Aggarwal v DSD Homes Limited - [2023] NZHC 918

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2022-404-002195

[2023] NZHC 918

IN THE MATTER of a claim for compensation for breach of warranty

BETWEEN

RAJESH AGGARWAL and SAKSHI KHANNA

Plaintiffs

AND

DSD HOMES LIMITED

First Defendant
DALVIR SINGH DHALIWAL

Second Defendant

Hearing: 20 April 2023

Appearances:

S Sharma for the Plaintiffs

No appearance by or for the Defendants

Judgment:

24 April 2023

JUDGMENT OF TAHANA J

This judgment was delivered by me on 24 April 2023 at 3.30pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors/Counsel: S Sharma, Auckland

AGGARWAL v DSD HOMES LIMITED [2023] NZHC 918 [24 April 2023]

Introduction

[1] The plaintiffs seek to recover $166,956.00 (the GST amount) following an agreement to purchase a property in Manurewa from DSD Homes Ltd (DSD) (the agreement). The agreement included:1

(a)a warranty that DSD was not GST registered;

(b)that the purchase price was to be reduced by 15 per cent if DSD was in breach of the warranty; and

(c)that if it transpired after settlement that DSD was GST registered, the person signing the agreement (Mr Dalvir Dhaliwal) would be personally liable for any GST claim denied to the purchaser.

[2] DSD was GST registered at the date of settlement. Inland Revenue denied the plaintiffs’ claim for an input credit (GST claim) because the transaction was zero-rated. The plaintiffs now seek to recover that amount from DSD and Mr Dhaliwal (the defendants).

[3] The plaintiffs initially applied for summary judgment but the defendants have failed to file a defence. The hearing now proceeds by way of formal proof.

Background

[4]The plaintiffs are Ms Sakshi Khanna and her husband Mr Rajesh Aggarwal.

[5] DSD is a residential property development business. Mr Dhaliwal, is the sole director and shareholder of DSD.

Agreement for sale and purchase

[6] On 29 September 2021, Ms Khanna entered into the agreement with DSD to purchase a property at 44 McKean Ave, Manurewa (the property). The agreement was

1 Clause 23 of sale and purchase agreement.

signed by Ms Khanna as purchaser. Mr Dhaliwal signed the agreement on behalf of DSD as vendor. The parties used the Auckland District Law Society standard form (tenth edition) with further terms agreed between the parties.

[7]Relevant terms of the agreement include:

(a)Purchase price of $1,420,000.00 including GST, if any.

(b)DSD made a declaration that it was not GST registered.

(c)Settlement to occur on 14 June 2022.2

(d)Schedule 1 (relating to GST information) and cl 14 were crossed out.

[8] In cl 14.1 of the agreement, DSD provided a warranty that DSD’s GST registration status as stated in the agreement was correct on the date of the agreement and would remain correct at the settlement date. On the front page of the agreement, DSD stated that it was not GST registered and would not be at the date of settlement.

[9]The agreement included a further term, cl 23, which states:

23.0 GST CLAUSE

The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 918
Decision Date: 24 April 2023

CaseChat Overview and Summary

Rajesh Aggarwal and Sakshi Khanna sought to recover $166,956.00 from DSD Homes Limited and Dalvir Singh Dhaliwal after the latter failed to file a defence in response to the former’s claim for breach of warranty. DSD had breached an agreement to purchase a property in Manurewa by representing that it was not GST registered, and Dhaliwal, who signed the agreement on behalf of DSD, agreed to be personally liable for any GST claim denied to the plaintiffs if it transpired that DSD was GST registered after settlement. The plaintiffs sought to recover the GST component of the purchase price as a result of DSD’s breach of warranty and the defendants’ failure to file a defence.

The court had to determine whether the plaintiffs’ evidence established their claims against the defendants. The court found that the evidence proved the claims against the defendants, as the Inland Revenue had confirmed that DSD was GST registered and the transaction was therefore zero-rated. The court also found that the defendants had no defence to the claim because the consequences of breach were clear to DSD and reasonably foreseeable. The court held that Dhaliwal was personally liable for DSD’s breach of warranty, and the plaintiffs were entitled to recover the GST component of the purchase price.

The court ordered that the defendants were jointly and severally liable to the plaintiffs for $166,956.00, interest at 14 per cent per annum for the period from 27 May 2022 to 20 April 2023, and costs and disbursements as set out in the judgment.

Orders