Park Homes Ltd v Miah
[2022] NZHC 1352
•9 June 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001961
[2022] NZHC 1352
BETWEEN THE PARK HOMES LIMITED
Plaintiff
AND
ABDDUR RAHIM MIAH
Defendant
Hearing: 19 May 2022 Appearances:
R J Thompson for Plaintiff R J Hooker for Defendant
Judgment:
9 June 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 9 June 2022 at 3.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date …………………………….
THE PARK HOMES LTD v MIAH [2022] NZHC 1352 [9 June 2022]
Introduction
[1] The Park Homes Ltd1 seeks summary judgment in the sum of $730,434.78 against Mr Miah for an alleged breach of a GST warranty he provided to Park Homes. The warranty was contained in a variation to an agreement for sale and purchase2 of a property on Park Estate Road, Rosehill, Auckland,3 sold by Mr Miah to Park Homes.
[2] The issue I must determine is one of contractual interpretation. Has Park Homes established that Mr Miah has no defence to the claim; or is there a tenable defence that the warranty was not breached, and that Park Homes has suffered no recoverable loss?
Factual background
[3]Mr Wong is the director of Park Homes.
[4] On 13 November 2020, Mr Wong, as purchaser, entered into the ASP with Mr Miah, as the vendor. The sale price was $6.5m, including GST, and set a settlement date of 15 March 2021.
[5] The ASP was in the 10th edition 2019(2) format approved by the Real Estate Institute of New Zealand Incorporated and the Auckland District Law Society Incorporated. The particular terms of the agreement included:
(a)(On the front sheet) “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”;4
(b)(On the front sheet) “purchase price: $6,500,000.00 incl GST” / “inclusive of GST (if any)”;
1 Park Homes.
2 ASP.
3 The Property (115 Park Estate Road, Rosehill, Auckland, Record of Title NA67C/103).
4 The line crossing out ‘No’ does extend somewhat into the ‘Yes’ column, but it seems clear on the face of the document that the question is being answered in the affirmative.
(c)(On the front sheet) the settlement date is recorded as 15 March 2021 (with other dates, including 25 November 2021 and 30 September 2021 crossed out);
(d)Schedule 1 (GST information) records that vendor’s GST registration number as 117-283-291.5 The remainder of Schedule 1 has not been completed.
[6] On 18 November 2020, Mr Wong and Mr Miah entered into a written variation agreement which reduced the purchase price of the Property to $5,750,000 inclusive of GST if any. The variation agreement also included the following warranty, at cl 3:
The Vendor warrants that they are not registered for GST as at the date of this agreement, and that they will not be registered for GST at settlement. If the vendor is in breach of this warranty at settlement then the purchase price shall be reduced by 15% and be changed from “inclusive of GST (if any)” to “plus GST (if any)”.
[7] On 19 November 2020, Mr Wong paid Mr Miah the deposit under the agreement, being $632,250.
[8] On 20 November 2020, Mr Miah’s solicitors advised Park Homes’ solicitors that Mr Miah was not registered for GST.
[9] On 25 November 2020, the parties entered into a further variation to the ASP. They agreed that the purchase price should be reduced by $150,000 (to $5,600,000 inclusive of GST, if any).
[10] On 27 January 2021, Mr Wong incorporated Park Homes. On 9 March 2021, Mr Wong nominated Park Homes as the purchaser under the ASP, by written deed of nomination.
[11]Settlement took place on 16 March 2021. On 16 March 2021:
(a)Park Homes paid the further sum of $4,972,120.08 to Mr Miah;
5 In his affidavit of February 2022, Mr Miah states that the GST number 117-283-291 is the GST number for Bismillah Property Ltd, a company of which he is the sole shareholder and director.
(b)The Property was transferred from Mr Miah to Park Homes.
[12] At no point at settlement, or afterwards, did Mr Miah or his agents provide Park Homes with a GST invoice as to the payment of the purchase price.
[13] Subsequent to settlement, Park Homes attempted to obtain a GST refund from the Inland Revenue Department (IRD) for the GST component of the purchase price.
[14] Park Homes says that it was advised by IRD that Mr Miah was registered for GST.
[15] IRD declined to pay the refund on the basis that it deemed that Mr Miah was registered for GST on the settlement of the purchase and accordingly the supply was a zero-rated transaction under the Goods and Services Tax Act 1985.6 IRD provided written confirmation of its decision in its letter to Park Homes dated 13 August 2021.
Relevant legal principles
[16]Rule 12.2(1) of the High Court Rules 2016 provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[17] The principles applicable on a plaintiff’s summary judgment application were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:7
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA) …
6 The GST Act.
7 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
Analysis and decision
Issue – Is there a tenable defence that the warranty was not breached?
