A & a Property Developers Pty Ltd v MCCA Asset Management Ltd
[2017] VSCA 365
•12 December 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0161
| A & A PROPERTY DEVELOPERS PTY LTD (ABN 153 624 910) | Applicant |
| v | |
| MCCA ASSET MANAGEMENT LTD (ABN 18 113 728 706) and SANDHURST TRUSTEES LTD (ABN 16 004 030 737) as Trustee for the MCCA PROPERTY FUND | Respondents |
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| JUDGES: | TATE, OSBORN and KAYE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 22 August 2017 |
| DATE OF JUDGMENT: | 12 December 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 365 |
| JUDGMENT APPEALED FROM: | [2016] VSC 653 (Ginnane J) |
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CONTRACT – Sale of land – Standard form contract of sale – Liability to pay GST –Insertion of the words ‘GST’ rather than ‘plus GST’ into the relevant box in the contract – Whether judge erred in finding that failure to use correct term meant mechanism for departure from the default position had not been triggered – Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, applied – Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715, Duoedge Pty Ltd v Leong [2013] VSC 36, discussed – Leave to appeal granted – Appeal allowed – Estate Agents (Contracts) Regulations 2008 sch 1, Forms 1 and 2.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C G Juebner | Obst Legal |
| For the Respondents | Mr M J Rivette | Blaak & Associates |
TATE JA:
Introduction and summary
This proceeding raises the question of whether a contract for the sale of real estate imposed liability upon the vendor or the purchaser to pay any Goods and Services Tax (‘GST’) arising from the transaction.
The judge below, after careful consideration, concluded that the vendor was liable to pay any GST.[1] For the reasons that follow, I have arrived at a different conclusion and consider that the obligation to pay any GST fell upon the purchaser. I would grant leave to appeal and allow the appeal.
[1]A & A Property Developers Pty Ltd v MCCA Asset Management Ltd [2016] VSC 653 [37] (‘Reasons’).
Contract of sale
On 15 June 2016 the applicant, A & A Property Developers Pty Ltd (‘the vendor’), entered into a contract of sale of real estate (‘the contract’) with the first respondent, MCCA Asset Management Ltd (‘the purchaser’), in relation to property at 42 Grant Crescent, Ringwood (‘the land’). After the contract was executed, the purchaser nominated the second respondent, Sandhurst Trustees Ltd (‘Sandhurst’), to receive the conveyance of the land.[2]
[2]MCCA Asset Management Ltd and Sandhurst were jointly represented. In what follows a reference to ‘the purchaser’ is intended to refer to both MCCA Asset Management Ltd and Sandhurst, unless the context reveals otherwise.
The vendor and purchaser used the standard form contract of sale of real estate published by the Law Institute of Victoria Ltd and the Real Estate Institute of Victoria Ltd.[3] This standard form incorporates the general conditions as prescribed under the Estate Agents (Contracts) Regulations 2008 (‘the Regulations’).
[3]Version February 2016.
The purchase price of the contract was $2.9 million. The amount of GST in question is $290,000.
The particulars of sale on the standard form contract of sale, as set out in Form 1 of sch 1 to the Regulations, state that ‘The price includes GST (if any) unless the words “plus GST” appear in this box’, with an adjacent box provided.
An important general condition under Form 2 of sch 1 to the Regulations is general condition 13.1 which provides that the purchaser does not have liability for GST unless the particulars of sale specify the price as ‘plus GST’:
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’.
General condition 13.2 reinforces this approach:
The purchaser must pay to the vendor any GST payable by the vendor in respect of a taxable supply made under this contract in addition to the price if the particulars of sale specify that the price is ‘plus GST’.
The default position of the standard form contract is therefore that the vendor has the liability to pay any GST. General condition 13.1 and the box provided in the particulars of sale provide a mechanism to depart from that default position, namely, by inserting the expression ‘plus GST’.
The contract executed between the parties included only the letters ‘GST’, rather than the words ‘plus GST’, in the relevant box provided in the particulars of sale. The particulars of sale in the contract executed by the parties appear as follows:
Goods sold with the land (general condition 2.3(f)) (list or attach schedule)
Including all fixed floor coverings, electric light fittings, window furnishing, fittings and fixtures as inspected.
Payment (general condition 11)
Price $2,900,000
Deposit $290,000 10% by (of which $5K has been paid)
Balance $2,610,000 payable at settlement
GST (general condition 13)
The price includes GST (if any) unless the words ‘plus GST’ appear in this box
If this sale is a sale of land on which a ‘farming business’ is carried on which the parties consider meets requirements of section 38-480 of the GST Act or of a ‘going concern’ then add the words ‘farming business’ or ‘going concern’ in this box
If the margin scheme will be used to calculate GST then add the words ‘margin scheme’ in this box
Settlement (general condition 10)
is due on
Lease (general condition 1.1)At settlement the purchaser is entitled to vacant possession of the property unless the words ‘subject to lease’ appear in this box in which case refer to general condition 1.1.
If ‘subject to lease’ the particulars of the lease are:
(*only complete the one that applies. Check tenancy agreement/lease before completing details)
Terms contract (general condition 23)
If this contract is intended to be a terms contract within the meaning of the Sale of Land Act 1962 then add the words ‘terms contract’ in this box and refer to general condition 23 and add any further provisions by way of special conditions.
Loan (general condition 14)
The following details apply if this contract is subject to a loan being approved.
Lender:
Loan amount: Approval date:
This contract does not include any special conditions unless the words ‘special conditions’ appear in this box
In addition to standard special conditions on electronic conveyancing, the special conditions agreed to by the parties were:
Special Condition 16
Initial deposit: $5,000 non-refundable for 30-day Due Diligence period commencing from date of contract.
Special Condition 17
Purchase deposit: upon satisfactory completion of the 30-day Due Diligence period, balance of 10% of the purchase price is payable ($285,000).
Special Condition 18
Settlement: 60 days or prior by mutual agreement.
Special Condition 19
The vendor will provide all the reports and plans available up to date to the purchaser, including council-endorsed town planning documents and all other consultant reports required for issue of building permit. The vendor will give consent to the purchaser to use the plans in relation to 42 Grant Crescent Ringwood before settlement. The vendor will pay any fee if owed by vendor to any consultant associated with the property.
