise and that it was once formerly run by a government department does not prevent it from using its rights in contract and property law when conducting business with private individuals and entities.

(e) A lease and renewal which is written up by a Government body should be above board and ethical. When the tenant signs up, the tenant has a right to expect the renewal to be achievable and a credible extension of the original lease. The landlord should not create a lease renewal because of the tenant’s lack of experience which is incompatible with the least itself.

[27] This direction does not disqualify the entitlement of Kiwirail from the benefits of the law of contract and property law in the course of conducting its business.

(f) That Kiwirail in recent months are being dictatorial, high-handed, capricious, and scheming and have no consideration for the effects of their

actions on parties with whom they have been in a business relationship for years, sometimes for decades.

(g) They have terminated two tenancies of around fifteen years standing that we know about in the neighbourhood: with Steve Elkin in Neilson St, Penrose and with Michael Moot in Te Papapa at a month’s notice causing great distress to these tenants and their employees.

(h) They have confiscated a building worth at least $159,000 in Alfred St, Onehunga erected by Mr Tom Atkinson, a tenant of 50 years’ standing with no compensation.

(i) These matters may have been done legally, but a SOE is expected to act in a moral as well as a legal fashion.

(j) Kiwirail have made mistakes in other areas of their operation and are attempting to compensate for their losses by abusing tenants.

[28] These contentions, even if proven, which they are not, are not relevant. The

parties’ rights are contained in the Deed of Lease.

(k) If the court considers that the State Owned Enterprises Act is not sufficient basis for our claim, then there is the Bill of Rights Act 1990; s 27(1) “Rights to Justice: “Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person’s rights, obligations or interests protected or recognised by law.”

(n) The principles of natural justice in terms of the proper treatment by a landlord of a tenant would seem to include that any increase in rent or other change proposed by the landlord should be consistent with the tenant’s usage of the property as established with the landlord’s consent during the previous term of the lease, and with the tenant’s reasonable expectation that this usage will continue.

(m) We submit that Kiwirail as part of the Government is a public authority which has the power to make such determinations in respect of the interests of its tenants, and that the increasing of rental by a massive and atypical percentage is not consistent with the observation of the principles of natural justice.

[29] Rent setting of this lease is by a State Owned Enterprise, it is not an exercise of government power. The parties to this dispute have agreed to be governed by the terms of the lease. The Bill of Rights Act does not apply to this dispute.

(l) The interests protected by law are either those of a tenant to quiet enjoyment under the Property Law Act 2007 or their rights under the terms of the lease to stay on the property for the duration of the lease.

[30] I agree with the proposition in (l).

[31] This case has to be argued within the framework of the law of contract and the equitable relief against forfeiture now contained in the Property Law Act.

[32] The Court has allowed, and continues to allow, Messrs Hubbard and Haynes to speak for the company, Oceanic Palms Limited. The Court also takes into account that these two gentlemen are not lawyers and are doing their best to frame their grievance according to the law as they understand it and think may be applicable. The Court also notes that the application by Oceanic Palms and these two men is essentially appealing to the Court for relief against forfeiture in all the circumstances of the case. In a situation like this, the hearing Judge, faced with lay litigants, does not confine examination of the merits of the case to the pleading and argument raised by the applicant, subject of course to applying the principles of natural justice by requiring adequate notice of any other arguments be given to the landlord.

[33] It seems to me that there are two issues sufficiently serious to warrant examination in the evaluation of this application for relief. They are:

(a) First, whether the conduct of Kiwirail, taken as a whole, amounts to derogation of right.

(b) Secondly, whether the quadrupling of the rental has been justified, by reason of the fact that the two valuers have agreed, but without presenting to the Court the nature of their reasoning.

Derogation of Right

[34] The tenants argue that Kiwirail’s lift in rent has the effect of denying the tenants the right of the enjoyment of the lease and so is in derogation of the lease. This is a novel application of the concept of derogation of grant. Derogation of grant is a longstanding cause of liability against landlords. Usually, if not always, it is conduct by the landlord in the relevant vicinity of the leased property which renders the intended use and enjoyment of the lease impossible. Lord Justice Nicholls, as he

then was, explains the remedy in a case, Johnson & Sons Limited v Holland,² as

essentially that if a man agrees to confer a particular benefit on another, he must not do anything which deprives the other of the enjoyment of that benefit: because that would be to take away with one hand what is given with the other.

