back to news

Auctioneer announced the Sale Price "exclusive of GST", overrides Contract for Sale

CaseFlash 18 April 2016

In SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2016] NSWSC 362 the Supreme Court found that a Contract of Sale should be rectified to reflect the common intention of the parties when entering into the agreement that the purchase price of a property was to be exclusive of GST.
 
Material Facts

The Vendor listed its industrial property at Wetherill Park for public auction on 19 August 2015. The Purchaser sent its agent, Mr Jody Parker, to the auction to bid on its behalf. Mr Parker bid $3.325 million to purchase the property. The auctioneer accepted the bid. Contracts were executed and exchanged in the form of a draft that had been circulated prior to the auction. There was confusion as to whether the price was exclusive or inclusive of GST. The effect of the contract, as executed, was to provide for a purchase price of $3.325 million inclusive of GST.

The Vendor alleged that, despite the form of contract as executed, the “clear and common intention” of the parties was that the contract price be $3.325 million plus GST and sought rectification of the contract accordingly.

Court’s Decision

The Court held that rectification was available where there is “clear and convincing proof” that by reason of the common mistake of the parties, the document they have signed does not “embody the final intention of the parties”. The evidentiary burden of “clear and convincing proof” placed on the party seeking rectification is high and relief is not easily obtained.

The Court found that there was a striking difference between the recollections of the witnesses called by the parties and their evidence could not be reconciled. The Court found that the auctioneers email evidence reflected the actual recollection of what occurred at the auction, in particular, his recollection that at the auction “it was clearly stated that GST was payable above and beyond the sale price.” The evidence of the auctioneer was corroborated by the “Reserve Price Letter” given by the vendor to the agent before the auction, stating that the reserve price was “3,500,000 + GST”. The Court held that Mr Parker must have heard the Auctioneer say that bids were to be exclusive of GST, and furthermore that by the time Mr Parker made his final bid, he had seen the Reserve Price Letter, and from that must have seen the Vendor’s intention was that the sale price be “+ GST” and that his bids were being received by the Auctioneer on that basis.

Thus the Court found that Mr Parker was well aware that his final bid of $3.325 million was accepted by the Auctioneer on the basis that it was exclusive of GST. The Court then held that the common intention of the parties was that the sale price would be $3.325 million plus GST and that the contract should be rectified accordingly.

Importance

In this case the Vendor did not read the Contract prior to the auction, and hence the Vendor did not notice that the Contract did not contain any special condition overriding clause 13.2 of the standard terms of the Contract (“Normally, if a party must pay the price…to the other party under this contract, GST is not to be added to the price…”). It is important that the Vendor understand the nature of their contract, in particular whether or not the sale price will be inclusive of GST, in this case the Vendor was fortunately able to provide “clear and convincing proof” that the common intention of the parties was that the sale price did not include GST, however this evidential burden is quite substantial and not easily attained. If the Vendor was unable to satisfy this evidential burden they would have suffered a significant loss of $325,000 (10% of the purchase price of $3.25 million). Dealing with property, and large sums of money, confusion of whether GST is included or not can become very costly.


Gary Newton, Partner
Sydney

Henry Yuan, Paralegal
Sydney

CaseFlash 18 April 2016
back to news