The contract also included the general conditions prescribed under Form 2 of sch 1 to the Regulations. Relevantly, the whole of general condition 13 provided:
13. GST
13.1The 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’. However the purchaser must pay to the vendor any GST payable by the vendor:
(a)solely as a result of any action taken or intended to be taken by the purchaser after the day of sale, including a change of use; or
(b)if the particulars of sale specify that the supply made under this contract is of land on which a ‘farming business’ is carried on and the supply (or a part of it) does not satisfy the requirements of section 38-480 of the GST Act; or
(c)if the particulars of sale specify that the supply made under this contract is of a going concern and the supply (or a part of it) does not satisfy the requirements of section 38-325 of the GST Act.
13.2The purchaser must pay to the vendor any GST payable by the vendor in respect of a taxable supply made under this contract in addition to the price if the particulars of sale specify that the price is ‘plus GST’.
13.3If the purchaser is liable to pay GST, the purchaser is not required to make payment until provided with a tax invoice, unless the margin scheme applies.
13.4If the particulars of sale specify that the supply made under this contract is of land on which a ‘farming business’ is carried on:
(a)the vendor warrants that the property is of land on which a farming business has been carried on for the period of 5 years preceding the date of supply; and
(b)the purchaser warrants that the purchaser intends that a farming business will be carried on after settlement on the property.
13.5If the particulars of sale specify that the supply made under this contract is a ‘going concern’:
(a)the parties agree that this contract is for the supply of a going concern; and
(b)the purchaser warrants that the purchaser is, or prior to settlement will be, registered for GST; and
(c)the vendor warrants that the vendor will carry on the going concern until the date of supply.
13.6If the particulars of sale specify that the supply made under this contract is a ‘margin scheme’ supply, the parties agree that the margin scheme applies to this contract.
13.7This general condition will not merge on either settlement or registration.
13.8In this general condition:
(a)‘GST Act’ means A New Tax System (Goods and Services Tax) Act 1999 (Cth); and
(b)‘GST’ includes penalties and interest.
On 3 August 2016, a transfer of the land was prepared by the conveyancer for the purchaser specifying the consideration as $2.9 million. Sandhurst executed this transfer of land on the same date, as the nominee purchaser.
On 10 August 2016, solicitors for the vendor emailed the conveyancer for the purchaser asking her to supply an ABN/ACN so that a tax invoice could be prepared for settlement.
In the light of that communication, the conveyancer for the purchaser replaced the front page of the transfer with a page showing the consideration as $3.19 million including GST. She posted the updated transfer to the vendor’s solicitors without any instructions from her client.
On 11 August 2016, the purchaser’s conveyancer spoke to a representative of her client, MCCA Asset Management Ltd, namely, Shiraz Ali Patel, who informed her that there was no GST payable by the purchaser in addition to the purchase price.
The purchaser’s conveyancer then emailed the vendor’s solicitors to inform them of her instructions:
We are instructed that our client’s purchase is an existing dwelling and the question of GST was never raised and we also note that the particulars of sale [do] not include the words ‘PLUS GST’.
Accordingly our client has not budgeted for GST and in addition proposes to later develop the property and sell on the margin scheme.
On 12 August 2016, the vendor’s solicitor wrote to the purchaser’s conveyancer and the purchaser’s solicitor and informed them that the land was not fit for habitation and therefore did not fit the definition of residential premises within s 195–1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). Further, the vendor’s solicitor stated that as the vendor was charged the full rate of GST when it purchased the property, the ‘margin scheme’ could not be used[4] and that since the relevant box included the letters ‘GST’, the purchaser should have concluded that GST applied to the sale.
[4]See A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 75–5(3).
The purchaser’s solicitor replied on 15 August 2016 disputing that GST should be added to the purchase price and stating that at no time had the purchaser been informed that the purchase price was ‘exclusive of GST’. The purchaser’s solicitor referred to various rights of action that the purchaser might have against the vendor.
On 2 September 2016, the vendor commenced a proceeding in the Trial Division of this Court against the purchaser, pursuant to s 49(1) of the Property Law Act 1958[5] seeking a declaration that the total price payable by the purchaser under the contract was ‘plus GST [that is, $3.19 million] and not inclusive of GST [that is, $2.9 million]’.[6]
[5]Section 49(1) of the Property Law Act provides: ‘A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid’.
[6]Sandhurst paid $290,000 into its solicitor’s trust account to allow settlement to proceed and pending determination of the GST issue below. After the proceeding brought by the vendor was dismissed, the $290,000 was returned to Sandhurst.
The judge’s reasons
Before the trial judge, the vendor submitted that the contract should be interpreted in the light of its being a commercial transaction and thus carrying potential liability for GST. The vendor submitted that the insertion of the letters ‘GST’ in the box provided in the particulars of sale indicated that the contract price was ‘plus GST’. It submitted that this was the only way the letters ‘GST’ in the box could be given any meaning.
The vendor submitted that if the Court found that the inclusion of the letters ‘GST’ was ambiguous, the surrounding circumstances supported the interpretation that the purchase price was exclusive of GST; that is, that the purchaser was required to pay the GST in addition to the agreed purchase price. Those surrounding circumstances included, as the judge recorded,
that GST had already been paid when the property was previously purchased, that the box for GST in the particulars of sale had the letters ‘GST’ written in it, that the vendor’s registration for GST was public knowledge, that no query about GST was raised until after an adjustment statement was sent out and that the transaction was one that commonly ’calls into account GST’.[7]
[7]Reasons [20].
