Belconnen Lakeview Pty Ltd v Lloyd

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FEDERAL COURT OF AUSTRALIA

Belconnen Lakeview Pty Ltd v Lloyd [2021] FCAFC 187

Appeal from:

Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177

Lloyd v Belconnen Lakeview Pty Ltd (No 2) [2020] FCA 698
File number: NSD 651 of 2020
Judgment of: GRIFFITHS, DAVIES AND MOSHINSKY JJ
Date of judgment: 25 October 2021
Catchwords:

CONSUMER LAW – misleading or deceptive conduct – sale of unexpired term of a lease with respect to a residential unit in a development – where the draft contract was prepared on the basis that the supply would be a taxable supply and subject to the margin scheme for the purposes of GST – where, in fact, the developer had obtained a private binding ruling two years earlier that it could bring itself within an exception to the relevant GST provisions such that the supply would be an input taxed supply – where the primary judge found that the developer had engaged in misleading and deceptive conduct – where the primary judge found that the purchaser lost an opportunity of non-negligible value, namely an opportunity to renegotiate the contract between the date of the contract and the date of settlement – where the primary judge awarded damages to the purchaser for loss of that opportunity – whether the primary judge erred in holding that the purchaser lost an opportunity of non-negligible value – whether the primary judge erred in holding that the developer engaged in misleading or deceptive conduct

CONSUMER LAW – misleading or deceptive conduct – accessorial liability – where the primary judge dismissed claims that two officers of a company were knowingly involved in contraventions by the company – whether the primary judge erred in so holding

RESTITUTION – money had and received – sale of unexpired term of a lease with respect to a residential unit in a development – where the contract was prepared on the basis that the supply would be a taxable supply and subject to the margin scheme for the purposes of GST – where, in fact, the supply was an input taxed supply – where the purchaser brought a claim for money had and received with respect to the component of the purchase price referable to GST on the basis that there was a total failure of a severable part of the consideration – whether there was a total failure of a severable part of the consideration – whether the terms of the contract precluded recovery on the basis of money had and received

Legislation:

A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 7-1, 9-30, 9-40, 9-70, 40-1, 75-5, 75-10, 75-20

Competition and Consumer Act 2010 (Cth), Sch 2 Australian Consumer Law, ss 18, 236

Federal Court of Australia Act 1976 (Cth), ss 33N, 33ZB

Tax Laws Amendment (2011 Measures No. 9) Act 2012 (Cth)

Trade Practices Act 1974 (Cth), s 82

Business Franchise Licences (Tobacco) Act 1987 (NSW)

Cases cited:

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42…

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Details
Case
[2021] FCAFC 187
Decision Date

CaseChat Overview and Summary

The case of Belconnen Lakeview Pty Ltd v Lloyd involves a dispute regarding the sale of the unexpired term of a lease for a residential unit in a development, specifically in relation to the classification of the supply for the purposes of GST. The dispute was brought before the court to determine whether the developer, Belconnen Lakeview, had engaged in misleading or deceptive conduct by representing that the sale was subject to GST, when in fact, it was an input taxed supply. Additionally, the court considered whether Belconnen Lakeview, as well as two of its officers, were liable for accessorial liability in relation to the contraventions, and whether the purchaser, Mrs Lloyd, was entitled to restitution for the overpaid GST.

The primary legal issues the court was required to decide included whether Belconnen Lakeview engaged in misleading or deceptive conduct by representing that the supply was subject to GST when it was not, and whether this conduct resulted in a loss of a non-negligible opportunity for Mrs Lloyd. The court was also required to determine whether the two officers of Belconnen Lakeview were knowingly involved in the contraventions, and whether Mrs Lloyd was entitled to restitution for the overpaid GST under the doctrine of money had and received.

The court found that Belconnen Lakeview had indeed engaged in misleading or deceptive conduct by representing that the supply was subject to GST, when it had obtained a private binding ruling that the supply was an input taxed supply. However, the court found that Mrs Lloyd did not suffer a loss of a non-negligible opportunity due to this conduct, and therefore, the award of damages for the lost opportunity was set aside. In relation to the accessorial liability of the two officers, the court found that there was no evidence to support the claim that they were knowingly involved in the contraventions. Finally, the court found that the doctrine of money had and received did not apply in this case, as the contract did not preclude recovery on that basis.

The outcome of the case resulted in the appeal brought by Belconnen Lakeview being allowed, while the cross-appeal brought by Mrs Lloyd and the cross-cross-appeal brought by the two officers were dismissed. The court set aside certain parts of the primary judge's orders and dismissed Mrs Lloyd's claim against Belconnen Lakeview. The costs of the proceeding at first instance, and the costs of the appeal, cross-appeal and cross-cross-appeal, were to be determined on the papers.

Orders

Orders of the court

1. The appeal brought by the appellant (Belconnen) be allowed.

2. The cross-appeal brought by the respondent (Mrs Lloyd) be dismissed.

3. The cross-cross-appeal brought by the second cross-respondent (Mr Hindmarsh) and the third cross-respondent (Mr Ryan) be allowed.

4. The following parts of the orders of the primary judge dated 14 May 2020 be set aside:

(a) paragraph 1;

(b) paragraph 4; and

(c) the reference to order 4 in paragraph 6.