[18] It is not disputed that in a summary judgment application the onus of proof is on the plaintiff to show that the defendant has no arguable defence to its claim. However, there is an evidential onus on the defendant to provide a foundation for any defences raised. If not, the plaintiff’s verification stands unchallenged and ought to be accepted unless it is patently wrong.8
[19] Mr Miah denies liability on two principal grounds: that he was never registered for GST and that the warranty only applied until 15 March 2021. Settlement occurred on 16 March 2021, and the warranty accordingly had no application. He contends that he has an arguable defence that there was no breach of the warranty and that the matter should therefore go to trial.
[20] The clear subject matter of the warranty is GST. GST is of course a creature of statute. The warranty, which expressly refers to the ASP, is included in a variation to the ASP. The ASP defines GST by reference to the GST Act.
[21] The requirement to register for GST and the deeming of registration is governed by the provisions of the GST Act. Section 2 of the GST Act defines “registered person” as “a person who is registered or is liable to be registered under this Act”.
[22] A person’s liability for registration is governed by s 51 of the GST Act. A person becomes liable to be registered if, in a 12-month period, he or she carries on taxable activities exceeding the relevant threshold ($60,000 at the time) or there are reasonable grounds for believing that will occur.9 Subsection 4 provides two ways for a person to be registered:
(4)Where any person has –
(a)made application for registration pursuant to subsection (2), (3), or section 54B, and the Commissioner is satisfied that
8 Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 55 (CA) at 59.
9 Section 51(1)(b); see Ling v YL NZ Investment Ltd [2018] NZCA 133 at [26].
that person is eligible to be registered under this Act, that person shall be a registered person for the purposes of this Act with effect from such date as the Commissioner may determine; or
(b)not made application for registration pursuant to subsection (2), and the Commissioner is satisfied that that person is liable to be registered under this Act, that person shall be a registered person for the purposes of this Act with effect from the date on which that person first became liable to be registered under this Act: provided that the Commissioner may, having regard to the circumstances of the case, determine that person to be a registered person from such later date as the Commissioner considers equitable.
[23] Thomas J in Ling v YL NZ Investment Ltd,10 held that the effect of these provisions is as follows:
Therefore, if a person applies for registration, the person will be registered with effect from such date as the Commissioner may determine. If a person has not applied, and the Commissioner is satisfied a person is liable to be registered, he or she is registered with effect from the date on which that person first became liable to be registered, provided the Commissioner can determine that person to be a registered person from a date the Commissioner considers equitable.
[24] The fundamental problem for Mr Miah is that he seeks to avoid the application of the legislation; he cannot do so. Section 51(4) applies. The only tenable interpretation of the warranty is that the issue of registration and whether Mr Miah was registered for GST at settlement can only be answered by applying the mandatory requirements of the GST Act. He is deemed by the legislation to be registered, the Commissioner having determined that he was registered for GST as at the settlement date, 16 March 2021.
[25] Mr Hooker’s submission that the reasonable person, in applying the objective test of contractual interpretation, would not interpret “at settlement” using “some deemed status backdated to the settlement date by IRD” is untenable. It is equally flawed to contend that the warranty has nothing to do with the GST Act or the claim for the GST refund by Park Homes. The principal reason the warranty was given was because of the application of the GST Act and the words of the warranty clause cannot sensibly be read in any other way.
10 Ling v YL NZ Investment Ltd, above n 9, at [27].
[26] It may be that at no time has Mr Miah taken steps to register himself personally for GST. However, that is irrelevant and certainly no defence to the claim now made. There has been no challenge to the determination of the IRD deeming Mr Miah to be registered for GST as at 16 March 2021. Even if Mr Miah committed an inadvertent breach of the warranty (meaning he may not have realised that IRD would deem him to have been registered for GST as at the date of settlement), that does not alter the fact that he is “registered” in terms of the GST Act.
[27] I find that this case is in essence the same as Ling v YL NZ Investment Ltd. The appellant in that case was the vendor of real estate for a price inclusive of GST and warranted that she was not registered under the GST Act and would not be so at the date of settlement. The purchaser said they were registered and that they intended to make a claim for an input tax refund of around $365,000. After settlement, the IRD advised the purchaser that the supply was a zero-rated transaction under the Act because the vendor was deemed to be registered when the sale of the property took place.11
[28] The High Court granted summary judgment in the purchaser’s favour, holding that the vendor had breached her warranty. The purchaser’s loss was the amount of the input credit they would have been entitled to if the vendor’s GST position was as warranted, professional accounting fees incurred in dealing with the GST position, interest and costs. The Court of Appeal upheld the High Court’s decision. The Court of Appeal held that the warranty’s purpose was to avoid confusion about the GST position and its impact on the purchase price.12
[29]Thomas J held:13
The purpose of a warranty in a commercial contract is to assign risk between the parties. A party provides a warranty in respect of matters which are or can be expected to be within that party’s knowledge but not within the knowledge of the other party. This is plainly the situation in this case. YL could not know Ms Ling’s GST status, that is, whether she was in fact registered or whether she was liable to be registered. YL could not challenge the Commissioner’s decision as to Ms Ling’s registration and its retrospective effect. In those circumstances, it is right that the risk as to GST registration lies with Ms Ling.