The purchaser submitted that the language in the particulars of sale was clear and that GST could only be payable in addition to the purchase price if there had been strict compliance with the mechanism provided under the contract. If, however, the court found an ambiguity, it submitted that the surrounding circumstances did not establish a shared intention between the parties that the purchaser would pay GST in addition to the purchase price.[8] The purchaser relied on an affidavit of Mr Najjar, the general manager of MCCA Asset Management Ltd, who stated that its feasibility study for the acquisition of the land did not ‘show’ GST as part of the acquisition costs. He also stated that he signed the contract on 15 June 2016 on behalf of the purchaser and initialled page 3 which listed the total price payable at settlement as $2.61 million (a 10 per cent deposit having already been paid). He further stated:
In the GST particulars the words ‘plus GST’ did not appear in the box provided, so my understanding was that no additional GST was payable. The selling agent Peter Bozinovski and Shiraz, were present at the time of signing. No mention of ‘GST’ being payable was made by the Plaintiff’s [the vendor’s] agent and there was no mention of GST at all.[9]
[8]The purchaser also submitted that the Court did not have jurisdiction to make the declaration sought by the vendor because it did not have the ability to bind the Commissioner of Taxation. The judge immediately rejected that argument stating that any declaration was a matter of contractual interpretation rather than a determination of a tax liability: Reasons [21].
[9]Reasons [16].
The judge noted that there was no evidence before the Court that established whether GST would be payable on the sale of the land. He held that the presence of the letters ‘GST’ in the box provided in the particulars of sale was ‘capable of a number of interpretations’.[10] These interpretations included that GST should be added to the purchase price, another was that some thought had been given as to who should be liable to pay GST but a decision had not been reached, and a third was that the letters ‘GST’ had been entered erroneously and were intended to be deleted but that deletion was overlooked.[11]
[10]Ibid [25].
[11]Ibid.
The judge went on to consider the reasoning of John Dixon J in Duoedge Pty Ltd v Leong,[12] which also concerned the payment of GST and the standard form contract of sale for real estate, including, relevantly, general conditions 13.1 and 13.2. In Duoedge, the vendor had hand-written the purchase price as ‘$916,000 GST inclusive’ and placed a hand-written strike through the centre of the box that provided for ‘plus GST’. The vendor sent a tax invoice for the sale of the property which specified that the purchase price was $832,727.27, plus GST of $83,272.73. When it was later found that GST was not payable on the supply, the purchaser sought a refund of the GST paid. Dixon J held that the purchaser was not entitled to a refund.[13] He construed the contract of sale between the parties, including the hand-written annotation and the strike-through of the relevant box, as manifesting an agreement that the risk of liability for GST lay with the vendor. He emphasised the specific manner in which the parties had completed the particulars of sale and considered that the mechanism under general condition 13.1 had not been utilised to reverse the default allocation of risk as lying with the vendor.
[12][2013] VSC 36 (‘Duoedge’).
[13]He also held that a magistrate had erred in concluding that the contract contained an implied term entitling the purchaser to a refund and in ordering rectification of the contract.
Dixon J made a number of observations relied upon by the judge here:
The plain meaning of this contract is that the GST risk lay with the vendor. That this was the contractual intention appears from at least two places. It is clear from the particulars of sale that the agreed contract price was GST inclusive, although adding those words after the price is not the correct way to complete the standard form of contract. The absence of the words ‘plus GST’ in the box confirms the handwritten addition of the words ‘GST inclusive’. The parties have expressed the intention that the purchaser has no obligation to make a further payment in respect of any GST assessment that might later follow. In other words, the parties plainly intended that the risk that GST might need to be remitted to the Tax Office lay with the vendor. If the transaction did not involve a taxable supply, that risk was abated to the benefit of the vendor, who retains the full price that it contracted to receive for the property. Objectively assessed, this is what the terms relating to GST show to be the intention of the contracting parties. The construction is neither uncertain, nor ambiguous. To reverse the allocation of that risk to the purchaser, the words ‘plus GST’ are added to the box.
General condition 13 deals at length with the mechanics of the allocation of risk that the transaction might involve a taxable supply creating an obligation to pay GST. There is nothing in general condition 13 that is inconsistent with the presumed intention identifiable from the completion of the particulars of sale, as I have described. Where the price includes GST, the purchaser pays the price and no more and if the transaction involves a taxable supply, the vendor must remit the GST to the Tax Office. Where the price is plus GST, the purchaser must, when provided with a tax invoice, pay an additional amount for GST.[14]
[14]Duoedge [2013] VSC 36 [23]-[24] (emphasis added) quoted in Reasons [24].
The judge held that ‘the reasoning in Duoedge ... is applicable even though the details of the particulars of sale in the two contracts differ’.[15] The judge arrived at this conclusion acknowledging that the two indicia in the contract relied upon by Dixon J as revealing that liability for GST lay with the vendor, namely, the hand-written words ‘inclusive of GST’ and the strike-through of the box where the words ‘plus GST’ could go, were not present in the contract here.
[15]Reasons [27].
The judge held that the purchaser’s construction of the contract was correct.[16] He accepted that in construing a contract, the ‘intention of the parties is to be determined objectively from the contract in admissible intrinsic evidence’.[17] He went on to say that:
In Fitzgerald v Masters Dixon CJ and Fullagar J stated:
Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.
I do not consider that this case attracts the principle discussed in Fitzgerald v Masters. There is no absurd result or inconsistency in the construction of the contract that I have adopted.[18]
[16]Ibid [25].
[17]Ibid [29].
[18]Ibid [29]-[30] (citations omitted).
The judge noted that the vendor did not seek rectification of the contract and that, in any event, the evidence did not suggest that the parties had an actual common intention with respect to the liability to pay GST.[19]
[19]See Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 346 (‘Codelfa’), Duoedge [2013] VSC 36 [19].
He also noted that the rule of construction in relation to blank spaces in an agreement was not applicable:
A further rule of construction is that when a clause in a contract contains a blank space, which was intended to be filled in, that part of the contract will usually be held void for uncertainty, unless the parties ’unexpressed intention can be discerned from the context and background or one party was authorised to fill in the blanks’. In some cases a blank in a document may be dealt with simply by ignoring it, and reading the contract as if it was not there.
I do not consider that this case falls within those principles.[20]
[20]Reasons [32]-[33] (citations omitted).
He held that the contract provided a clear mechanism in general condition 13.1 to displace the default position that the vendor carry the liability to pay GST but that it was not used and thus the burden was not shifted:
In my 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 did not shift the burden of the payment of GST to the purchaser.[21]
[21]Ibid [34].
