Marr v Mills - [2021] NZCA 505

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA224/2021
[2021] NZCA 505

BETWEEN	CAROLINE DESIREE MARR Applicant
AND	KAREN ANN MILLS AND GRAEME WILLIAM MILLS Respondents

Court:	Clifford and Goddard JJ
Counsel:	S A Keall for Applicant S A Grant for Respondents
Judgment: (On the papers)	4 October 2021 at 2.00 pm

JUDGMENT OF THE COURT

AThe application for leave to appeal is declined.
BThe applicant must pay costs to the respondents for a standard application on a band A basis, with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Goddard J)

Background

Ms Marr sold a property to Mr and Mrs Mills. The purchase price was $1,450,000.00 inclusive of GST (if any). In the agreement for sale and purchase (ASP)

Ms Marr warranted that the statement on the front page of the ASP regarding the vendor’s GST registration status was correct at the date of the ASP. On the front page of the ASP the following statement appeared:
The vendor is registered under the GST Act in respect of the transaction evidenced by this Agreement and/or will be so registered at settlement.
~~Yes~~/No
However at the date the property was sold Ms Marr was registered for GST. The warranty was therefore breached.
The Mills intended to live in part of the property, and to operate two businesses from part of the property. At the time they bought the property they were not registered persons under the Goods and Services Tax Act 1985. But they planned to register for GST in connection with setting up their proposed businesses. If Ms Marr had not been registered for GST, and the Mills had become registered for GST, they would have been able to claim a GST input tax credit in respect of part of the purchase price. The Mills planned to use the GST refund they would obtain in this way to fund the set up and operation of the proposed businesses.
However a sale of commercial property by one registered person to another is zero rated for GST purposes, so the purchaser cannot claim any input tax credit in connection with the purchase. Because Ms Marr was registered for GST, the Mills would not have been able to claim the GST portion of the purchase price as an input tax credit if they became registered for GST.
The Mills did not want to put further funding into the proposed businesses, and did not want to borrow more money than had already been necessary to complete the purchase. Once they became aware that Ms Marr was registered for GST, so they would not be able to claim a GST input credit if they registered for GST, they decided not to commence the businesses, and not to become GST registered.

Claim for breach of warranty

The Mills issued proceedings against Ms Marr claiming damages for breach of warranty. The amount they claimed was the GST refund they were unable to obtain of $121,610.86 plus costs…

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 Marr v Mills

Details

AGLC: Marr v Mills [2021] NZCA 505
Case: [2021] NZCA 505
Decision Date: 4 October 2021 at 2.00 pm

CaseChat Overview and Summary

Caroline Desiree Marr applied for leave to appeal to the Court of Appeal of New Zealand against the decision of the High Court, which dismissed her appeal against a damages award of $121,610.86 plus interest and costs to Karen Ann Mills and Graeme William Mills. Ms Marr had sold a property to the Mills, who claimed damages for breach of a warranty in the agreement for sale and purchase that the vendor was not registered for GST. The Mills intended to register for GST in connection with two businesses they intended to operate from part of the property. They planned to use a GST input credit in respect of the purchase price to fund the set-up and operation of the businesses. The sale was zero-rated for GST purposes because Ms Marr was registered for GST, so the Mills could not claim the GST input credit. The Mills did not commence the businesses, did not register for GST, and did not wish to put further funding into the businesses or borrow more money than necessary to complete the purchase. The District Court and High Court both found that the Mills were entitled to recover the GST input credit as damages for breach of warranty. Ms Marr argued on appeal that the Mills did not establish with sufficient certainty that they would have established their businesses, and obtained a GST input credit, and that the Mills did not establish that they would have ended up in a "net" better off position, taking the subsequent sale of part of the property into account. The Court of Appeal found that Ms Marr's arguments did not raise any arguable question of law or fact and that a second appeal would result in cost and delay which is unjustified in this case.

The application for leave to appeal is declined. The applicant must pay costs to the respondents for a standard application on a band A basis, with usual disbursements.

Orders