Hawkins Construction Ltd v Chan - [2000] NZCA 80

IN THE COURT OF APPEAL OF NEW ZEALAND

CA190/99

BETWEEN	HAWKINS CONSTRUCTION LIMITED
Appellant

AND	KWOK CHOR CHAN
First Respondent

AND	RICHARD CHUNG IP YEUNG
Second Respondent

Hearing:	1 June 2000
Coram:	Gault J
Doogue J Robertson J
Appearances:	P Mills for Appellant
A P Molloy QC for Respondents
Judgment:	12 June 2000

JUDGMENT OF THE COURT DELIVERED BY ROBERTSON J

This is an appeal against a judgment delivered in the High Court at Auckland on 7 July 1999 striking out the appellant’s statement of claim against the respondents on the basis that the appellant’s claim did not disclose any tenable cause of action.
That appeal was initiated on the bases that the Judge :
[a]Wrongly applied the provisions of s 29 of the Goods and Services Tax Act 1985 (the Act); and
[b]Wrongly applied the provisions of r 265 of the High Court Rules.
The appellant is in business as a construction company in Auckland and is a registered person in terms of the Act. The three statements of claim which have been filed allege that the first respondent is resident in New Zealand but the second respondent is a resident of Hong Kong.
The respondents are said to have purchased 24.1622 hectares of land in Pakuranga being the land in Certificate of Title 202/31 North Auckland Registry (the land) in November 1993 from Neil Construction Limited. They subsequently formed and registered the Golden Harvest Partnership for GST purposes. In March 1994 the formed Golden Harvest Investments and Trading Limited which was also registered for GST as property developers and the land was transferred to it. In March 1996 the land was re-transferred to the respondents.
On 22 May 1997 the appellant and the respondents entered into a written agreement for the sale and purchase of the land. The consideration was expressed as “$6.135 million plus GST (if any).”
It is the argument of the respondents that Mr Chan has been assessed for and paid GST in respect of this transaction so they were entitled to reimbursement of that sum from the appellant.
Prior to the parties entering into the contract in May 1997 the appellant had sought and been given advice by the Inland Revenue Department (IRD) that no GST would be payable. Not surprisingly therefore it has at least been curious as to why GST was later levied.
The issue of the payment of GST was in dispute between the parties when settlement of the contract should have been effected. There was a referral of the matter to Nigel Smith & Associates, taxation specialists, as to whether GST was payable and enquiries were made of the IRD.
Eventually the appellant paid the claimed sum of $766,875 under protest and without prejudice to its obligation to pay this sum and interest which had accrued for late settlement.
As against that background the appellant sought in the proceedings filed in the High Court declaratory relief and a mandatory injunction that pursuant to the provisions of s 8 of 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.

Continue reading Hawkins Construction Ltd v Chan

Details

AGLC: Hawkins Construction Ltd v Chan [2000] NZCA 80
Case: [2000] NZCA 80
Decision Date: 12 June 2000

CaseChat Overview and Summary

Hawkins Construction Limited, a construction company based in Auckland, appealed against a High Court judgment that struck out its statement of claim against Kwok Chor Chan and Richard Chung Ip Yeung, both of whom were involved in the sale of a parcel of land to Hawkins. The central issue was whether Hawkins was required to pay Goods and Services Tax (GST) on the transaction and if it had a valid cause of action against Chan and Yeung for reimbursement or damages. Chan and Yeung argued that Hawkins was required to pay GST, which they had already settled, and that the statutory provisions and contractual terms precluded Hawkins from challenging the tax liability.

The Court of Appeal examined whether the trial judge correctly applied sections 29 and 27(2) of the Goods and Services Tax Act 1985, and rule 265 of the High Court Rules. Section 29 generally prevents challenges to GST assessments by taxpayers in court, except in specific proceedings. The Court found that while section 29 did apply to bar Hawkins from challenging the assessment, it did not automatically render Hawkins' claim untenable. The key issue was whether the assessment related to the specific transaction between the parties, which was a factual matter that needed to be determined at trial. The Court of Appeal held that the High Court should not have struck out the claim without resolving this factual dispute. The appeal was allowed, and the matter was remitted to the High Court for further proceedings.

The Court of Appeal emphasised that the discretion to strike out a claim should be sparingly exercised and that disputed factual issues must not be resolved at the strike-out stage. The Court also noted that the parties had chosen to incorporate the GST assessment into their contractual formula for determining the consideration. Therefore, Hawkins' rights were aligned with those of the respondents, and it could not challenge the assessment under section 29 until the connection between the assessment and the transaction was established. The Court of Appeal quashed the order for strike out and directed the matter back to the High Court for trial on the factual issues. Hawkins was awarded costs of $3000 plus disbursements.

Orders