Wang v Y & P New Zealand Ltd
[2016] NZHC 3173
•21 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-001884 [2016] NZHC 3173
BETWEEN YANG WANG AND CHEN ZHANG
Plaintiffs
AND
Y & P NEW ZEALAND LIMITED Defendant
Hearing: 6 December 2016 Appearances:
G Blanchard for Plaintiffs / Applicants
B Rooney for Defendant / RespondentJudgment:
21 December 2016
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 21 December 2016 at 11.00 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Park Legal, Auckland
Yang Lawyers, Auckland
B Rooney, Auckland
G Blanchard, Auckland
WANG & Anor v Y & P NEW ZEALAND LTD [2016] NZHC 3173 [21 December 2016]
[1] Yang Wang and Chen Zhang apply for:
(a) Summary judgment on their claim for specific performance of four agreements for sale and purchase of land, with settlement to be on the basis that GST is payable by the plaintiffs at 0%; and interest at 14% on the entire purchase price for period from 29 July 2016 to the date
of settlement pursuant to the terms of the agreement.1
(b) An order under s 145A Land Transfer Act 1952 that caveats
10522966.1; 10523030.1; 10523003.1; and 10522942.1 lodged against the four properties not lapse.
[2] It is not in dispute that the plaintiffs will be entitled to orders sustaining the caveats pending settlement, if an order for summary judgment is made; and conversely, that if there is a finding that there is no arguable basis for sustaining the caveats, there should be an order requiring their removal – in which case their claim for specific performance must be struck out.
[3] The applications are opposed. The plaintiffs have the onus on both applications.
[4] For reasons that I will turn to presently, I am satisfied that the question whether or not there is an entitlement to orders for specific performance is not appropriately dealt with by way summary judgment and but that under the agreements for sale and purchase, the plaintiffs arguably retain a sufficient interest in the properties which ought to be determined by the normal process of trial. It follows that I consider the caveats should stand pending further order.
Background
[5] Mr Wang and Ms Zhang are husband and wife and partners in a transaction involving the purchase of four properties. On 2 May 2016 the first plaintiff,
1 The properties are located at 1-3/13 Lincoln Road, and 15 Lincoln Road, Henderson. The certificates of title for the properties are NA28D/929, NA28D/930, NA28D/931, and identifier
567996.
Mr Wang, signed sale and purchase agreements in relation to the four properties at
1/13, 2/13, 3/13 and 15 Lincoln Road for a total purchase price of $2,430,000 plus GST, if any. The settlement date was 28 July 2016. The vendor was the defendant, Y&P NZ Ltd and the purchaser was described as “Mr Wang and/or nominee”. Mr Wang subsequently named the second plaintiff, Ms Zhang, as the purchaser of 2/13
Lincoln Road.
[6] At the date of signing the agreements, the defendant was GST-registered, but Mr Wang was not. These details were recorded in Schedule 2 to each of the agreements. The effect of this arrangement was that the plaintiffs were required to pay GST at 15% of the purchase price. Clause 14.5 of the agreements provided as follows:
If any of the particulars stated by the purchaser in Schedule 2 should alter between the date of this agreement and settlement, the purchaser shall notify the vendor of the altered particulars and of any other relevant particulars in Schedule 2 which may not have been completed by the purchaser as soon as practicable and in any event no later than two working days before settlement. The purchaser warrants that any altered or added particulars will be correct as at the date of the purchaser’s notification. If the GST treatment of the supply under this agreement should be altered as a result of the altered or added particulars, the vendor shall prepare and deliver to the purchaser or the purchaser’s lawyer an amended settlement statement if the vendor has already tendered a settlement statement, and a credit note or a debit note, as the case may be, if the vendor has already issued a tax invoice.
[7] On 25 July 2016 the defendant’s solicitors, Park Legal, issued settlement statements to the plaintiffs’ solicitors, Yang Lawyers. The statements included GST on the purchase price at 15%.