5. In lieu thereof, it be ordered that Mrs Lloyd’s claim against Belconnen be dismissed.

6. In relation to any consequential orders arising from the above, the costs of the proceeding at first instance, and the costs of the appeal, the cross-appeal and the cross-cross-appeal:

(a) Within 14 days:

(i) Belconnen file and serve written submissions (of no more than five pages), proposed minutes of orders and any affidavit material; and

(ii) Mr Hindmarsh and Mr Ryan file and serve written submissions (of no more than two pages), proposed minutes of orders and any affidavit material;

(b) Within a further 14 days, Mrs Lloyd file and serve written submissions (of no more than seven pages), proposed minutes of orders and any affidavit material; and

(c) Subject to further order, the issues of consequential orders and costs be determined on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The interest of a commercial purchaser in being able to use the margin scheme for a future sale would seem to be the purpose of the warranty by the seller in cl 24.5 of the contract of sale in issue in the present case (discussed later in these reasons).BACKGROUND FACTS The following statement of the background facts is largely based on the findings of the primary judge as set out in the Reasons.Overview Before setting out the facts in detail, it is useful to identify five key dates in the chronology of relevant events:(a)On 8 February 2013, Belconnen applied to the ATO for a private binding ruling.(b)On 12 March 2013, Belconnen received a private binding ruling from the ATO (the Altitude Private Ruling).(c)In March and April 2013, Belconnen amended its GST returns and repaid input tax credits consistently with the Altitude Private Ruling.(d)On 10 March 2015, Mrs Lloyd and Belconnen exchanged contracts with respect to her purchase of the unexpired term of a lease of a residential unit in the Altitude Apartments development (the Lloyd Contract).(e)On 7 April 2015, settlement of the purchase took place.The period before February 2013 In 2007, Belconnen purchased the unexpired term of a Crown lease for the relevant land in the suburb of Belconnen, ACT. In or around August 2008, Belconnen retained Clayton Utz to prepare a master contract for the Altitude Apartments development and to act on any sales. A partner of Clayton Utz was appointed by power of attorney to sign contracts on Belconnen’s behalf. Mr Hindmarsh is and was at the material times the sole director and 50% shareholder of Belconnen. He was the Executive Chairman of the Hindmarsh Group, of which Belconnen formed part. At the material times, Mr Ryan was the company secretary of Belconnen and the CFO of the Hindmarsh Group. In 2009, Belconnen was granted development approval in relation to the development of the Altitude Apartments. From about 2010, Belconnen offered to enter into, and entered into, contracts to sell the unexpired term of the then unregistered leases for the residential units in the development. In May 2010, the Full Court of this Court gave judgment in Federal Commissioner of Taxation v Gloxinia Investments Ltd (2010) 183 FCR 420 (Gloxinia). In the context of a developer selling strata lot leases with respect to residential premises, the Full Court (by a majority) held that the supply was an “input taxed supply” rather than a taxable supply for the purposes of the GST Act. In circumstances where the Full Court’s holding departed from the then prevailing understanding of the ATO, legislation was passed (the Tax Laws Amendment (2011 Measures No. 9) Act 2012 (Cth)), with the effect that, subject to transitional provisions (or exceptions), sales of newly constructed residential premises that were the subject of a development lease arrangement would be taxable supplies. The transitional arrangements (or exceptions) are of significance for present purposes. As discussed below, Belconnen obtained a private binding ruling that an exception applied to supplies of the unexpired term of leases of residential units in the Altitude Apartments development, with the effect that the relevant supplies were input taxed supplies.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In light of our conclusion that Belconnen’s appeal should be allowed, the costs order in paragraph 4 of the 14 May 2020 orders needs to be set aside (as does the reference to order 4 in paragraph 6 of those orders). It is appropriate also to make an order that the cross-cross-appeal be allowed. We will give the parties an opportunity to make submissions on the costs of the trial (as well as the costs of the appeal, cross-appeal and cross-cross-appeal).CONCLUSION For the reasons set out above, we will make orders to the following effect:(a)The appeal brought by Belconnen be allowed.(b)The cross-appeal brought by Mrs Lloyd be dismissed.(c)The cross-cross-appeal brought by Messrs Hindmarsh and Ryan be allowed.(d)The following parts of the orders of the primary judge dated 14 May 2020 be set aside:(i)paragraph 1;(ii)paragraph 4; and(iii)the reference to order 4 in paragraph 6.(e)In lieu thereof, it be ordered that Mrs Lloyd’s claim against Belconnen be dismissed.(f)In relation to any consequential orders arising from the above, the costs of the proceeding at first instance, and the costs of the appeal, the cross-appeal and the cross-cross-appeal:(i)Within 14 days:(A)Belconnen file and serve written submissions (of no more than five pages), proposed minutes of orders and any affidavit material; and(B)Mr Hindmarsh and Mr Ryan file and serve written submissions (of no more than two pages), proposed minutes of orders and any affidavit material;(ii)Within a further 14 days, Mrs Lloyd file and serve written submissions (of no more than seven pages), proposed minutes of orders and any affidavit material; and(iii)Subject to further order, the issues of consequential orders and costs be determined on the papers.

Ratio Decidendi

Legal Principle Established

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