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Costly reminder: Plus GST is not an optional extra

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By Divya Sharma, Lawyer, MST Lawyers

What happened?

In the case of A & A Property Developers Pty Ltd v MCCA Asset Management Ltd [2016] VSC 653, the purchaser entered into a Contract of Sale (“Contract”) to purchase a property for $2,900,000. A dispute arose between the parties whether the purchase price included GST or GST was payable on top of the purchase price.

General Condition 13.1 of the Contract stated:

The purchaser does not have to pay the vendor any GST payable by the vendor… unless the particulars of sale specify that the price is ‘plus GST’.

The particulars of the sale page of the Contract included a box providing space for the words ‘plus GST’. However, within the box, only the letters ‘GST’ were written. 

What was the issue?

The vendor sought a declaration that the purchase price under the Contract was $2,900,000 plus GST. At the core of the dispute was the construction of the Contract. Specifically, did the wording of General Condition 13.1 strictly require ‘plus GST’ to be written in the box in order to increase the purchase price to add GST?

As the word ‘GST’, rather than the words ‘plus GST’ was written, the purchaser contended that in accordance with General Condition 13.1, it did not have to pay the GST payable by the vendor.

What did the Court say?

The Supreme Court of Victoria found in favour of the purchaser. The language of General Condition 13.1 was clear; the words ‘plus GST’ must be given some meaning and cannot be ignored. Therefore, in the absence of the word ‘plus’, no GST was payable by the purchaser.

The Court considered the judgement of Dixon J in Duoedge Pty Ltd v Leong [2013] VSC 36:

The plain meaning of this contract is that the GST risk lay with the vendor… This construction is neither uncertain, nor ambiguous. To reverse the allocation of that risk to the purchaser, the words ‘plus GST’ [must be] added to the box.

Furthermore, despite the vendor’s argument otherwise, as there was no ambiguity concerning General Condition 13.1, no surrounding circumstances were admissible in interpreting the Contract.

His Honour, Ginnane J, also rejected the notion that the result was absurd, given that ‘GST’ alone could hold multiple meanings.

What does this mean for you?

Whilst the omission of the word ‘plus’ may seem trivial, the intention of the parties is judged based on a strict interpretation of the language of the contract. The reluctance of the Court to read words into the contract of sale demonstrates the importance of complying with the clear meaning of its terms.

If you want to avoid the same fate as the vendor in this case, make sure you seek timely legal advice please contact our experienced Property and Leasing team for any questions that you may have by email or telephone +61 3 8540 0200.