Takapuna Residence Development Limited v Dixon - [2023] NZHC 624

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-001423

[2023] NZHC 624

BETWEEN
TAKAPUNA RESIDENCE DEVELOPMENT LIMITED
First Plaintiff

EDEN GP LIMITED
Second Plaintiff

EDEN DEVELOPMENT LIMITED
Third Plaintiff

AND

PETER ANDREW DIXON and MARGARET JOAN DIXON

Defendants

Hearing: 21 February 2023

Appearances:

A J Casey for the Plaintiffs

W McCartney for the Defendants

Judgment:

27 March 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by Associate Judge Gardiner
on 27 March 2023 at 4.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar / Deputy Registrar – Date: ………………………………..

Solicitors:

Duncan King Law, Auckland Duthie White, Auckland

W McCartney, Auckland
A J Casey, Auckland

TAKAPUNA RESIDENCE DEVELOPMENT LTD v DIXON [2023] NZHC 624 [27 March 2023]

Introduction

[1] Takapuna Residence Development Ltd (Takapuna RD) seeks summary judgment against the Dixons for breach of a goods and services tax (GST) warranty on the sale and purchase of a property.

[2] In brief, Takapuna RD was the nominee of Eden GP Limited (formerly Eden Reits Limited) (Eden GP), who, on 28 October 2019 entered into an agreement with the Dixons to purchase a property. The Dixons represented that they were not GST registered under the Goods and Services Tax Act 1985 (the Act) and would not be so at the time of settlement. Eden Development No. 1 LP (Eden LP) (the general partner of Eden GP) paid $550,000 in deposits before Takapuna RD was nominated as purchaser. Takapuna RD paid the remainder of the purchase price ($1,950,000) and settled the transaction. Takapuna RD and Eden LP subsequently applied to the Inland Revenue Department (IRD) for input tax credits in relation to the purchase. These applications were declined by the IRD as the Dixons were GST registered and consequently the transaction was zero-rated under s 11(1)(mb) of the Act.

[3] The Dixons accept that they are liable in damages to Takapuna RD for the input tax credit Takapuna RD would have received in respect of the $1,950,000 had they, as they warranted, not been GST registered. However, they submit that Takapuna RD is not entitled to recover the loss of input tax credit in respect of the deposit as Takapuna RD did not pay the deposit and consequently has not suffered any loss. The Dixons note that Takapuna RD was not yet incorporated at the time of the deposit and Eden LP has already (unsuccessfully) attempted to claim an input tax credit for the deposit.

[4] At issue is whether the Dixons’ defence, that because Takapuna RD is not entitled to claim the tax credit it has not suffered any loss, is reasonably arguable.

[5]There are three sub-issues:

(a)Who would have been entitled to the input tax credit in respect of the deposit? Takapuna RD as recipient of the goods, or Eden LP as the party who paid the deposit.

(b)If Takapuna RD is prima facie entitled…

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: [2023] NZHC 624
Decision Date: 27 March 2023

CaseChat Overview and Summary

Takapuna Residence Development Ltd (Takapuna RD) sought summary judgment against the Dixons for breach of a GST warranty in relation to the sale and purchase of a property. The Dixons argued that Takapuna RD had not suffered any loss because it did not pay the deposit, and therefore, was not entitled to claim input tax credits on the deposit portion of the purchase price. Takapuna RD argued that it was entitled to the input tax credit for the deposit because it was the sole recipient of the supply of land. The court held that Takapuna RD was entitled to the input tax credit for the deposit, even though Eden LP paid it. The court also held that Takapuna RD was entitled to recover damages for the Dixons’ breach of the GST warranty, even though it was not incorporated at the time of the deposit. Finally, the court held that Eden LP’s unsuccessful application for the input tax credit did not prevent Takapuna RD from recovering damages. The court entered summary judgment for Takapuna RD in the sum of $331,642.96 plus interest pursuant to s 10 of the Interest and Money Claims Act 2016. The plaintiffs were invited to file submissions for indemnity or increased costs.

Orders