Wrongly claiming GST had to be paid on a $2.43 million property deal is costing Auckland property company Y&P NZ Ltd $980 a day in interest for late settlement with one million dollars now lopped off the purchase price as it unsuccessfully argued its case in court.
In 2016, Yang Wang agreed to buy four blocks of bare land in the west Auckland suburb of Henderson. The price was described as $2.43 million ‘plus GST (if any).’ Y&P was registered for GST. It expected Mr Wang to be paying GST on the purchase price. Evidence was given that on day before settlement Mr Wang advised he was now registered for GST, making the transaction zero-rated. Y&P could be left paying GST on the deal out of its own pocket.
Y&P refused to settle the deal unless the extra fifteen per cent GST was also handed over. It said the standard-form agreement for sale and purchase required at least two days notice prior to settlement of any change in GST status. Both the High Court and the Court of Appeal ruled Y&P was in breach of contract by failing to settle on payment of $2.43 million without addition of GST. Goods and Services Tax legislation is specific; GST status is assessed as at the date of settlement. A requirement in their agreement that two days notice be given was for administrative convenience only; an agreement for sale and purchase cannot override rules in a statute. Specific performance was ordered, requiring Y&P hand over title.
The agreement for sale and purchase stated both vendor and purchaser were potentially liable to pay interest at 14 per cent for any late settlement. Since Y&P had no legal grounds to refuse settlement, it was in breach of contract. The dispute has been running since 2016. Mr Wang is now owed over one million dollars for late settlement, to be set off against the purchase price.
Y&P NZ Ltd v. Wang – Court of Appeal (18.12.19)
20.018