In SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd  NSWSC 362 the Supreme Court found that a Contract of Sale should be rectified to reflect the common intention of the parties that the purchase price was to be exclusive of GST.
The decision is another example of the difficulties that can arise where real estate is sold and there is confusion as to whether the price is exclusive or inclusive of GST. The amounts at issue can be significant, in this case it was $325,000 (10% of the purchase price of $3.25m). Similar disputes arose in the NSW Supreme Court in Gallinar Holdings Pty Ltd v Riedel  NSWSC 476, Ashton v Monteleone  NSWSC 258 and Tam v Mannall  NSWSC 250. The issue is discussed in more detail in my paper “GST and Real Estate Contracts – when things go wrong“.
In this case, the Contract of Sale clearly provided that the price was inclusive of GST – in contrast to other cases where the proper construction of the contract was at issue. The vendor contended that despite the form of contract executed, the “clear and common intention” of the parties was that the price was “plus GST” and the contract should be rectified accordingly.
The Court observed that rectification was available where there is “clear and convincing proof” that by reason of the common mistake of the parties, the document they signed did not “embody the final intention of the parties”. The evidentiary burden placed on the party seeking rectification is high and the relief is not easily obtained.
The difficulty faced by the Court (and the applicant) in the case was that there was a sharp divide in the evidence given on behalf of the parties. At the end of the day, the evidence that appeared to sway the Court was that of the auctioneer, who recalled telling the crowd at the auction that the bids were to be exclusive of GST and that GST would be in addition to the knockdown price. Critically, the auctioneer sent an email shortly after the auction confirming his recollection of events. The evidence of the auctioneer was consistent with a “Reserve Price Letter” given by the vendor to the agent before the auction stating that the reserve price was “$3,500,000 + GST”.
The email was seen by the Court as decisive, being described as an almost contemporaneous note by the auctioneer of what he said at the auction. Given the disparity in oral evidence of what was actually said at the auction, the email provided the Court with a piece of documentary evidence upon which it could base its finding. This can be compared with the decision in Tam v Mannall where the auctioneer gave evidence that he informed the bidders that the price was to be increased for GST but, given the disparity in the oral evidence given at trial about what was actually said at the auction, the Court found that the vendor could not establish that the purchasers had heard those words and the parties held a common intention that the price was to be plus GST.