He concluded, at least implicitly, that the letters ‘GST’ must have been retained in the box in error and that there was no ambiguity justifying reference to surrounding circumstances:
The words of commercial contracts are to be interpreted in accordance with their commercial purpose. While words should ordinarily be given some role to play in the operation of the contract, sometimes words are included or are left in the contract in error.
There was no ambiguity in this contract justifying reference to surrounding circumstances.[22]
[22]Ibid [35]–[36].
The judge made a declaration that the purchaser was not liable to pay GST in addition to the purchase price:
Pursuant to s 49(1) of the Property Law Act 1958, the purchaser under the contract of sale, the subject of this proceeding, of the property at 42 Grant Crescent, Ringwood, was not liable to pay GST in addition to the purchase price of $2,900,000.[23]
[23]He ordered that the $290,000 held in trust to cover that liability be released.
Grounds of appeal
The vendor now applies for leave to appeal. It relies on two grounds of appeal. In summary, the first ground is that the judge erred in failing to give the letters ‘GST’ appearing in the relevant box in the particulars of sale a meaning which a reasonable businessperson would have understood such letters to have in the context of the contract, namely, that the default position was reversed and the purchaser assumed any liability for GST. The second ground is that the judge erred in finding that the inclusion of ‘GST’ in the box was capable of a number of interpretations of equal probability and should have found that the most likely interpretation was that the purchaser assumed liability for any GST. Those grounds appear in the application for leave to appeal in the following terms:
Ground 1
1.The learned trial judge erred in failing to give the letters ‘GST’ in the GST box in the particulars of sale of the Contract a meaning which reasonable businesspersons would have understood such letters to have by reference to the text of the Contract, the context in which it was made and its purpose (all of which were matters to which the trial judge was required to have regard without the need to first find ambiguity: Eureka [Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95] [45] and [47]), in that:
1.1the particulars of sale were part of a standard form contract of sale of land published by the Law Institute of Victoria Limited and the Real Estate Institute of Victoria Limited (Version February 2006[[24]]);
[24]The date on the document is February 2016.
1.2the standard form contract contained a ‘blank’ GST box, by reason of which the default position was to the effect that the purchaser was not obliged to pay any GST in addition to the price (clauses 13.1 and 13.2 of the Contract) (hereafter default position);
1.3the fact that the letters ‘GST’ appeared in the GST box (which necessarily meant that a modification had been made to the standard form contract) was objectively indicative of an intention to depart from the ‘default position’;
1.4the only reasonably conceivable departure from the default position was to make the purchaser liable to pay GST in addition to the price if the transaction triggered a GST liability to the COT [Commissioner of Taxation];
...
1.6the Contract was one for the sale of land which contained special conditions in relation to due diligence (SC 16 and 17) and the provision of development reports in connection with the land (SC 19);
1.7the Contract was accompanied by a vendor statement (which was part of the context required to be considered by the trial judge) from which it was apparent that:
1.7.1council had approved a planning permit for a 10 unit development;
1.7.2such development required the demolition of the existing dwelling.
(collectively the Textual and Contextual Indicators).
2.The trial judge should have found that the letters ‘GST’ in the GST box, by reference to the Textual and Contextual Indicators, would have caused reasonable businesspersons to conclude that the parties intended that the default position be reversed so as to require the purchasers to pay GST in addition to the price if the sale transaction triggered a GST liability to the COT.
Ground 2
3.The learned trial judge erred in finding, implicitly (at [25]), that the presence of the letters ‘GST’ in the GST box were capable of a number of interpretations of equal probability.
4.The learned trial judge should have found that the most likely interpretation (based on the three postulated scenarios [the judge identified] and having regard to the Textual and Contextual Indicators) was that the letters ‘GST’ in the GST box had been inserted to require the purchasers to pay GST in addition to the price if the sale transaction triggered a GST liability to the COT.[25]
[25]The vendor abandoned reliance upon a particular to Ground 1 (1.5). It also abandoned a third ground of appeal.
Ground 1: Construction of the letters ‘GST’ and the reasonable businessperson
The vendor submits that the judge erroneously concluded that the omission of the word ‘plus’ in the relevant box in the particulars of sale was fatal to its claim that the purchaser was required to pay GST in addition to the purchase price.
The vendor’s argument is that since the default position of the standard form contract of sale is only altered by inserting words in the boxes provided, the decision to insert the letters ‘GST’ into the relevant box indicated an intention to depart from the default position. It submits that if the default position was intended to be adopted there would be no need to make any notation in the box provided.
The vendor further submits that the judge ought to have taken into account the ‘context’ in construing the contract. In Eureka Operations Pty Ltd v Viva Energy Australia Ltd[26] this court applied the approach endorsed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[27] and stated that that ‘approach to contractual interpretation requires reference to the “text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose”’.[28] Ambiguity is not a threshold that must be met before completing such an inquiry.[29]
[26][2016] VSCA 95 (‘Eureka’).
[27](2015) 256 CLR 104, 116 [46] (‘Mount Bruce’).
[28]Eureka [2016] VSCA 95 [45] (citations omitted) quoting Mount Bruce (2015) 256 CLR 104, 116 [46].
[29]Eureka [2016] VSCA 95 [47].
The context relied upon here includes the ‘Textual and Contextual Indicators’ the vendor identified in ground 1 of the grounds of appeal that reveal the contract as having a commercial character. This includes special conditions 16 and 17 which relate to a $5,000 initial deposit for the purpose of conducting a 30-day due diligence and special condition 19 which requires the provision of council-endorsed town planning documents and other consultant reports required for the issue of a building permit.[30] Furthermore, the vendor statement accompanying the contract attached a planning permit in relation to a 10-unit development on the land and approval for the demolition of the existing dwelling on the land. The vendor submits that, given this context, a reasonable businessperson would have understood the contract as manifesting an intention to impose an obligation on the purchaser to pay GST, in addition to the purchase price, in the event that the transaction resulted in a GST liability.
[30]See [11] above.
