In A & A Property Developers Pty Ltd v MCCA Asset Management Ltd  VSC 643 the Supreme Court of Victoria found that GST was not to be added to the purchase price payable under a contract of sale. The decision is a further example of the difficulties that can arise when documenting the contractual position with regards to GST and the sale of real property. This issue is discussed more broadly in a paper I presented in 2013, GST and Real Estate Contracts – when things go wrong.
In this case the parties entered into the standard form LIV contract of sale which provides for a “tick the box” process with regards to GST. The particulars of sale state that “The price includes GST (if any) unless the words “plus GST” appear in this box”. Clause 13.1 of the General Conditions provides that “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’.”
The difficulty appears to have arisen because of the way the particulars of sale were completed. The price was $2,900,000 with a deposit of $290,000 but the word “GST”
was included in the box dealing with GST, not the words “plus GST”.
The Court accepted the defendant’s construction of the contract – that the language of clause 13.1 was clear and the purchaser was not required to pay GST unless the Particulars of Sale specified that the price was “plus GST”. The Court found that its should not add words into a written instrument unless it was clear that the words had been omitted and what those omitted words were. The Court observed that the presence of the letters “GST” was capable of a number of interpretations.
The Court observed that the plain meaning of the contract was that the obligation to pay GST lay with the vendor and that 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 that it was not employed in this instance.
The Court also observed that the plaintiff did not seek an order for rectification of the contract – and in any event, the evidence suggested that the parties did not have a common intention about their agreement concerning the liability to pay GST.
This decision can be compared with the recent decision of the New South Wales Supreme Court in SSE Corp Pty Ltd v Toongabbie Investments Pty Ltd as Trustee for the Toongabbie Investments Unit Trust  NSWSC 1235 where the plaintiff unsuccessfully applied for rectification of two contracts of sale by inserting the words “plus GST” after the purchase price. The plaintiff contended that by mistake the words “plus GST” had not been added to the statement of the price in each of the contracts before the contracts were exchanged
The Court undertook a detailed review of the evidence and concluded that the parties did not make a common mistake in the recording of the agreement, and that the purchaser entered into the contracts with a definite and clear understanding that the prices were to be inclusive of GST, whatever the subjective understanding of the vendor may have been. The principals of the purchaser were not aware, when the contracts were exchanged, that the contracts did not reflect the vendor’s understanding of the prices to be paid – so this was not a case where the vendor entered into the contracts under a unilateral mistake that was known to the purchaser.