The Supreme Court of Victoria has held that, under the terms of a contract for the purchase of land, the purchaser was not liable to pay an additional amount for the vendor’s obligation to pay GST.
The matter involved the purchase of land with a contract price of $2.9 million. The plaintiff sought a declaration that the total price payable by the purchaser under the contract of sale was “plus GST” (a total of $3,190,000).
In this case the parties entered into the standard form LIV contract of sale, which provides for a “tick the box” process with regards to GST.
- The particulars of sale state that “The price includes GST (if any) unless the words “plus GST” appear in this box”.
- Clause 13.1 of the General Conditions provides that “The purchaser does not have to pay the vendor any GST payable by the vendor in respect of a taxable supply made under this contract in addition to the price unless the particulars of sale specify that the price is ‘plus GST’.”
The problem was that the only the word “GST” appeared in the box in the particulars (and not the words: “plus GST” as directed in the particulars and required by the General Conditions, if an amount for GST is to be added to the price).
The defendant purchasers submitted that the language of clause 13.1 and 13.2 in the Particulars of Sale was clear and meant that, even if GST was payable on the sale, the purchaser was not required to pay it, unless the Particulars of Sale specified the price was “plus GST”. The Court agreed.
- The Court said the “plain meaning of the contract is that the obligation to pay the GST lay with the vendor” unless the mechanism the contract was engaged (by the correct words in the box and the particulars of sale and clauses 13.1 and 13.2).
- In the Court’s opinion, the contract provided a clear mechanism for the parties to give effect to an agreement that the purchaser must pay GST on the purchase price, but it was not employed in this instance. The inclusion of the letters “GST” in the box in the particulars were not enough to shift the burden of GST.
- The Court said there was no ambiguity in the contract and neither was there any mistake or other warrant for inserting words into this contract, which were not there.
- The Court also observed that the plaintiff did not seek an order for rectification of the contract – and in any event, the evidence suggested that the parties did not have a common intention about their agreement concerning the liability to pay GST.
(A & A Property Developers Pty Ltd v MCCA Asset Management Ltd & Anor [2016] VSC 653, Supreme Court of Victoria, Ginnane J, 2 November 2016.)
[LTN 217, 9/3/16] [Sievers’ article] [FJM]
Extract from Chris Sievers’ blog: ‘All about GST in Australia’
This decision can be compared with the recent decision of the New South Wales Supreme Court in SSE Corp Pty Ltd v Toongabbie Investments Pty Ltd as Trustee for the Toongabbie Investments Unit Trust [2016] NSWSC 1235 where the plaintiff unsuccessfully applied for rectification of two contracts of sale by inserting the words “plus GST” after the purchase price. The plaintiff contended that by mistake the words “plus GST” had not been added to the statement of the price in each of the contracts before the contracts were exchanged
The Court undertook a detailed review of the evidence and concluded that the parties did not make a common mistake in the recording of the agreement, and that the purchaser entered into the contracts with a definite and clear understanding that the prices were to be inclusive of GST, whatever the subjective understanding of the vendor may have been. The principals of the purchaser were not aware, when the contracts were exchanged, that the contracts did not reflect the vendor’s understanding of the prices to be paid – so this was not a case where the vendor entered into the contracts under a unilateral mistake that was known to the purchaser.