In response, the purchaser submits that the approach taken by the judge was unimpeachable. It accepts that the approach endorsed in Mount Bruce requires consideration of the language used in the contract, the circumstances known to the parties addressed by the contract, and the commercial purpose or objects of the contract.[31] These are not matters external to the contract and ordinarily call for an interpretation by reference to the contract alone.[32] The purchaser does not resist the proposition that evidence of external surrounding circumstances cannot be used to interpret the contract unless the language employed in the contract is ambiguous or susceptible of more than one meaning.[33] Rather, the purchaser submits that the judge correctly identified the applicable principles of interpretation and that no error is disclosed by his reasoning.
[31]Mount Bruce (2015) 256 CLR 104, 116 [46]–[47], see also Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656–7 [35] (‘Woodside’).
[32]Mount Bruce (2015) 256 CLR 104, 116 [48].
[33]Codelfa (1982) 149 CLR 337, 352, Mount Bruce (2015) 256 CLR 104, 116 [48], Apple & Pear Australia Ltd v Pink Lady America LLC (2016) 343 ALR 112, 115 [137] (Victorian Court of Appeal).
The purchaser relies on the close attention given by the judge to the language used in the contract, especially the attention given to general condition 13 and the judge’s observation that the ‘purchase price could only be increased by the addition of GST, if the mechanism provided for in clauses 13.1 and 13.2 was adopted’.[34]
[34]Reasons [22]; see also [26].
The purchaser also submits that the judge properly took into account the contract as a whole, including the fact that the standard form contract of sale had been used; that the default position in that contract of sale was that the risk of liability for GST lay with the vendor; and that general condition 13.1 provided for the default position to be shifted if ‘plus GST’ was inserted in the box provided.
With respect to the commercial purpose of the contract, the purchaser submits that this was correctly taken into account with the judge noting, as extracted above,[35] that:
The words of commercial contracts are to be interpreted in accordance with their commercial purpose. While words should ordinarily be given some role to play in the operation of the contract, sometimes words are included or are left in the contract in error.[36]
[35]Reasons [35]. See [32] above.
[36]Reasons [35].
The purchaser also submits that the judge properly considered and applied Duoedge in concluding that the mechanism under general condition 13.1 was not employed. To have concluded otherwise, it submits, would be impermissibly to disregard the clear words set out in that general condition.[37]
[37]The purchaser relied upon Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 [27], [38].
In response to the question of exactly how the letters ‘GST’ in the relevant box are to be understood, if not as invoking, albeit imperfectly, the mechanism for shifting the allocation of risk, the purchaser submits that the letters ‘GST’ are to be ignored as pure surplusage; they have no work to do.
I consider that submission to be untenable.
In my view, there is no error in the principles the judge adopted with respect to contractual interpretation. However, I consider that an error lies in the application of those principles.
It is not in contest that the default position under the standard form contract of sale is that the risk of liability for GST lies with the vendor. So much may be accepted, as was acknowledged in Duoedge, by the opening words under the heading ‘GST’ in the particulars of sale of the contract, namely, the words ‘the price includes GST’[38] which are to be read as indicating that, prima facie, the vendor assumes liability for GST. In this way GST is included within the purchase price. The subsequent words ‘(if any)’[39] allow for the possibility that no GST may be payable to the Commissioner of Taxation.
[38]See [10] above.
[39]Ibid.
It is also not in contest that the remaining words of the first sentence under the heading ‘GST’ in the particulars of sale, namely, ‘unless the words “plus GST” appear in this box’ are intended to reflect the mechanism provided for in general condition 13.1 (supported by general condition 13.2) to reverse the default allocation of risk as lying with the vendor. This is supported by the presence beside the heading ‘GST’ of the words ‘(general condition 13)’.
It is further not in contest that the box opposite the first sentence under the heading ‘GST’ in the particulars of sale is the relevant box for the insertion of the words ‘plus GST’ if the contract is to be objectively construed as manifesting an intention to reverse the default position.
The contest is a narrow one: it is 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?
In my view, there is sufficient indication in the contract that the parties agreed to reverse the default allocation of the risk of liability for GST. I do not consider that the absence of the single word ‘plus’ precludes that conclusion. The foundation of the judge’s reasoning lies in his assumption that the mechanism under general condition 13.1 can only be attracted in the event of strict compliance. With great respect to his Honour, there is no adequate explanation given that identifies the basis upon which that assumption is based. The reasoning in Duoedge does not support that assumption. Moreover, in my view, the judge’s approach does not adequately account for the presence of the letters ‘GST’ in the relevant box or to other indications of contractual intention, objectively construed.
First, it is noteworthy that there are several boxes in the particulars of sale, most of which were left blank.[40] For example, the purchaser was entitled to vacant possession unless the words ‘subject to lease’ appeared in the box opposite the heading ‘Lease’. The reference to general condition 1.1 beside the heading ‘Lease’ is a reference to the various encumbrances to which the land may be subject including any lease referred to in the particulars of sale. The words ‘subject to lease’ did not appear in the relevant box here from which it can be inferred that the land was not subject to a lease. There is no evidence to the contrary.
[40]See [10] above.
In the particulars of sale a further box is provided whereby an indication can be made that the land being sold is land on which a farming business is carried on. The words ‘farming business’ are to be added to the relevant box. This box was left blank from which it can be inferred that there was no farming business carried on on the land. There was no evidence to the contrary.
Further, in the particulars of sale another box is provided for the purpose of indicating that the calculation of GST will occur by reference to the margin scheme. The words ‘margin scheme’ are to be added to the relevant box. This box was left blank.
The particulars of sale also include a box whereby the parties could indicate that the contract was intended to be a terms contract, in accordance with general condition 23, by adding the words ‘terms contract’ to the relevant box. This box too was left blank.
The particulars of sale also provided that the contract was not to include any special conditions unless the word ‘special conditions’ appeared in the box opposite. This box was completed with the words ‘Special conditions’. As noted above,[41] the contract included numerous special conditions, including special conditions 16, 17, 18 and 19.
[41]See [11] and [38] above.
The particulars of sale included, at the bottom of the page, the signatures of the parties.
