Holdaway v Ellwood - [2019] NZHC 792

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE

CIV 2018-406-36

[2019] NZHC 792

UNDER the District Court Act 2016

BETWEEN

CORY IVAN HOLDAWAY and KIM MARIE HOLDAWAY

Appellants

AND

DAVID ROSS ELLWOOD

Respondent

Hearing: 4 April 2019 via AVL

Counsel:

D J Clark for Appellants

B A Fletcher and J S Marshall for Respondent

Judgment:

11 April 2019

JUDGMENT OF MALLON J

Introduction

[1] The Holdaways (the appellants) purchased a rural property from Mr Ellwood (the respondent). Under the agreement for sale and purchase Mr Ellwood warranted that he was not registered for GST when in fact he was so registered. The Holdaways brought a summary judgment application against Mr Ellwood for breach of warranty. They claimed damages for the GST input credit they would have been entitled to if Mr Ellwood was not registered for GST. They also claimed fees charged by their accountants following the Inland Revenue’s advice rejecting their GST input credit.

[2] The District Court declined to grant summary judgment.1 The Holdaways appeal from that decision.

1 Holdaway v Ellwood [2018] NZDC 18487.

HOLDAWAY v ELLWOOD [2019] NZHC 792 [11 April 2019]

Factual background

[3] On 20 December 2017, Mr Ellwood and the Holdaways entered into an agreement for the sale and purchase of Mr Ellwood’s 8-hectare rural property on Waihopai Valley Road, southwest of Blenheim (the Agreement).2

[4] The purchase price, stated on the front page, was “$335,000 inclusive of GST (if any)”. Also, on the front page, Mr Ellwood, as vendor, recorded that he was not registered under the Goods and Services Tax Act 1985 (the GST Act) in respect of the transaction and would not be so registered at settlement. Clause 15.1 of the Agreement provided that the vendor warranted that this statement was “correct at the date of the agreement”.

[5] Schedule 2 of the Agreement provided that it “must be completed if the vendor has stated on the front page that the vendor is registered under the GST Act”. As Mr Ellwood had stated he was not registered for GST, the Holdaways were not required to complete Schedule 2.

[6] However, they did partially complete Schedule 2 by answering questions 3 and 4 in that schedule. Question 3 asked if “[t]he purchaser is registered under the GST Act and/or will be so registered at settlement”. The Holdaways answered “no” to this question. Question 4 asked if “[t]he purchaser intends at settlement to use the property for making taxable supplies”. The Holdaways also answered “no” to this question. Schedule 2 went on to direct the purchaser to answer question 7 if they had answered “no” to either question 3 or question 4. The Holdaways did not answer question 7 or any other question in Schedule 2.

[7] Clause 15.2 of the Agreement provided that “the purchaser warrants that any particulars stated by the purchaser in Schedule 2 are correct at the date of this agreement”. Clause 15.5 provided:

If any 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.

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Details

Case: [2019] NZHC 792
Decision Date: 11 April 2019

CaseChat Overview and Summary

The Holdaways purchased a rural property from Mr Ellwood, who warranted that he was not registered for GST. The Holdaways brought a summary judgment application against Mr Ellwood for breach of warranty, claiming damages for the GST input credit they would have been entitled to if Mr Ellwood was not registered for GST. The District Court declined to grant summary judgment, a decision the Holdaways appeal. The central legal issue was whether the Holdaways’ claim for damages was reasonably foreseeable and, therefore, recoverable under the contract. The court found that the Holdaways were entitled to summary judgment for the input credit they would have received if Mr Ellwood’s warranty had been correct, as well as for the accounting fees incurred in dealing with the problem presented by Mr Ellwood’s breach of warranty. The court held that the Holdaways were entitled to damages in the amount of the input credit they would have received if Mr Ellwood’s warranty had been correct. They were also entitled to summary judgment for the $3,925 (GST exclusive) accounting expenses they incurred. The appeal is allowed and the Holdaways are entitled to summary judgment for $46,760.39 (the input credit denied and the accounting expenses exclusive of GST), plus interest and costs.

Orders