In December 2017 the Victorian Court of Appeal allowed the appeal brought by the vendor in A & A Property Developers Pty Ltd v MCCA Asset Management Ltd as trustee for the MCCA Property Fund [2017] VSCA 365. The Court found that the insertion of the words “GST”, rather than “plus GST”, in the Particulars of Sale, to the standard form contract of sale, meant that the parties had agreed that the price was exclusive of GST and the cost of any GST, that fell on the Vendor, was to be passed on to the Purchaser.
At first instance, Ginnane J reached the opposite conclusion [2016] VSC 653. In his Honour’s view, merely inserting the word ‘GST’ (in the box) was capable of a number of meanings and it did not conform to the clear mechanism, in the Law Institute of Victoria contract, to move the normal liability of the vendor, for any GST, to the purchaser. Inserting the whole of the phrase: ‘Plus GST’, however, did not have suffered either of those disabilities.
The Court of Appeal, however, reached the opposite conclusion, as I’ve noted.
Tate JA state the issue as a narrow one:
…whether the inclusion of the letters ‘GST’ in the relevant box, rather than ‘plus GST’, is a sufficient indication that under the contract the risk of liability for GST lay with the purchaser. In other words, does the absence of the preceding single word ‘plus’ in the relevant box preclude the conclusion that the parties agreed to reverse the default allocation of liability for GST by employing the mechanism in general condition 13.1?
Her Honour considered that there was sufficient indication in the contract that the parties agreed to reverse the default allocation of the liability for GST.
- Her Honour considered the absence of the word “plus” did not preclude that conclusion.
- Had the parties remained content with the default allocation of liability for GST, there was no need for any words to be added to the box – the box could simply have been left blank.
- That blank box would have sat alongside all the other blank boxes in the particulars of sale.
- A reasonable business person would have understood the letters “GST” in the relevant box to mean that the parties, objectively, intended to reverse the default allocation of liability for GST to the vendor and intended to do so by employing the mechanism in general condition 13.1.
Osborn and Kaye JJA came to a similar conclusion. Their Honours were persuaded that: the inclusion of the letters “GST” in the Particulars of Sale; the parties being selective as to which spaces, in those particulars, were filled in; and the commercial context to that notation in the contract, taken together, lead to the conclusion contended for by the vendor – that the risk of liability for GST was to lie with the purchaser.
26 January 2018
[Sievers: article; FJM; Tax Month January 2018]
Study Questions (answers below*)
- Was the standard form sale of land contract, the one produced by the Law Society of NSW?
- Was the mechanism, in the contract, to get the purchaser to pay an further amount, to move the vendor’s statutory liability to GST, to insert the phrase: ‘plus GST’ into the relevant box in the standard form contract?
- Did the Court at first instance find that the insertion of the term: ‘GST’ (without more) was effective to require the purchaser to pay more (to the vendor) to reimburse it for any GST liability?
- Did the Court of Appeal reach a different conclusion?
- Was it a consideration, that that the normal position (of the vendor being liable for any GST), could have been achieved by leaving that box blank, and that the inclusion of part of the phrase, stipulated by the contract, to move the liability to the purchaser, must mean something to a reasonable business man?
- Was the commercial context of the contract, however, irrelevant?
*[Answers:1.no(LIV);2.yes;3.no(StrictComplianceRequired);4.yes;5.yes;6.no(seeOsbornKayeJJ)]