In my view, it can be inferred, objectively, from the systematic manner in which the particulars of sale were completed that where the parties left a box blank they intended not to attract the operation of the relevant general condition or other relevant scheme. For example, there being no need to refer to a lease the box opposite ‘Lease’ was left blank. Conversely, where relevant words were added to a box the parties intended, objectively, to attract the operation of the relevant general condition. For example, because the parties intended to include special conditions in the contract, the words ‘Special conditions’ were added to the relevant box. Had the parties remained content with the default allocation of the risk of liability for GST to the vendor, there was no need for any words to be added to the box opposite the heading ‘GST’ in the particulars of sale. That box could simply have been left blank. Had it been left blank there would have been no basis in the contract from which it could be inferred that the default position had been displaced. The blank box would have sat alongside all the other blank boxes.
I consider that the fact that the relevant box was not left blank to be of greater significance than the lack of strict compliance with general condition 13.1, namely, the absence of the word ‘plus’. That is, in my view, the presence of the letters ‘GST’ in the relevant box is of greater significance as an objective indicia of contractual intention than is the absence of the word ‘plus’. That presence reveals that there was an attempt at compliance with the mechanism in general condition 13.1, albeit that strict compliance was not achieved.
The only explanation proffered by the judge for the presence of the letters ‘GST’ in the relevant box is that they may have been placed there, or remained there, in error.[42] But there is nothing in the terms of the contract, or its context, which supports that conclusion; conjecturing a mistake merely avoids the need to confront the presence of the letters ‘GST’ in the relevant box and the obligation to give those letters some meaning is not met.
[42]See [32] above.
Furthermore, I do not consider that the judge’s conclusion is supported by the reasoning of Dixon J in Duoedge.[43] There the evidence of the hand-written strike through the relevant box for GST, indicated, objectively, that the parties intended that the agreement would not attract the operation of the mechanism of general condition 13.1; the striking through was tantamount to rendering that mechanism ‘not applicable’. Attention to the marking the parties chose to use supported an inference that the parties did not intend to reverse the default allocation of liability for GST, as lying with the vendor. This was reinforced by the hand-written annotation of the purchase price as being ‘GST inclusive’; that is, that it was not intended that the purchaser pay more than the purchase price. This hand-written annotation was, as recognised by Dixon J, not the correct way to complete the standard form of contract. It was nevertheless considered by his Honour as a matter that required explanation in assessing what agreement the parties had reached.
[43]See [25]-[26] above.
In my view, comparable attention to the markings made here on the contract gives rise to a need to explain, within the context of an objective approach to the construction of contracts, the presence of the letters ‘GST’ in the relevant box. As mentioned, I do not consider that the judge’s conclusion can explain that presence.
Looking at the contract as a whole, I do not consider that the operation of general condition 13.1 can only be attracted where there is strict compliance. It is sufficient that the contract manifests an intention to attract the operation of general condition 13.1. In my opinion, a reasonable businessperson would have understood the letters ‘GST’ in the relevant box to mean[44] 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. This is not to say that the same conclusion would be reached if the word ‘Plus’ appeared alone in the relevant box, or some other word or mark. Here, the letters ‘GST’ were added to the box and, in my view, the objective intention manifest by those letters is plain.
[44]Woodside (2014) 251 CLR 640, 656–7 [35].
It is important to emphasise the objective approach to the construction of commercial contracts: as French CJ, Nettle and Gordon JJ emphasised in Mount Bruce, ‘[w]hat is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations’.[45] Rather, it is necessary properly to take into account all of the indications in the contract from which the parties’ rights and liabilities can be objectively determined.
[45]Mount Bruce (2015) 256 CLR 104, 117 [50].
I uphold ground 1.
Ground 2 – Multiple interpretations of equal probability
The judge observed that the inclusion of the letters ‘GST’ in the box provided in the particulars of sale was ‘capable of a number of interpretations’.[46] As mentioned,[47] he proposed three possible interpretations:
One is that proposed by the [vendor]. Another, is that some thought was given as to who should be liable to pay any GST that was payable, but a decision was not reached. A third interpretation is that the letters ‘GST’ were inserted erroneously and were intended to be deleted, but that the deletion was overlooked.[48]
[46]Reasons [25].
[47]See [24] above.
[48]Reasons [25].
The vendor submits that the second and third interpretations are improbable. It submits that if a decision was not reached about liability for GST, then no words would have been added to the box. Similarly, it is more likely that the word ‘plus’ was mistakenly omitted rather than that the letters ‘GST’ were inserted by mistake and their deletion was overlooked.
The vendor further submits that the judge erred in finding that the possible interpretations were equally likely. Even if the judge considered that multiple interpretations were available, he should have found that the most likely interpretation was that liability for any GST was intended to be borne by the purchaser in addition to the purchase price. The vendor relies, in support of this proposition, on the ‘Textual and Contextual Indicators’ it identified in support of ground 1 and the fact that the contract was drafted by the solicitors for the vendor.
The purchaser submits that the vendor has taken the judge’s observation that a number of interpretations were equally available out of context. The observation was made at the point in the judge’s reasons when he was considering under what circumstances it is permissible for a court to add words to a contract. In that context the judge was merely reflecting the principles outlined in Homburg Houtimport BV v Agrosin Private Ltd.[49] In Homburg, the House of Lords held that ‘the court should not interpolate words into a written instrument, of whatever nature, unless it is clear both that words have been omitted and what those omitted words were’.[50] The judge’s observation was thus not a comment on the ambiguity of the contract as a whole, but rather a statement on the uncertainty of what words would be required to be read into the contract to support the vendor’s interpretation.
[49][2004] 1 AC 715 (‘Homburg’).
[50]Ibid 741 [23]. See also Kingston v Kemprose Pty Ltd (1987) 11 NSWLR 404, 421-4, DPP v Leys (2012) 44 VR 1. See further Sir Kim Lewison and David Hughes, The Interpretation of Contracts in Australia (Lawbook Co, 2012) 416-17 [9.04].
