ETO Pty Ltd v Idameneo (No 123) Pty Ltd

ETO Pty Ltd (the purchaser) and Idameneo (No 123) Pty Ltd (the vendor) were parties to a contract for the sale of five parcels of land. The dispute concerned the application of clause 13.9 of the contract, which stipulated that the vendor would pay the purchaser one-eleventh of the purchase price if the sale was not a taxable supply for Goods and Services Tax (GST) purposes. The Court of Appeal of New South Wales was required to determine how this clause operated when the supply of four of the parcels was not a taxable supply, but the supply of the fifth parcel was.

The central legal issue was the interpretation of clause 13.9 in circumstances where the sale was only partly a taxable supply. Specifically, the court had to decide whether the clause should be construed distributively, allowing for an apportionment of GST that would have been payable had all parcels been a taxable supply, or if it applied only in an all-or-nothing scenario.

The Court of Appeal held that clause 13.9 was not to be construed distributively. The judges reasoned that the contract adopted an "all or nothing" approach to the operation of clause 13.9. The clause was found not to operate unless the sale, as a whole, was not a taxable supply. Therefore, because part of the sale constituted a taxable supply, the condition for the operation of clause 13.9 was not met. The appeal was dismissed with costs.