[35] The New Zealand case relied upon by the applicants is the decision of the Court of Appeal in Mt Cook National Park Board v Mt Cook Motels Limited.³ Mt Cook Motels Limited leased a small area of the Mt Cook National Park from the Crown. The lease was a 21-year lease from 1962 with a right of renewal for a further 21 years and with a right of review of the rental every seven years. The original rental, set in 1962, was £10 per annum.

[36] The lease was conditional on the lessee being the holder of a licence to trade within the park. Originally the licence to trade was granted at a cost of £1 per annum. In 1963 it was increased tenfold to £10. In 1965 the Park Board intimated it would raise the licence fee to be fixed on a basis of six pennies per night per person accommodated. In 1967 the terms changed to 5 per cent per paid bed per night or

_{$700, whichever was the lesser.}

² _{Johnson & Sons Limited v Holland [1988] 1 EGLR 264 (EWCA).}

³ Mt Cook National Park Board v Mt Cook Motels Limited [1972] NZLR 481 (CA).

[37] Mt Cook Motels continued to pay £10 or $20 per annum and the Park Board sued for the balance and was successful in the Magistrate’s Court. The decision was reversed in the High Court and then went on to the Court of Appeal. A good deal of the judgment was on the subject of the ability of the Park Board to drive an income by licences. North P then turned to the impact on the ability to review the licence fee every five years and the terms of the 21-year lease. The lease was subject to the condition the respondent was required to be a holder of a licence to trade. North P

went on:⁴

Surely, in these circumstances, it is not permissible in law for the appellant to demand a share of the profits of the motel business on a “take it or leave it basis”. If the appellant is too greedy, then I am of the opinion that it would offend the maxim which applies to all grants, namely that the law will not permit a man to derogate from his own grant...

[38] In his separate judgment, Woodhouse J said:⁵

The general rule is that a lessor must not voluntarily prejudice the rights which he has created and he will not be permitted to do anything which is inconsistent with the purpose for which the demised premises are let. In a word he may not derogate from his grant.

He also said:⁶

In the final analysis the question as to whether the Board’s behaviour in regard to the licence actually did amount to a derogation from the grant is a matter of fact and degree.

[39] I think there is room to argue here that a deliberate ramping of the lease could amount to a derogation from the obligations of having granted a lease with a right of renewal. That principle need not be subject to a prior classification as derogation from grant. For, as we have seen, the term “derogation from grant” is really just a name given to express the simple principle that having given with one hand, you can’t take away with another. So having agreed to a lease of five years with a right of renewal to five, the right of renewal cannot be defeated by deliberately imposing a

_{high rental.}

⁴ _{At 488.}

⁵ _{At 496.}

⁶ Above.

Application of the Rent Review Standard⁷

[40] Putting to one side the implied term “subject to derogation of right arguments”, the merit in the application for relief against cancellation of the lease depends completely on whether or not the rent agreed by the valuers is justified.

[41] For these reasons, I called for the valuations to be filed:

(a) On the part of the lessor, I sought disclosure of the full opinion of the valuer justifying the rental sought by the lessor as being equivalent to the current market rent of the leased land at the commencement of the term of right of renewal; together with any additional information in support of that value, at the discretion of the lessor.

(b) I similarly required disclosure by the lessee of the valuation received by it from its valuer, together with any additional materials at its discretion.

[42] I was and remain well aware that the lessee has no confidence in the valuation agreed by its valuer with ONTRACK’s valuer. I was not seeking the lessee’s valuation assessment on the basis of inferring that that is the lessee’s position. Rather, given that this Court has been asked to exercise a discretion of relief against forfeiture, I am seeking that information as a relevant fact to be taken into account in the exercise of the discretion. If the valuers have been in error of law that is a relevant consideration for giving the lessees more time, to elect arbitration, being partial relief against forfeiture.

[43] I invited further submissions as to the nature of the test of current market rental of the leased land.

The lessor’s valuation by CBRE

[44] The valuation by CBRE at the outset defined the task as being to provide an assessment of the market rental of the premises. It contained a correct definition of

⁷ See paragraph [6] above.

market rent. Under the heading “methodology” it distinguished between “the traditional rental valuation” approach and the “classical rental valuation” approach. It did not set out the rent review standard agreed by the parties in clause 2.2(a). This standard is “such (annual) rent to be determined by ONTRACK to reflect the current market rent of the leased land, based on the highest and best use of the leased land, at the rent review date”.

[45] It defined the traditional approach as follows:

This approach involves determining a market freehold value of the subject site on the basis of comparable market evidence (i.e. vacant land sales). Once this value is established on an annualised percentage return as applied to derive at a per annum rental. This percentage is based on percentages agreed for other market ground leases. In arriving at a relevant market percentage return specific regard is paid to the type of lease (i.e. finite or perpetual), length of term, rent review frequency, land use and risk.