[8] The day before settlement, 27 July 2016, the Yang Lawyers advised Park Legal by telephone that the plaintiffs were now registered under the GST Act. Ms Xia, a legal executive employed by Yang Lawyers, gave evidence that in the course of that conversation, she informed Park Legal that the plaintiffs intended to use the properties for the purpose of making taxable supplies and that the properties would not be used as the plaintiffs’ principal place of residence. That evidence is disputed by Amanda Deng, a legal executive employed by Park Legal. In any case, Yang Lawyers requested Park Legal to amend the settlement statements to show that the transaction would be zero-rated for GST purposes.
[9] Later that day, Ms Deng emailed Ms Xia, attaching amended settlement statements which showed the transaction as zero-rated. The email also requested that Yang Lawyers provide the plaintiffs’ GST numbers so that Ms Deng could prepare tax invoices for settlement. Ms Xia supplied the GST numbers by email on the same day.
[10] On the settlement date, 28 July 2016, Ms Deng emailed Ms Xia advising that the defendant refused to accept the plaintiffs’ notification regarding their change in GST status, because the plaintiffs had not complied with the requisite two-day notice period under cl 14.5 of the sale and purchase agreements and further, had not complied with the requirement to supply any such notice in writing. Accordingly, Ms Deng advised that the defendant required the plaintiffs to settle on the basis of the original settlement statements with GST payable at 15%. Mr Yang of Yang Lawyers replied, stating that there had been no change to the particulars in Schedule
2 of the agreements for sale and purchase and that, therefore, the two-day notice requirement did not apply.
[11] Later that day, Ms Deng emailed a settlement statement and tax invoice to Yang Lawyers showing GST payable at 15%. The plaintiffs refused to settle on that basis. The defendant accordingly issued settlement notices in respect of the four sale and purchase agreements, stating that the plaintiffs were required to settle the purchase within 12 working days, time being of the essence.
[12] Between 28 July and 4 August 2016, the solicitors for both parties exchanged various emails regarding the GST status of the transaction. However the parties failed to achieve resolution of the dispute. On 4 August 2016, the plaintiffs lodged caveats over the properties to protect their interest under the agreements. The following day, the plaintiffs commenced summary judgment proceedings seeking specific performance.
[13] On 17 August 2016, the defendant gave notice that it was cancelling the agreements for sale and purchase.
Zero-rating of land transactions
[14] Section 11(1)(mb) Goods and Services Tax Act 1985 provides as follows:
(1) A supply of goods that is chargeable with tax under section 8 must be charged at the rate of 0% in the following situations:
(mb) the supply wholly or partly consists of land, being a supply—
(i) made by a registered person to another registered person who acquires the goods with the intention of using them for making taxable supplies; and
(ii) that is not a supply of land intended to be used as a principal place of residence of the recipient of the supply or a person associated with them under section 2A(1)(c); …
[15] The language of subs (1)(mb) is unequivocal: the transaction must be zero- rated. However, this absolute requirement is also subject to s 78F2, which relevantly provides:
78F Liability in relation to supplies of land
(1) This section applies in relation to a supply that wholly or partly consists of land.
(2) At or before settlement of the transaction relating to the supply, the recipient is required to notify the supplier as to whether, at the date of settlement,—
(a) they are, or expect to be, a registered person; and
(b) they are acquiring the goods with the intention of using them for making taxable supplies; and
(c) they do not intend to use the land as a principal place of residence for them or a person associated with them under section 2A(1)(c).
(2B) …
(3) The supplier may rely on the information provided as required by subsection (2) in determining the tax treatment of the supply.
[16] “Notify” is further defined3 by reference to s 14C Tax Administration Act
1994, which states:
2 All references in this judgment to statutory provisions are references to provisions in the
GST Act 1985 unless otherwise indicated.
3 Goods and Services Tax Act 1985, definition of “notify” in s 2.
14C Applying or notifying
(1) This section applies when a provision in this Act, the Income Tax Act 2007, or the Goods and Services Tax Act 1985 refers to or describes person A—
(a) applying to person B for something: (b) notifying person B about something.
