Late last week the Supreme Court of Victoria handed down its decision in Cityrose Trading Pty Ltd v Booth [2013] VSC 504 where the Court found that the GST Special Condition in a real estate contract was meaningless and should be severed from the contract. This meant that the price was GST-inclusive as there was no longer any GST clause. The decision illustrates the importance of drafting GST clauses that properly reflect the intentions of the parties, and also that not all GST disputes involve the Commissioner.
This proceeding has a very long (and very expensive) history, involving two hearings before the Victorian Civil and Administrative Tribunal and two appeals to the Supreme Court. The essential question was whether the purchaser was bound to pay, in addition to the stated purchase price of $2,250,000, an amount of $225,000 on account of GST. One would expect that the legal costs have long since overtaken the GST in dispute.
The history of the case is as follows:
- In 2007 there was a hearing before the Victorian Civil and Appeals Tribunal (VCAT) which took 6 days and found in favour of the purchaser.
- In 2008 the decision of VCAT was appealed to the Supreme Court, which allowed the appeal and referred the matter to the Tribunal for re-hearing: [2008] VSC 495
- In 2011 VCAT re-heard the matter, over three days. The tribunal again found in favour of the purchaser: [2011] VCAT 278
- In February 2012 the vendor sought leave to appeal from the decision of VCAT before an Associate Justice of the Supreme Court. Leave to appeal was refused.
- In July 2012 the vendor sought a rehearing of the application for leave to appeal the decision of VCAT before a Judge of the Supreme Court. That hearing was heard over 2 days. On 19 September Emerton J found that leave to appeal should be granted, the appeal allowed and the order of VCAT be substituted by the orders of the Court: [2013] VSC 504
I first discussed this decision as part of a paper I delivered earlier this year entitled “GST and Real Estate Contracts – when things go wrong”. This was just after the Tribunal had handed down its decision on the re-hearing. The Supreme Court allowed the vendor’s appeal but accepted the notice of contention of the purchaser that the GST clause was void for uncertainty and the clause should be severed from the contract.
My analysis of the decision can be found here.
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hey chris was that spec cond in city rose not the standard spec cond re gst in in the standard real estate contract produced by the liv and reiv just after gst came along??
if yes well i am glad the judge had those things to say about it and i could have added a few myself
Hi Victor, yes I believe that this was one of the standard clauses floating around at the time. I think it was clear that the intent of the clause was to pass GST on to the purchaser, but the drafting of the clause clearly had its difficulties.