11 See Holdaway v Ellwood [2019] NZHC 792 at [13] and [14].
12 Ling v YL NZ Investments Ltd, above n 9, at [34]–[35].
13 Ling v YL NZ Investments Ltd, above n 9, at [34].
The GST warranty was for the purpose of avoiding any confusion as to the GST liability and position of the parties.
[30] The position here is exactly the same. The risk as to GST registration clearly lies with Mr Miah. There can be no dispute about the clear statutory context which applies and there is no issue that needs to go to trial. Mr Miah was unable to point to any disputed factual matters which could have any real bearing on the clear and unequivocal meaning of the warranty at issue.
[31] Mr Miah’s contention that the warranty only applied until 15 March, when settlement ultimately took place the next day, is equally without merit. The only tenable interpretation of the relevant contractual terms is that the settlement referred to in the warranty clause was the settlement that occurred on 16 March 2021.
[32]Settlement is defined in cl 1 of the ASP as follows:
“Settlement” means (unless otherwise agreed by the parties in writing) the moment in time when the vendor and purchaser have fulfilled their obligations under subclause 3.8.
[33] Clause 3.8 contains the essential remaining terms of the bargain that are to be completed. The purchaser is to pay the balance of the purchase price and the vendor is to release or procure the release of the transfer instrument so that the purchaser’s lawyer can submit it for registration.
[34] The warranty, at cl 3, expressly refers to “settlement”. That can only be the settlement expressly contemplated by the ASP. I acknowledge that on the front page of the ASP a particular settlement date of 15 March 2021 is specified. However, it is clear and cannot be seriously challenged that the parties agreed to a deferral of settlement on 15 March 2021 until 16 March 2021. The settlement that cl 3 expressly contemplates is the settlement that occurred on 16 March 2021. The parties were represented by lawyers throughout and it was Mr Miah’s own solicitor who proposed a deferral of the settlement from 15 to 16 March 2021. The vendor’s solicitors, namely Mr Miah’s solicitors, issued a settlement statement on 16 March 2021. Settlement was then completed.
[35] Mr Miah says in his first affidavit that he gave the warranty on the clear understanding that it applied between himself and Mr Wong and also only applied to settlement on 15 March 2021. He says that he believed at the time that the word “settlement” in the warranty clause meant 15 March 2021 and no other date.
[36] Mr Miah provides no evidence as to the basis for this understanding. In any event, his alleged subjective understanding is irrelevant. He does not give any evidence that he communicated his alleged understanding to the plaintiff.14 As a matter of objective interpretation, the term “settlement” in the warranty, as considered in the context of the ASP (which it must be) means the settlement that occurred on 16 March 2021. It could not be anything else. There are no relevant disputed factual matters that need to go to trial to resolve this issue.
[37] Mr Miah may originally have understood “settlement” to refer to 15 March 2021. However, his agent, his solicitor, subsequently agreed to a variation. There is no suggestion that the solicitor was acting without authority or that the subsequently agreed settlement date was not binding on all parties.
[38] Finally, I also reject the submission of Mr Miah that the plaintiff has not established any loss. The loss suffered by the plaintiff is exactly the same as the loss described by Mallon J in Holdaway v Ellwood. Mallon J held that the Holdaways were entitled to be put in the position that they would have been if the breach of warranty had not occurred:15
That is, as was the case in Ling, they would have been entitled to claim an input tax credit for the GST component of the sale price if they became GST registered before settlement under the Agreement.
[39] Here, Park Homes was denied an input credit for the GST component of the purchase price. That was a loss that arose naturally from the breach of the warranty.
[40] In conclusion, I find that Park Homes has established that Mr Miah has no defence to his claim.
14 See Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85.
15 Holdaway v Ellwood, above n 11, at [18].
Result
[41] I grant the application by the plaintiff, Park Homes Ltd, for summary judgment. I enter judgment against the defendant, Mr Miah, in favour of Park Homes in the sum of $730,434.78 together with interest under the Interest on Money Claims Act 2016 from 15 August 2021 to today’s date.
[42] As to costs, I am of the preliminary view that having succeeded, Park Homes, the plaintiff, is entitled to costs on a 2B basis plus disbursements. If costs cannot be agreed, then brief memoranda (no more than three pages) are to be filed and served within 14 days.
Associate Judge P J Andrew
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