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Cockburn v CS Development No 2 Ltd

Cockburn v CS Development No 2 Ltd

Case [2010] NZCA 373 16 August 2010

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA455/2009
[2010] NZCA 373
BETWEENALDWYN JOHN COCKBURN, JANET ELIZABETH COCKBURN AND KEITH IAN JEFFERIES
Appellants

ANDC S DEVELOPMENT NO 2 LIMITED
Respondent

Hearing:24 March 2010

Court:William Young P, O'Regan and Baragwanath JJ
Counsel:C R Carruthers QC and R P Harley for Appellants
H B Rennie QC for Respondent

Judgment:16 August 2010 at 11.30 am

JUDGMENT OF THE COURT

A The appeal is dismissed, except to the limited extent set out at B below.
BThe appeal against the award of interest made in the High Court is allowed and the award of interest is quashed. The proceeding is remitted to the High Court for determination as to whether interest is payable and, if so, from what date and at what rate.
CThe appellant must pay the respondent costs calculated at 90 per cent of costs for a standard appeal on a band A basis plus 90 per cent of usual disbursements.

____________________________________________________________________
REASONS
O’Regan and Baragwanath JJ [1]
William Young P (dissenting) [102]
O’REGAN AND BARAGWANATH JJ
(Given by O’Regan J)
Table of Contents
Para No

Introduction  [1]
Factual background  [4]
Issues  [19]
Summary judgment criteria  [26]
Section 109 of the TAA  [28]
Construction of the agreement
Relevant provisions of the GST Act  [36]
Capable of being a going concern  [52]

Written agreement  [60]
      Mutual intention  [82]
      Supply of a separately operable taxable activity  [83]
      Supply of all necessary goods or services  [84]
      Conclusion  [87]
Section 78E of the GST Act  [88]
Interest  [95]
Conclusion  [100]
Costs  [101]
Introduction
[1]       This appeal and cross-appeal concern a dispute about the GST implications of an agreement for sale and purchase of a property in Oriental Bay, Wellington. The sale price was $5,000,000, including GST. A dispute has arisen between the parties as to whether the property was sold as a going concern and therefore zero rated for GST purposes, as the appellants (whom we will call the Cockburn trustees) contend, or not, as the respondent, C S Development No 2 Ltd (C S Development), contends. If C S Development is right, the Cockburn trustees are required to provide C S Development with a tax invoice reflecting a GST component of 12.5 per cent of the purchase price, so that C S Development may obtain a GST refund. The Cockburn trustees will need to pay GST of $555,555.56, thereby reducing the net amount received by them for the property to $4,444,444.44.
[2]       In the High Court, each party sought summary judgment against the other. Associate Judge Gendall found in favour of C S Development and ordered the Cockburn trustees to deliver a GST invoice reflecting GST payable of $555,555.56.[1] He also noted that the Cockburn trustees would be liable for interest on the GST amount for a period and a rate yet to be determined. He dismissed the Cockburn trustees’ summary judgment application and awarded costs to C S Development.
[1]      C S Development No 2 Ltd v Cockburn HC Wellington CIV-2009-485-587, 26 June 2009.
[3]…

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.

Continue reading Cockburn v CS Development No 2 Ltd

Details

AGLC: Cockburn v CS Development No 2 Ltd [2010] NZCA 373
Case: [2010] NZCA 373
Decision Date: 16 August 2010

CaseChat Overview and Summary

Cockburn v CS Development No 2 Ltd concerned a dispute about the GST implications of an agreement for sale and purchase of a property in Oriental Bay, Wellington. The sale price was $5,000,000, including GST. The dispute arose as to whether the property was sold as a going concern and therefore zero rated for GST purposes, as the appellants (the Cockburn trustees) contended, or not, as the respondent, C S Development, contended. If C S Development was correct, the Cockburn trustees were required to provide C S Development with a tax invoice reflecting a GST component of 12.5 per cent of the purchase price, so that C S Development may obtain a GST refund. The Cockburn trustees would need to pay GST of $555,556, reducing the net amount received by them for the property to $4,444,444.44. In the High Court, each party sought summary judgment against the other. The Associate Judge found in favour of C S Development and ordered the Cockburn trustees to deliver a GST invoice reflecting GST payable of $555,555.56. He also noted that the Cockburn trustees would be liable for interest on the GST amount for a period and a rate yet to be determined. He dismissed the Cockburn trustees’ summary judgment application and awarded costs to C S Development. In this Court, the Cockburn trustees renewed the positions they took in the High Court. In addition, the Cockburn trustees sought to introduce a new argument in this Court. The Court found that s 109 of the Tax Administration Act 1994 was not engaged in the present case. The Court held that the present proceedings did not involve a challenge to a GST assessment, but rather to the legal obligations of the Cockburn trustees under the agreement for sale and purchase. The Court held that the agreement for sale and purchase did not meet the requirements of s 11(1)(m) of the Goods and Services Tax Act 1985. The supply by the Cockburn trustees was not zero rated. The Cockburn trustees ought to have supplied a tax invoice to C S Development reflecting a supply on which GST was payable at 12.5 per cent. The Court held that s 78E of the Goods and Services Tax Act 1985 did not apply because the agreement as varied by the 2 July variation did not amount to an agreement in writing that the supply of the property was the supply of a going concern. The Court held that the award of interest was quashed and the proceeding was remitted to the High Court for determination as to whether interest is payable and, if so, from what date and at what rate. The appeal was dismissed, except to the limited extent set out above. The appellant must pay the respondent costs calculated at 90 per cent of costs for a standard appeal on a band A basis plus 90 per cent of usual disbursements.

Orders