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Lucy Scott
Senior Assc

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Lucy Scott

What does “plus GST, if any” really mean?

Real Estate agents and purchasers alike will be interested in a recent case, which found that a vendor’s agent may be liable in negligence to the purchaser for using the words “plus GST, if any” in a sale and purchase agreement. You can read the case here.


The facts are as follows:

  • Ms Johnston and Mr Johnston (as trustees of a family trust) purchased two properties on Franklin Road for $1,430,000 plus GST (if any) and $1,200,000 plus GST (if any) respectively.
  • An agent of Colliers International New Zealand Limited (Colliers) acted for the vendor in respect of the sale.
  • The Sale and Purchase Agreements were prepared by the vendor’s agent, and stated that the purchase price was “plus GST, if any”.
  • The purchasers did not obtain legal advice before signing the agreements, and only discovered they would be liable to pay GST at the time of settlement.
  • The purchasers were obliged to account to the vendor for GST on the purchase price in the sum of $394,500.

Complaints Assessment Committee

The purchasers lodged a complaint with the Complaints Assessment Committee (CAC). The CAC made a finding of unsatisfactory conduct, holding that the agent fell short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee; contravened provisions/rules of the Real Estate Agents Act 2008; and that the agent was incompetent or negligent.

High Court claim

The purchasers also filed a claim against Colliers in the High Court to recover the GST, which is the subject of this decision. The purchasers claim that Colliers is vicariously liable on the basis that:

  • The agent owed the purchasers a duty of care and breached that duty by failing (amongst other things) to give the purchasers correct GST advice or advise them to seek legal, technical or other advice before finalising any offer.
  •  The agent’s conduct was misleading or deceptive, in breach of section 9 of the Fair Trading Act on the basis that he failed to complete schedule 2 of the agreement and advised the purchasers that the price of the properties would be “plus GST, if any”.

The core claim in negligence is that the words “if any” amounted to advice as to the GST liability. The purchasers say that the agent was aware that GST was payable, and therefore he was negligent in failing to delete the “if any” proviso when preparing the agreements for sale and purchase. Further, the agent did not complete schedule 2 to the agreements (with respect to GST), and did not ensure that the purchasers initialled deletions/cross outs in the agreements.

Application for strike out / summary judgment

Colliers applied to strike out the negligence claim on the basis that the purchasers do not have a reasonably arguable cause of action, and for summary judgment on the basis that the remaining cause of action under the Fair Trading Act 1986 could not succeed.

Applications for strike out/summary judgment are assessed on the basis of affidavit evidence, without any opportunity to cross examine the witnesses. Accordingly, in order to strike out a claim, the cause of action must be “clearly untenable”, and the power to strike out will only be exercised in “clear cases”.[1]

Despite noting “on the face of it, it is extraordinary that the plaintiffs did not obtain legal advice before signing the agreements for sale and purchase”,[2] the Associate Judge found that the purchasers established a reasonably arguable case that the defendant owed them a duty of care. Associate Judge Andrews noted that while the claim was pleaded in negligence, it was more correctly framed as a claim for negligent misstatement. Accordingly, the judgment contains detailed discussion on the elements of negligent misstatement (a developing area of law), and whether it was reasonably arguable that the elements were met in this case.

Colliers argued that the agent was acting for the vendor and therefore could not be liable to the purchasers as they owed no contractual or fiduciary duty to the purchasers. This argument was dismissed given the proximate and direct relationship between the agent and the purchasers. It was also alleged the agent knew the purchasers did not have independent legal advice, and therefore it was foreseeable that the purchasers would rely on the agent’s statement.

The Court applied the cautionary approach adopted by the Supreme Court in Couch v Attorney General, which found that if a duty of care cannot confidently be excluded, the claim must be allowed to proceed, and further that particular care not to strike out is required in areas where the law is confused or developing.[3] This true in respect of claims for negligent misstatement.

The Court was also persuaded by an English case,[4] which found that an agent of the vendor may owe a duty of care to a purchaser in some circumstances.

Having found the claim in negligence was reasonably arguable, the Court was not required to rule on the Fair Trading Act claim.

Anthony Harper comments

While this decision will be of some concern to real estate agents, it is worth noting that the purchasers have only established a reasonably arguable cause of action in negligence. There are a number of legal and factual issues that may ultimately defeat their claim if it reaches full trial. In particular, it may be critical to determine whether the agent in fact knew that the purchasers would be liable to pay GST, and the claim will need to be amended to plead that fact.

Questions of causation and contributory negligence are also likely to arise given that the purchasers did not obtain legal advice before signing the sale and purchase agreement, despite the fact that the information sent to the purchasers, including the agreements for sale and purchase clearly spelt out the need for the purchasers to obtain legal advice and specifically with respect to GST.[5]

In the meantime, this case is definitely a warning for agents to take due care when making any representations regarding GST liability. It will come as a surprise to many that the words “plus GST, if any” could be negligent or misleading, particularly when the Court acknowledged that these clauses are common, and even recommended, in property transactions.[6] Moreover, we note that “plus GST, if any” is a standard clause in the Agreement for Sale and Purchase approved by the Real Estate Institute of New Zealand Incorporated and the Auckland District Law Society Incorporated.

We recommend that agents advise all prospective purchasers clearly and in writing to obtain specialist advice on the tax implications of any purchase, and state in writing that they do not make any representations as to liability for GST. It is also a timely reminder to ensure that sale and purchase agreements are prepared with care (with reference to legal advice as necessary), and to exercise best practice by having any additions or deletions countersigned by the prospective purchasers.

We will follow developments in this case with interest, whether it be an appeal to the strike out decision or a full hearing of the claim in the High Court. In our view, we do not agree that the words “plus GST, if any” can be construed as a representation or advice to the purchasers regarding GST liability. This is particularly the case where the usual practice in agreements for sale and purchase is to allow the purchaser to nominate, and a “plus GST, if any” clause protects the vendor in the event that the ultimate purchaser (and therefore their GST position) changes.

From the purchaser’s perspective, we agree it is remarkable that they did not seek legal advice on a significant property transaction, particularly when acting as trustees of a family trust. Accordingly, this case also serves as a reminder to seek specialist legal and tax advice before entering into a property transaction, especially when doing so on behalf of a trust.

The judgment does not provide any information on what the purchaser intended to do with the properties, except to say that it was a “residential property transaction”[7]. Although the properties are in a Business – Mixed Use Zone, we can only assume the purchaser was acquiring the properties for a GST exempt activity, such as residential rental accommodation or occupation by beneficiaries of the trust. Otherwise, the purchaser would have registered for GST prior to settlement in order to mitigate their loss.

[1] Taken from the Court of Appeal’s summary of general principles applicable to the Court’s power to strike out all or part of a pleading in Attorney-General v Prince [1998] 1 NZLR 262 (CA), endorsed by the Supreme Court in Couch v Attorney General [2008] NZSC 45; [2008] 3 NZLR 725 at [33].

[2] High Court judgment, at [42].

[3] Couch v Attorney General [2008] NZSC 45; [2008] 3 NZLR 725 at [33].

[4] McCullugh v Lane Fox & Partners Ltd [1996] 1 EGLR 35 (CA).

[5] High Court judgment, at [40] and [62].

[6] See Roger Thompson and Maurits van den Berg A Practical Guide to Taxing Property Transactions (6th ed, CCH Ltd, New Zealand, 2016) at 407-408 and 413, cited in the judgment at [34(b)].

[7] High Court judgment at [6].

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