(2) Person A may communicate—
(a) by electronic means, if person A complies with the provisions of the Electronic Transactions Act 2002, for an item of information delivered in a way referred to in section
14F; or
(b) in print and delivered in a way referred to in section 14F, whether the document is handwritten, typewritten, or otherwise visibly represented, and whether copied or reproduced on paper; or
(c) in another manner permitted by the Commissioner.
(3) However, communication under this section does not include communication on the internet or by other electronic means, if person B is not directly alerted to the communication in some manner.
[17] In summary, notwithstanding the absolute language of s 11(1)(mb), a GST- registered vendor in a land transaction is entitled to rely upon the most recent written communication of the matters set out in s 78F(2) for the purposes of determining whether a transaction for the sale of land should be zero-rated or not. The corollary of that principle would seem to be that, where a purchaser fails to provide written notification regarding the matters set out in s 78F(2) at or before settlement, the vendor is entitled to proceed on the basis that GST should be charged on the transaction at the rate of 15% of the purchase price. However, as the plaintiffs noted, the vendor is not required to rely upon such written notice. This is consistent with the general principle that:
Everyone has the right to waive and to agree to waive the advantage of a law made solely for the benefit and protection of the individual in his private capacity, which may be dispensed without infringing any public right or public policy.
[18] I am satisfied that the entitlement to rely upon written notice in s 78F is one which exists for the convenience of the vendor, so that it can easily determine the
correct GST treatment in relation to a land transaction. It follows that the vendor was in theory entitled to waive its statutory entitlement to written notice regarding the plaintiff’s GST status.
[19] In this case there is a further matter to consider, being the terms of the agreements for sale and purchase. Clause 14.5 of the agreements (set out at [6] above) provides that the purchaser must “notify the vendor … no later than two working days before settlement” if any of the particulars set out in Schedule 2 to the agreement should change between the date of the agreement and settlement. Clause
1.3(1) of the agreements further provides that “[a]ll notices must be served in writing.” There was no dispute that cl 1.3(1) of the agreements applied in respect of notice given under cl 14.5, such that the plaintiffs were required to provide written notice of any change to their GST status. Specifically, the plaintiffs were required to provide written notice of the following matters:
(a) That they were registered for GST purposes;
(b)That they were acquiring the land with the intention of using it to make taxable supplies; and
(c) That they did not intend to use the land as a principal place of residence for them or any person associated with them.4
[20] The plaintiffs were also required to supply the defendant with their GST
registration numbers.
[21] In addition to the statutory requirements set out in s 78F, therefore, the plaintiffs were subject to a separate contractual obligation to provide sufficient written notice regarding any change to their GST status prior to settlement. As above, however, I note that the vendor was in theory entitled to waive that obligation
and to accept notice in a form which did not comply with cl 14.5 of the agreements.5
4 As defined by s 2A(1)(c) of the Goods and Services Tax Act 1985.
5 See generally Burrows, Finn and Todd The Law of Contract in New Zealand (5th ed, LexisNexis, Wellington, 2016) at [19.3.2].
Summary judgment principles
[22] In order to succeed at the summary judgment stage, a plaintiff must demonstrate that the defendant has no arguable defence to a cause of action in the statement of claim or to a particular part of any such cause of action.6 The Court
must be left without any real doubt or uncertainty on the matter.7 However, the
Court will not hesitate to decide questions of law where appropriate.8
Application for summary judgment
[23] In their statement of claim, the plaintiffs plead:
17.Prior to settlement the plaintiffs decided that contrary to what was stated in Schedule 2 they did wish to use the properties for making taxable supplies.
18.Accordingly, on 27 July 2016 Yang Lawyers, advised Park Legal that contrary to Schedule 2 the plaintiffs:
(a) were registered under the GST Act and/or would be so registered at settlement; and
(b) did intend at settlement to use the property for making taxable supplies.
19. …
20. Later on 27 July 2016 Yang Lawyers emailed Park Legal advising
the plaintiffs’ GST numbers.
