Hearing:	8 August 2017
Court:	Elias CJ, William Young, Glazebrook, OʼRegan and Ellen France JJ
Counsel:	G D Pearson, J K Scragg and T A V McKeown for Appellants K J Crossland and J S Langston for Respondents H W Ebersohn and S J Osborne for Attorney-General as Intervener
Judgment:	6 October 2017

JUDGMENT OF THE COURT

A The appeal is dismissed.
BThe appellants are to pay costs of $25,000 to the respondents and reasonable disbursements.

____________________________________________________________________

REASONS
(Given by William Young J)

Table of Contents

Para No.
The appeal	[1]
The background facts	[3]
Overview of the case	[8]
High Court decision	[13]
The Court of Appeal decision	[16]
The incurring of the tax liability	[19]
A preliminary comment	[19]
DRK’s argument	[21]
The primarily relevant provisions of the Income Tax Act	[23]
When is property disposed of?	[28]
Derivation of income from disposals of land – general principles	[30]
Application of the general principles to the particular circumstances of this case	[37]
The s GC 1 argument	[44]
Could the Roose parties have unwound the transaction without adverse tax consequences?	[52]
Ancillary loss	[54]
An overview of the law	[54]
Wasted costs	[59]
Unwind costs	[64]
Disposition	[69]

The appeal

This case concerns the transfer of a property from the second respondent, Denise Developments Ltd (DDL) to the third respondent, DMR Development Ltd (DMR). Both companies are associated with the first respondent, Denise Roose, and we will refer to Ms Roose and the two companies collectively as the Roose parties. The sale by DDL to DMR attracted adverse tax consequences for which the Roose parties seek damages from their chartered accountants, Craig Duthie and Kirsten Taylor‑Ruiterman, later incorporated as DRK Chartered Accountants Ltd. They are the appellants and we will refer to them collectively as DRK. The Roose parties’ case is that, prior to the sale by DDL to DMR, Ms Roose sought Mr Duthie’s advice about the proposed transfer and was negligently told that it would not generate tax liability. A number of causes of action are alleged, including negligence.
The sale by DDL to DMR was pursuant to an agreement entered into on 14 April 2008, with the transaction being settled on 2 May 2008. The proceedings were commenced on 1 May 2014. On a preliminary issue, Toogood J concluded that the Roose parties first suffered relevant loss before 1 May 2008 and that, accordingly, the negligence claim was barred by the six year limitation period in s 4 of the Limitation Act 1950.[1] A subsequent appeal to the Court of Appeal by the Roose parties was allowed.[2]

The background facts

[1]Roose v Duthie [2015] NZHC 2035 [Duthie (HC)] at [86].

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 Duthie v Roose

Details

AGLC: Duthie v Roose [2017] NZSC 152
Case: [2017] NZSC 152
Decision Date: 6 October 2017

CaseChat Overview and Summary

This case concerns the transfer of a property from Denise Developments Ltd to DMR Development Ltd. Both companies are associated with the first respondent, Denise Roose, who sought advice from Craig Duthie and Kirsten Taylor-Ruiterman, later incorporated as DRK Chartered Accountants Ltd, about the proposed transfer. The Roose parties alleged that Duthie negligently told them that the transfer would not generate a tax liability. The Court was required to decide whether the tax liability arose on the date the agreement for sale and purchase was signed or the settlement date and whether the claims were barred by the six-year limitation period. The Court found that the tax liability did not arise until the settlement date and the claims were not barred by the limitation period. The appeal was dismissed, and the appellants were ordered to pay the respondents costs of $25,000 and reasonable disbursements.

Orders