A J Cockburn v CS Developments Ltd

IN THE SUPREME COURT OF NEW ZEALAND
SC 93/2010
[2010] NZSC 139

BETWEENALDWYN JOHN COCKBURN AND ORS
Applicants

ANDC S DEVELOPMENT NO 2 LIMITED
Respondent

Court:Blanchard, Tipping and McGrath JJ
Counsel:C R Carruthers QC and R P Harley for Applicants
H B Rennie QC for Respondent

Judgment:16 November 2010

JUDGMENT OF THE COURT

The application for leave to appeal is dismissed with costs of $2,500 to the respondent.

REASONS
[1]       The proposed appeal concerns whether the High Court[1] and the majority in the Court of Appeal[2] erred in concluding that the supply of the property in question was not zero rated for GST purposes and that the applicant vendors, the Cockburn trustees, ought to have supplied the respondent, C S Development No 2 Ltd, with a tax invoice reflecting a supply on which GST was payable.
[1]C S Development No 2 Ltd v Cockburn HC Wellington CIV-2009-485-587, 24 July 2009 per Associate Judge Gendall.
[2]Cockburn v C S Development No 2 Ltd [2010] NZCA 373 per O’Regan and Baragwanath JJ; William Young P dissenting.
[2]       The date of supply under the agreement for sale and purchase was the date of payment of the deposit, at which time there was an existing tenancy, namely a holding over by a tenant under an expired lease. However, the agreement, as varied, provided for vacant possession at settlement. In that circumstance we do not consider that it is fairly open to argument that this was a sale of the vendors’ leasing business as a going concern. The requirement for vacant possession precluded that. Although the deemed date of supply preceded the settlement date it was still necessary to look forward to the latter date in order to determine what was actually being supplied. Under the varied agreement the purchaser was never at any stage going to receive rentals from the holding over, which was to cease at settlement and to be replaced by a new lease from the purchaser to the tenant. No going concern was, or was to be, supplied.
[3]       The proposed argument that s 109 of the Tax Administration Act 1994 prevented the High Court from determining the proceeding was rightly rejected in both Courts below. It did not involve the Court in ruling on a tax assessment but, rather, on the rights and obligations of the parties to an agreement for sale and purchase. No challenge was being made to any assessment by the Commissioner of Inland Revenue.
Solicitors:
Jefferies Raizis, Wellington for Applicants
Treadwells, Wellington for Respondent

CaseChat Overview and Summary

In the case of A J Cockburn v CS Developments Ltd, the applicants, Alwyn John Cockburn and Ors, sought leave to appeal against the Court of Appeal's decision that the sale of a property was not zero-rated for Goods and Services Tax (GST) purposes, and that they should have issued a tax invoice to the respondent, CS Development No 2 Ltd, for a supply on which GST was payable. The court was required to determine whether the High Court and the majority in the Court of Appeal had erred in their conclusions. The applicants argued that the sale should be considered a supply of the vendors' leasing business as a going concern, which would have entitled them to zero-rate the transaction for GST purposes. However, the court found that the requirement for vacant possession at settlement precluded the sale from being considered as such. The court also rejected the applicants' argument that section 109 of the Tax Administration Act 1994 prevented the High Court from determining the proceeding, as the case involved the rights and obligations of the parties to an agreement for sale and purchase, not a tax assessment by the Commissioner of Inland Revenue. The court dismissed the application for leave to appeal with costs of $2,500 to the respondent.

The primary legal issue in this case was whether the sale of the property should be considered a supply of the vendors' leasing business as a going concern, which would have entitled the applicants to zero-rate the transaction for GST purposes. The court found that the requirement for vacant possession at settlement precluded the sale from being considered as such. The court also considered whether section 109 of the Tax Administration Act 1994 prevented the High Court from determining the proceeding, and rejected the applicants' argument that it did. The court held that the case involved the rights and obligations of the parties to an agreement for sale and purchase, not a tax assessment by the Commissioner of Inland Revenue.

The court's reasoning was based on the terms of the agreement for sale and purchase, which provided for vacant possession at settlement. The court found that the requirement for vacant possession precluded the sale from being considered as a supply of the vendors' leasing business as a going concern. The court also rejected the applicants' argument that section 109 of the Tax Administration Act 1994 prevented the High Court from determining the proceeding, as the case involved the rights and obligations of the parties to an agreement for sale and purchase, not a tax assessment by the Commissioner of Inland Revenue. The court held that the applicants' argument was not fairly open to argument and dismissed the application for leave to appeal with costs of $2,500 to the respondent.

The final orders of the court were that the application for leave to appeal was dismissed with costs of $2,500 to the respondent. The court held that the applicants were not entitled to zero-rate the transaction for GST purposes, and that they should have issued a tax invoice to the respondent for a supply on which GST was payable. The court's decision was based on the terms of the agreement for sale and purchase, and the court's interpretation of the relevant legislation.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established