CS Development No. 2 Ltd v AJ Cockburn and Je Cockburn and Ki Jefferies Sued as Trustees of the Aldwyn and Janet Cockburn Family Trust
| Jurisdiction | New Zealand |
| Judge | Judge D.I. Gendall |
| Judgment Date | 10 May 2011 |
| Neutral Citation | [2011] NZHC 464 |
| Docket Number | CIV-2009-485-587 |
| Court | High Court |
| Date | 10 May 2011 |
[2011] NZHC 464
CIV-2009-485-587
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
Claim for equitable relief in the form of summary judgment for costs and interest under s87 Judicature Act 1908 (“JA”) (interest on debts and damages) — plaintiff successful in earlier summary judgment that defendant was liable for failing to provide a GST invoice so that the respondent could claim a tax credit — Court of Appeal upheld High Court on GST issue but remitted issue of interest back to High Court — whether plaintiff entitled to interest where the contract did not provide for it — whether the loss arose from the breach of contract — whether plaintff's loss would have been reasonably contemplated by the parties.
H. Rennie QC — Counsel for Plaintiff
R.P. Harley — Counsel for Defendant
JUDGMENT OF ASSOCIATE Judge D.I. Gendall
This judgment relates to a claim by the plaintiff for interest and costs in respect of earlier liability decisions given in these proceedings. The proceedings have a relatively protracted history. The plaintiff's original claim which involved also an application for summary judgment concerned whether Goods and Services Tax (GST) on a sale of commercial land, buildings and chattels at Oriental Bay, Wellington from the defendant trust as vendors to the plaintiff as purchaser was appropriately rated by the defendant at zero per cent as a going concern. By a judgment issued on 24 July 2009, I found that it was not. I accordingly made an order by way of summary judgment for the delivery by the defendant to the plaintiff of an appropriate GST invoice specifying GST on the transaction as $555,555.56 and the purchase price net of GST as $4,444,444.44. I also ordered that the plaintiff was entitled to costs on a 2B basis, together with disbursements.
In that 24 July 2009 decision, I also found that the plaintiff was entitled to interest on the GST amount. However, I reserved leave for counsel to approach this Court on issues as to the rate and quantum of the interest to be awarded. In doing so, I noted at [59]:
However, the fact remains that until the defendants issue a proper and accurate GST tax invoice, the plaintiff is unable to lodge a correct GST return, and so the plaintiff has been deprived of the use of any GST tax refund to which it is entitled by the defendants' failure to issue a correct invoice.
The defendant appealed to the Court of Appeal against both my substantive decision and my decision with regard to the defendant's liability for interest. By judgment released on 16 August 2010, the majority of the Court upheld my substantive decision, but allowed the defendant's appeal with regard to its liability for interest: Aldwyn John Cockburn, Janet Elizabeth Cockburn and Keith Ian Jefferies v CS Development No 2 Limited [2010] NZCA 373. The majority concluded at [99]:
We are unable to discern the basis on which interest was awarded in this case. The interest provision in the agreement for sale and purchase appears not to apply to the present situation. The matter has to be remitted to the High Court for quantification of interest anyway. In those circumstances, we consider appropriate appellate response is to allow the appeal on this ground and remit the matter to the High Court for determination as to whether interest is payable, and, if so, from what date and at what rate.
The defendant then applied for leave to appeal to the Supreme Court from that decision of the Court of Appeal. Leave was refused by judgment dated 16 November 2010: Aldwyn John Cockburn and Ors v CS Development No 2 Limited [2010] NZSC 139.
The factual background to this matter is fully traversed in both my 24 July 2009 and the Court of Appeal's 16 August 2010 decision. However, it is useful to provide a brief summary here.
On 26 May 2007 the defendant agreed in writing to sell its property at 148 Oriental Parade, Wellington (the Property) to Hodge Properties Limited or its nominee (the Agreement). The Property had been subject to a lease from the defendant as lessor now to Torta Holdings Limited (Torta) as lessee. Torta operated a business at the Property, the Parade Café. Torta previously had been the recipient of an assignment of the lease from the original tenants, the AJ & JE Cockburn Partnership.
On 22 June 2007, Hodge Properties Limited nominated Hodge Trustees Services Limited and/or its nominee as purchaser under the Agreement. On 2 July 2007, Hodge Trustees Services Limited agreed with the defendant to vary the Agreement by way of a written Variation Agreement (the Variation Agreement). By that point, due diligence had been completed by Hodge Trustees Services Limited, the Agreement had become unconditional and a deposit had been paid. Under the Goods and Services Tax Act 1985 (the GST Act), 2 July 2007 became the date of supply. The interest rate for late settlement under the Agreement was set at 12 per cent.
The Variation Agreement provided for vacant possession, it reduced the purchase price for the Property from $5,500,000.00 to $5,000,000.00 and provided for the sale to the plaintiff under the Agreement of additional chattels including all chattels associated with the Parade Café business. A second later variation was entered into on 4 July 2007 but this is not material for the present purposes.
On 5 July 2007, Hodge Trustees Services Limited nominated the plaintiff to be the purchaser under the now varied Agreement. On 11 February 2008 the plaintiff entered into an Agreement to Lease the Parade Café with Torta. The lease was to commence on 2 April 2008.
On 19 March 2008, the defendant forwarded a settlement statement to the plaintiff. An amended settlement statement was forwarded on the same day. The amended settlement statement identified GST of $625,000.00 as payable by the plaintiff in addition to the purchase price. However, these settlement statements were incorrect, as the Agreement provided that the purchase price was to be “Inclusive of GST” and not “Plus GST”.
The plaintiff notified the defendant's solicitors of this error. The defendants' solicitors replied suggesting that as there was a continuing tenancy, the sale was of a “going concern” and therefore was zero-rated for GST purposes pursuant to the GST Act. The plaintiff rejected this however and further negotiations ensued.
Settlement then took place on 2 April 2008, on a without prejudice basis to the GST issue. The defendant then issued a tax invoice with GST rated at zero per cent and on that basis, they filed their GST return.
As this matter before me still involves a summary judgment application, r 12.2(1) of the High Court Rules applies. That rule provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) 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.
The principles of summary judgment have been summarised relatively recently by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]:
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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
As noted above at [3] on 16 August 2010 the Court of Appeal remitted this matter back to this Court to determine:
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a) whether interest is payable; and
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b) if so, from what date; and
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c) at what rate.
Before me, the plaintiff contended that its claim was for equitable relief, in that it claimed specific performance of the terms of the Agreement or other relief. Therefore, it says the claim for interest is within the power of this Court under s 87(1) of the Judicature Act 1908, relying on Day v Mead: [1987] 2 NZLR 443 (CA) at 442. Whilst that may be so, and I address that aspect later in this judgment, a better approach in this case is to regard the plaintiff's claim as one for breach of contract. Addressing this, clause 12.2 of the Agreement provides:
If the supply under this agreement is a taxable supply the vendor will deliver a tax invoice to the purchaser on or before the GST date or such earlier date as the purchaser is entitled to delivery of an invoice under the Act.
Clearly, the defendant did not perform its obligation under this...
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