Incorrectly denying she was registered for GST on sale of a commercial property in Auckland cost vendor Caroline Marr $121,600; the irrecoverable GST refund which was intended to provide working capital for new owners starting a business from the site.
In 2014, Ms Marr sold to the Mills a Royal Oak property consisting of a house, shop and workshop all with off-street parking. The price was $1.45 million; described as ‘GST inclusive, if any.’ In the contract, Ms Marr stated she was not registered for GST and would not be so registered at settlement. This was to the Mills’ advantage. They proposed running a small manufacturing business from the site. By becoming GST-registered, they could recover GST on the price paid. By contrast, sales of commercial property between GST-registered parties are zero-rated for GST.
In fact, Ms Marr was GST registered at settlement date. The Mills could not claim a GST refund. They abandoned plans to run a business from the Royal Oak property, saying this was not viable without the budgeted working capital expected from a GST refund. They sued.
At three hearings through the District Court, High Court and Court of Appeal all courts ruled Ms Marr was liable in damages for the unrecoverable $121,600 GST. To deny she was GST registered was a breach of contract. It was irrelevant that the Mills did not continue with their proposed business plans; that was thwarted by her breach of contract. It was also irrelevant that the Mills later subdivided the property, profitably selling off part.
Marr v. Mills – High Court (12.11.20) & Court of Appeal (4.10.21)
21.160