[24] It is clear from the excerpt set out above that the plaintiffs have not pleaded that they informed the vendor that they did not intend to use the land as a principal place of residence for them or any person associated with them. In their affidavit evidence, the plaintiffs have addressed this point. Ms Xia, who was the legal executive acting on the plaintiffs’ behalf, says that she gave oral notice of all three required elements. However, an application for summary judgment must proceed on the statement of claim as pleaded. Since the plaintiffs have failed to plead that they gave sufficient notice regarding their GST status, the application for summary
judgment must fail.
6 High Court Rules 2016, r 12.2.
7 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.
8 At 4.
[25] There is a further obstacle which stands in the way of summary judgment, which is that the plaintiffs have failed to plead the elements of specific performance. In order to succeed in a claim for specific performance, a plaintiff must prove:
(a) That there is a contract for sale and purchase of land;
(b) That the contract complies with s 24 of the Property Law Act 2007; (c) That there has been a breach or threatened breach by the defendant;
(d)That when the proceedings were issued, the plaintiff was ready, willing and able to perform its obligations under the contract;
(e) That the plaintiff remains ready, willing and able to perform those obligations.
[26] The statement of claim that has been filed does not address the question of whether the plaintiffs are or have been at any time ready, willing and able to settle. Accordingly, the plaintiffs cannot succeed in an application for summary judgment seeking specific performance.
Application to sustain caveats
[27] In order to obtain an order under s 145A Land Transfer Act 1952, the plaintiffs must demonstrate that they have a reasonably arguable case.9 In determining whether the plaintiffs have satisfied that onus, the court may consider the evidence and the submissions that have been filed, in addition to the statement of claim.
[28] It is clear on the facts as pleaded that the plaintiffs have failed to comply with the clear, prescriptive requirements of the agreements regarding the notice that they were required to give of any change to their GST status. Further, it is clear that the
plaintiffs did not at any time before the settlement date (contractual or delayed) give adequate written notice of the four requirements set out at [19] above.
[29] However, as noted above, Ms Xia has provided affidavit evidence in which she claims that she provided oral notice of those requirements. Following that telephone conversation, Park Legal issued an amended settlement statement showing GST at 0%. In his submissions, counsel for the plaintiffs argued that this action represented a waiver of the defendant’s contractual and statutory right to receive written notice at least two days prior to settlement.
[30] At this stage of the proceeding, it is reasonably arguable that by the actions of its agent in issuing a zero-rated settlement statement, the defendant did waive its right to timely written notice of the relevant GST-related information. If that is the case, then the defendant was not entitled to insist upon settlement at 15% GST. Accordingly, its settlement notice would be invalid and the contract would remain on foot.
[31] It may be that the defendant was able to retract any such waiver prior to settlement. There is authority that a waiver given without consideration can be retracted at any time by giving reasonable notice, unless it would be inequitable to do so.10 The defendant did not address this point before me. In any case, however, it is at least reasonably arguable that any attempted retraction of a waiver in this case would be inequitable, for two reasons: first, because any such retraction would place
the plaintiffs at a considerable disadvantage, either by causing a delay in settlement with resulting penalty interest and/or by forcing the plaintiffs to pay an additional
15% in GST which they were not statutorily liable to pay; and secondly, because the result of the retraction would be to deliberately flout the clear legislative requirements in s 11(1)(mb) Goods and Services Tax Act, which requires transactions for the sale of land such as the present to be zero-rated.
Result
[32] The application for summary judgment is dismissed. The plaintiff’s claim is
to be allocated an initial case management conference at the earliest available date.
[33] The application to sustain caveats 10522966.1; 10523030.1; 10523003.1; and
10522942.1 is granted. The caveats are to stand pending further order. If the plaintiff does not pursue its claim expeditiously, leave is reserved to the defendants to seek removal of the caveats.
Costs
[34] My initial impression on the issue of costs is that they should stand reserved in accordance with the Court of Appeal’s decision in NZI v Philpott.11 If costs are sought, then a memorandum as to costs should be filed and served by Friday
20 January 2017.
Associate Judge Sargisson
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