[46] The alternative classical approach is defined by CBRE as:

This is based on direct comparison approach having regard to the agreed per annum rentals for other properties. These rentals are then analysed and adjusted appropriately taking into account physical characteristics (location, area etc.), legal characteristics (lease type, term etc.) and risk profile (security of cash flow).

[47] By way of comment the valuers went on to say:

Whilst the classical approach is the methodology preferred by the Courts (Drapery and General Importers v Wellington City Council⁸ “prudent lessee” test) the traditional method has become the preferred method (“reasonable return to lessor”) test of assessment in the current market place.

[48] In the recent decision of the Supreme Court in Mandic v Cornwall Park Trust Board (Inc)⁹ the Supreme Court distinguished between rent reviews which were an assessment of the value of the land ignoring the value of the lease, from rent reviews

_{assessing the market value of the lease.}¹⁰

⁸ Drapery and General Importing Company of New Zealand Ltd v Mayor of Wellington (1912) 31

_{NZLR 598 (CA).}

⁹ _{Mandic v Cornwall Park Trust Board (Inc) [2011] NZSC 135, [2012] 2 NZLR 195.}

¹⁰ At [51], [70], [71] and [72].

[49] This distinction is broadly in line with the distinction by the valuer between the traditional rent valuation approach, based on assessment of the value of the land and the classical rental valuation approach, assessing the market value of the lease.

[50] CBRE said that the change in focus away from the classical approach has arisen due to the lack of fully disclosed “prudent lessee” based evidence, in addition to it being seen as overly simplistic by the market. Given that land sales evidence is reasonably well disclosed, and that return rates form a reasonably sound argument in terms of financial benefit attributed to property ownership, the “traditional approach” has gained significant popularity. As a result the majority of ground rent reviews are solely reviewed having regard to this method.

The lessor’s valuation by Frank Knight

[51] The lessor’s valuation by Frank Knight has a similar perspective on method. It describes the basis of valuation as “current market value of the freehold interest subject to the existing leases”. Like the CBRE valuation it does not set out the rent review terms in the lease. Rather, it starts with this proposition:

It’s usual for ground rentals to be established as a percentage rate of return on the assessed unimproved freehold land value. Accordingly, there are two tasks at hand. The first is to assess the freehold value of the land, the second is to apply an appropriate rate of return.

[52] The analysis then proceeded to define a land value rate and then go to the market to find the rack rate of industrial land in the Auckland suburbs, which it identified at between six and 6.5 per cent. It then discounted that down to five per cent because of the finite period of the lease for five years and that termination could be given on 24 months’ notice.

Discussion

[53] There is a significant argument that neither valuers squared up to the rent review test set by the lease.

[54] Following the second hearing, where I raised the question of whether there were any cases holding that the traditional approach to valuation is an appropriate

valuation method to assess current market rent, Mr Campbell filed a memorandum drawing my attention to two Court of Appeal decisions. The first is Hawke’s Bay Regional Council v Plested¹¹ where Cooke P commented that:

The process of ascertaining the land value and applying thereto a percentage such as five per cent is common, although not obligatory in law (see Wellington City v National Bank of New Zealand Properties Ltd [1970] NZLR 660) and has been followed by the valuers in this case. In principle it should make no difference for the purpose of the argument if some other process were followed, for it is still the fair annual ground rent of the land hereby demised that has to be ascertained.

[55] Second, Mr Campbell cited Granadilla Limited v Berben¹² where the traditional and classical valuation methods were discussed in the context of review of the “fair market rent”. The Court of Appeal confirmed the preference for the classical approach but noted that the traditional approach was a settled method to be used when the classical approach could not be employed or to operate as a check on the classical approach.

We have already indicated that this [traditional] approach is available to a valuer where there is insufficient market evidence of comparable lettings and is often used. It also provides a method of checking an assessment made by reference to such listings.

[56] In this case, however, both valuers went straight to the traditional and classic valuation methods without even examining the standard imposed in the lease and analysing what it required.

[57] This Court does understand that when valuers find a paucity of data directly related to the standard set by the lease, they have to adapt. They have to fall back on alternative methods of valuations and then use their wide experience and expertise to adjust the results of those alternative methods as to get as close as possible to the outcome intended by the particular standard set by the lease. For example, if they are attempting to find the market value of a commercial building, and can find no comparable sales at the date for valuation, valuers can fall back on a “bricks and mortar” analysis to form a judgment of what a willing, but not anxious seller and

_{buyer would agree is a fair price for the building.}

¹¹ _{Hawke’s Bay Regional Council v Plested [1994] 2 NZLR 1 (CA) at [4].}

¹² Granadilla Limited v Berben (1999) 4 NZ ConvC 192,963 (CA) at [15].