The test in Homburg applies at least where it is necessary to insert words to make sense of a contract.[51] The difficulty for the purchaser is that, applying that test, there is no real uncertainty here that a word was omitted and what the omitted word is. Looking at the contract as a whole, and in particular the mechanism provided to shift the allocation of risk under general condition 13.1, there is only one word omitted which would carry any meaning in the relevant box, namely, the word ‘plus’, and the insertion of that word would render it unequivocal that liability for GST lay with the purchaser. Although there would have been no difficulty in interpreting the contract had the relevant box been left blank, the presence of the letters ‘GST’ in that box does call for a construction that makes sense of the addition of those letters. As mentioned above,[52] I reject the purchaser’s submission that the addition of the letters ‘GST’ to the relevant box can be ignored as mere surplusage. To accept that proposition would be in itself to act contrary to the principle that, in construing a contract, a court is not permitted to disregard clear words.[53] This is not to ignore the details of the mechanism in general condition 13.1; it is, rather, to accept that the mechanism was implemented, albeit imperfectly, in the instant case. In my view, this is the most likely interpretation of the multiple interpretations the judge identified.
[51]As Lord Millett says, this is a ‘process of construction, not rectification’: ibid 797 [192].
[52]See [44] above.
[53]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109.
Further, if the judge was convinced that the letters ‘GST’ in the relevant box of the particulars of sale was ‘capable of a number of interpretations’[54] he was bound to take into account the ‘objective framework’ of the contract and the parties’ presumed intentions relative to that framework:
[W]hen the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting.[55]
The objective framework into which the contract came into existence was, as noted,[56] in the context of a commercial transaction for a property development with the potential for a liability for GST to be payable to the Commissioner of Taxation. The parties chose to use the standard form contract of sale that allocated the risk of liability for GST to the vendor unless that allocation was shifted. In my view, within that framework, the addition of the letters ‘GST’ into the relevant box demonstrates that the presumed intention of the parties, as expressed in the contract, was to shift the allocation of risk of liability for GST from the default position of the vendor to the purchaser.
[54]Reasons [25].
[55]Codelfa (1982) 149 CLR 337, 352.
[56]See [21] above.
I uphold ground 2.
Conclusion
For the reasons set out above, I would grant the application for leave to appeal and allow the appeal. I consider that the contract is ‘plus GST’ and not ‘inclusive of GST’. I would set aside the declaration made by the judge below and in its place make a declaration to the effect that it is the purchaser under the contract who is liable to pay to the vendor GST in addition to the purchase price of $2,900,000, if the sale transaction triggers a liability upon the vendor to pay GST to the Commissioner of Taxation.
OSBORN JA
KAYE JA:
We agree with Tate JA that the applicant should have leave to appeal, and that the appeal should be allowed. In view of her Honour’s comprehensive statement of the facts and of the primary judge’s reasons, we can state our reasons, for that conclusion, in short terms.
The issue, raised by the originating motion and summons in the proceeding, is whether, pursuant to the Contract of Sale, the purchaser was liable to pay the vendor any GST payable by the vendor in respect of the sale of the property at Grant Crescent, Ringwood to the purchaser. That short point of contractual interpretation gave rise to two basic competing propositions.
On the one hand, the submission advanced by the purchaser commenced by noting that, ordinarily, the risk of GST is borne by a vendor, unless the contract between the parties provides to the contrary. General conditions 13.1 and 13.2 of the contract prescribed precisely how that risk was to be transferred to the purchaser. That formula was not applied by the parties. Accordingly, it was contended, the liability for GST remained with the vendor, and was not transferred to the purchaser.
On the other hand, it was contended on behalf of the vendor that the position taken by the purchaser involved a construction of the contract that ignored the notation ‘GST’ that was inserted in the relevant space in the particulars of sale. It was contended that those letters, being placed in that space by the parties, must be given a meaning. The most probable construction of them, in the context of the contract, is that the parties intended to apply the formula prescribed by general condition 13, so that the parties agreed that any liability for GST in respect of the sale be borne by the purchaser and not the vendor.
The judge resolved the issue, raised by those submissions, in favour of the purchaser, in the following terms:
… 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 did not shift the burden of the payment of GST to the purchaser.[57]
[57]Reasons [34].
The issue, raised by the competing submissions of the parties, is not without difficulty. However, contrary to the conclusion of the judge, we have come to the conclusion that the correct construction of the contract is that contended for on behalf of the vendor, namely, that the contract provided that the purchaser is liable for any GST that might be payable by the vendor in respect of the sale of the property to the purchaser.
The principles of contractual construction, that are relevant to this case, are not in issue. The question, as to which party is liable for any GST payable in respect of the sale, is to be determined objectively by reference to the language used in the contract in the context of the contract as a whole, and by reference to its purpose. The meaning of the terms of the contract, that are in issue, is determined according to what a reasonable business person would have understood them to mean.
In Mount Bruce,[58] French CJ, Nettle and Gordon JJ, in their joint judgment, stated those principles as follows:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[59]
[58](2015) 256 CLR 104.
[59]Ibid 116 [46]–[47] (citations omitted).
Similarly, in Woodside,[60] French CJ, Hayne, Crennan and Kiefel JJ stated:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to meanhttps:// - FTN.13. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[61]
[60](2014) 251 CLR 640.
[61]Ibid 656–7 [35] (citations omitted); see also Eureka [2016] VSCA 95, [43]–[46] (Santamaria, Ferguson and McLeish JJA); Investors Compensation Scheme Limited v West Bromwich Building Society [No 1] [1998] 1 WLR 896, 912 (Lord Hoffman).
Evidence of surrounding circumstances, external to the contract, is relevant to illuminate the commercial purpose of the contract, and it may also be admissible to assist in the interpretation of a contract if the language of the contract is ambiguous. However, if the contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances, external to the contract, cannot be employed to contradict the plain meaning of the terms of the contract.[62]
[62]Mount Bruce (2015) 256 CLR 104, 116 [48]; Codelfa (1982) 149 CLR 337, 352 (Mason J).
A particular difficulty of contractual construction arises where it appears that particular words may have been adventitiously omitted from a contract. In such a case, the court will only interpolate a word into a written instrument if it is clear that the words have been omitted, and what those omitted words were.[63] A further requirement, for the interpolation of such words, was stated by Dixon CJ and Fullagar J in Fitzgerald v Masters as follows:[64]
Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.[65]
[63]Houtimport BV v Agrosin Private Limited [2004] 1 AC 715, 741 [23] (Lord Bingham).
[64](1956) 95 CLR 420.
