Would you like GST with that?
The question of whether a price for something includes or excludes GST is an issue that arises in contracts from time to time. Such was the dispute between the parties in A & A Property Developers Pty Ltd v MCCA Asset Management Ltd.[1] The Victorian Supreme Court had the task of construing the seemingly ambiguous wording which the parties had used in a sale of land contract, in order to ascertain whether the purchaser should be liable to pay GST in addition to the purchase price.
The facts
The plaintiff, A & A Property, was the vendor in a contract of sale of land, and the defendant the purchaser. The contract price was expressed as $2,900,000 with a 10 percent deposit. When the parties disagreed about the inclusion of GST in the contract price, the plaintiff sought a declaration, pursuant to section 49(1) of the Property Law Act 1958 (Vic), that GST was to be added to the stated price.
Section 49(1) of the Act states:
'A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid'.
The contract of sale contained a table of particulars, including the nominated purchase price and the deposit. Beneath those amounts, the table also included the following term:
'The price includes GST (if any) unless the words "plus GST" appear in this box'.
In the adjoining box the word 'GST' (not 'plus GST') was written.
Separately, a clause of the contract ('General Condition 13.1') stated:
'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 parties led evidence before the Court regarding matters occurring in the lead-up to executing the contract. That evidence included:
an email from the conveyancer for the purchaser which stated that the purchaser was preparing a 'tax invoice' to be handed over at settlement; and
a letter from the vendor's lawyer to the purchaser's lawyer, stating that the property was uninhabitable and therefore not a 'residential premises' for the purchases of the Australian GST regime, and consequentially GST was to be included in the price rather than added on top.
The Court's analysis
Ginnane J presided over the matter. His Honour considered that the presence of the word 'GST' (rather than the expression 'plus GST') in the contract could signify one of three things:
As the plaintiff submitted, that the word 'GST' was the same as the expression 'plus GST', such that the price of $2,900,000 should have a further amount added to it for GST.
That the parties had turned their minds to the question of GST, but had not reached a definitive view.
That the word 'GST' was inserted in error and should have been deleted but that the parties had neglected to do so.
What was the plain meaning of the contract?
In ascertaining which of the three possibilities was the most likely, his Honour noted that:
'In construing a contract, the court can correct obvious errors in the contract's language and grammar. Such correction is usually limited to obvious mistakes in the expression of the contract, including spelling and grammar, mistakes in names, omissions [of] obvious words or the obvious use of the wrong word'.[2]
His Honour held that the plain meaning of General Condition 13.1 was that the vendor bore the onus of paying GST unless otherwise required by the use of the expression 'plus GST' in the table of particulars.
Having identified the plain meaning of the contract, his Honour did not consider it necessary to add words (such as, presumably, the word 'plus' before 'GST') in order to avoid absurdity or inconsistency in the contract of sale. Moreover, his Honour noted that the plaintiff as vendor had not sought an order rectifying the contract.
Should the blank space be completed?
In looking to another principle of construction, his Honour noted:
'A further rule of construction is that when a clause in a contract contains a blank space, which was intended to be filled in, that part of the contract will usually be held void for uncertainty, unless the parties' unexpressed intention can be discerned from the context and background or one party was authorised to fill in the blanks. In some cases, a blank in a document may be dealt with simply by ignoring it, and reading the contract as it was not there'.[3]
His Honour did not consider the presence of a blank space in the contract of sale — presumably the 'blank' caused by the omission of the word 'plus' before 'GST' — had rendered that part of the contract void for uncertainty. Instead, his Honour considered 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 it was not employed in this instance'.[4]
For those reasons, the Court concluded that the purchaser was not required to pay GST in addition to the stipulated purchase price.
Conclusion
The decision in A & A Property Developers Pty Ltd v MCCA Asset Management Ltd is a handy reminder of how the principles of construction of contracts can be applied, particularly in circumstances where something appears to have been omitted from a contract. The case also highlights the importance, when drafting a contract, of leaving nothing to assumption. One hopes that, unlike the situation faced by the parties in this case, this can be a wisdom gained without the need for hindsight.
[1]: [2016] VSC 653.
[2]: Ibid [29].
[3]: Ibid [32].
[4]: Ibid [34]. The Court cited, as authority for the proposition that a blank in a contract could in some circumstances be ignored, the decision in Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617, 620–1.