[58] In Mandic the reasoning of Supreme Court in the majority judgment delivered by William Young J assumed that the valuers have to accept the “valuation formula” found in the lease.¹³ That is the starting point. It is not a sufficient answer to say it is too difficult to apply due to lack of reliable data.

[59] Simple application of the traditional method has the effect of ignoring the disadvantages of a particular lease and the premises of a particular lease. Yet that is the test here. The phrase the “current market rent of the leased land” means the current market rent of this land on the terms it is leased. Peculiarities of the lease can be discounting factors if they would reduce the rent a willing but not anxious lessee would be prepared to pay. The particular rent review criteria in this case is awkward. It combines the concept of the current market rent of land with the qualification that it is of the “leased” land, an adjective making relevant particular the terms of the lease, of which duration is clearly relevant, and then departs from “current market rent” to require it to be based on the “highest and best use of the leased land” (which may, it is a matter for argument, be independent as to whether or not there is any market demand for the highest and best use of the leased land).

[60] Mr Campbell acknowledged that at an arbitration the valuers would rely on more material than that gathered in their respective reports, and that the witnesses would no doubt give longer briefs and be subject to cross-examination. But Mr Campbell argued that his client was entitled now to cancellation of the lease. Mr Campbell submitted that given the agreement between the two arbitrator valuers, an arbitration would produce the same result. Certainly that would be the case if the valuers were able to defend successfully the methods that they followed and the data that they relied on. Mr Campbell emphasised that the scheme and content of the lease was that the lessor’s assessed rent was payable notwithstanding an election by the lessee to go to arbitration but, however, it was not being paid and that a considerable period of time had elapsed. “Enough is enough” was the theme of the

_submission.

¹³ “We reject any suggestion that what we contemplate is inconsistent with the rent formula.”: Mandic v Cornwall Park Trust Board (Inc), above n 9, at [62]. See also [70], [71], [77]. These and other paragraphs show that the reasoning is constantly against the rent review test set by the deed of lease.

[61] The submissions of the applicants in the second hearing contended “a written contract is not sacred”, that the Court had powers to disregard provisions in it or overturn it. This was a repetition of the non derogation of a grant argument which I have dealt with. There was some repetition of the other 16 points that I have dealt with. They went on to submit that they never thought that valuation was the deciding factor in their case. As I have explained to them at the hearing: to the contrary, the valuation is central and has to be.

[62] Mr Haynes acknowledged that he and Mr Hubbard together do have the ability to pay the arrears of rent, at the assessed rental. This was a proper and candid admission, but it does drive the outcome of their application. The Deed of Lease that they executed has anticipated that the lessor could demand a higher rent on rent review than the lessees considered right. Nonetheless, the lease provides for the rental to be paid even while the parties go to arbitration. A process that can take a long time.

[63] It is not a sufficient argument for non-payment of the assessed rent that there is a reasonable basis for challenging the rent of $100,000 per annum in arbitration. This lease fell for renewal in June 2015, a year ago. As already noted, Kiwirail has given notice that it may cancel the lease. See [21] above. At the hearing counsel for Kiwirail pursued cancellation – “Enough is enough” See [609] above.

[64] The merits of the new rental setting cannot be resolved in this proceeding. Nor can the terms of the lease be avoided.

Decision

[65] For these reasons the applications by the lessees are dismissed, with two qualifications:

(a) That is, that the lessees have one calendar month from the date of delivery of this judgment to pay the arrears of rental at the new rate. If not, having given notice, see [21] above, Kiwirail may cancel the lease. It is likely that the lessees will appeal this judgment to the Court

of Appeal. That will not affect the judgment of the High Court as to cancellation of the lease.

(b) Second, in place of the remedy of cancellation of rent, the lessees have one calendar month to formally dispute the rent, so that the dispute be then submitted to arbitration in Auckland, see cl 2.2(b) of the lease.

[66] I have explained to the lessees that if they wish to avoid cancellation of the lease alongside appealing to the Court of Appeal they will need to lodge their appeal from this judgment well within the one month allowed and also apply to the Court of Appeal, not to this Court, for any restraint they seek to be imposed on Kiwirail, pending the hearing of their appeal.

[67] Kiwirail Ltd is entitled to costs having successfully opposed the application. Costs are awarded on a 2B basis.