[65]Ibid 426–7; see also Westpac Banking Corporation v Tanzone [2000] NSWCA 25 [20]–[21] (Priestly and Fitzgerald JJA and Foster AJA); Dockside Holdings Pty Ltd v Rakio Pty Ltd (2001) 79 SASR 379, 383–6 (Williams J, Olsson and Duggan JJ concurring).
Courts have emphasised, however, that words will only be supplied where it is demonstrated that, in the absence of them, there would be a clear absurdity or inconsistency in the contract. In Miwa Pty Ltd v Siantan Properties Pty Ltd,[66] Basten JA (with whom McColl and Campbell JJA agreed) stated:
It is clear from [the] authorities that the test of absurdity is not easily satisfied. … The courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense. …[67]
[66][2011] NSWCA 297.
[67]Ibid [18] (emphasis in original).
In Watson v Phipps,[68] the Privy Council stated the principles in similar terms:
The function of a court of construction is to ascertain what the parties meant by the words which they have used. For this purpose the grammatical and ordinary sense of the words is to be adhered to, unless they lead to some absurdity or to some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity or inconsistency, but no further …[69]
[68](1985) 63 ALR 321.
[69]Ibid 324 (citations omitted).
General condition 13.1 provides that the purchaser shall not be liable for any GST, payable by the vendor, unless the particulars of sale specify that the price is ‘plus GST’. The question, then, is whether the insertion by the parties of the letters ‘GST’, in the relevant space in the particulars of sale, would have been understood by a reasonable businessperson to have been a sufficient, albeit literally incomplete, compliance by the parties with the pre-requisite, prescribed by general condition 13, to the transfer to the purchaser of any liability for GST payable by the vendor on the sale. In accordance with the principles to which we have just referred, that question must be answered by reference to the language used by the parties, together with the context in which the critical designation, of the letters ‘GST’, in the particulars of sale, occurred.
The construction, contended for by the vendor, does require acceptance of the proposition that the notation ‘GST’, in the relevant space in the particulars of sale in the contract, was a sufficient compliance by the parties with the requirements of general condition 13.1, notwithstanding that that construction notionally involves ‘reading into’ that notation the preposition ‘plus’. However, on the other hand, the converse construction, contended for by the purchaser, would involve disregarding, or notionally omitting, those letters from the contract. In the end, the critical question is whether, construed from the viewpoint of a reasonable businessperson, and taking into account the text and contractual context, the incomplete notation ‘GST’ was sufficient compliance with the requirements of general condition 13.1 so as to transfer any liability, that the vendor may have to pay GST, to the purchaser.
There are a number of factors, contained within the text of the agreement, that favour the construction that the notation of the letters ‘GST’, in the relevant space in the particulars of sale, was sufficient to allocate the risk of liability for GST to the purchaser under the contract, notwithstanding that it did not strictly comply with the requirement, stipulated by general condition 13.1, that the words ‘plus GST’ need be included in that space.
The starting point is the notation of the letters ‘GST’ in the applicable space of the particulars of sale itself. Those letters, inserted in the particulars of the sale, cannot be ignored. They were clearly intended by the parties to have some effect. Otherwise, that space would have been left blank.[70] The space is positioned immediately beneath the specification of the purchase price in the particulars of sale. Standing alone, the insertion of the notation ‘GST’, in the applicable space in the particulars of sale, is more consistent with an intention by the parties to signify that any GST on the sale was to be borne by the purchaser, than with the competing hypothesis (relied on by the purchaser) that the notation was meaningless surplusage which should be ignored.
[70]Cf Watson v Phipps (1985) 63 ALR 321, 324.
That proposition is strengthened by the fact that the four spaces, immediately beneath that notation, were each left blank in the particulars of sale, and the sixth space (relevant to the words ‘this contract does not include any special conditions unless the words “special conditions” appear in this box’) contained the words ‘Special conditions’. That structure of the particulars of sale adds force to the proposition that the notation of the letters ‘GST’, in the relevant space in the particulars, were intended to have contractual effect. Otherwise, if the parties had intended that the ‘default’ position under the contract should apply, so that the vendor remained liable for any GST payable by it, that space would have been left blank.
In addition, it is evident, from the contract, that the property, that was the subject of the sale, had commercial potential as a development site, so that the potential liability of the vendor for GST, on the sale of the property, was far from theoretical. The vendor statement, signed by the parties pursuant to s 32 of the Sale of Land Act 1962, was annexed to the Contract of Sale, and specifically referred to in it. One of the documents, attached to the s 32 Certificate, was a planning permit issued by the Maroondah City Council on 10 July 2013, that allowed the construction of ten dwellings and the removal of vegetation on the property.
Further, and significantly, in the contract, the parties specifically adverted to the development potential of the property. Special condition 19 provided:
The vendor will provide all the reports and plans available up to date to the purchaser, including council-endorsed town planning documents and all other consultant reports required for issue of building permit. The vendor will give consent to the purchaser to use the plans in relation to 42 Grant Crescent Ringwood before settlement. The vendor will pay any fee if owed by vendor to any consultant associated with the property.
The commercial potential of the property, and the reference to it in special condition 19, is a relevant context to the construction of the designation by the parties of the letters ‘GST’, in the relevant square in the particulars of sale. In that context, objectively construed from the viewpoint of an ordinary businessperson, the parties would be seen to have specifically and intentionally inserted those letters, in that space, in order to invoke the effect of general condition 13.1, so as to transfer any liability of the vendor to pay GST, arising from the sale of the property, to the purchaser.
Accordingly, in summary, we are persuaded that the fact that the parties notated the relevant space in the particulars of sale with the letters ‘GST’, the fact that the parties were selective as to which spaces, in the 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.
It is for those reasons that, notwithstanding the careful consideration of the question by the trial judge, we have reached the contrary conclusion to his Honour, namely, that, on its correct construction, the contract did, by its terms, provide that the purchaser would be liable to pay to the vendor any GST payable by the vendor.
Accordingly, we would grant the applicant leave to appeal on both grounds, and allow the appeal. The applicant vendor should be entitled to the declaration sought in the originating motion and the summons, namely, that pursuant to the contract of sale any GST that is payable by the vendor arising from the sale be paid by the purchaser to the vendor.