What happened?
The case of SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd involved the sale of a vacant industrial warehouse at Wetherill Park in Sydney at public auction on 19 August 2015.
The property sold for $3,325 million which was reflected as the “price” on the front page of the contract. It also contained the standard condition, clause 13.2, which says “normally GST is not to be added to the price”.
There were no special conditions in the contract to alter clause 13.2, which meant GST was inclusive of the price recorded on the front page of the Contract for Sale of Land and there was no amount inserted in the GST amount box.
The vendor, Shaye Properties, who I represented, understood that GST was in addition to the price and relied on what the auctioneer said at the beginning of the auction.
The auctioneer said that “the sale will be deemed a taxable supply and therefore GST will be payable by the purchasers in addition to the price of today’s auction”. The auction reserve price letter also stated a price “+ GST”, and was shown to the purchaser’s agent during the auction.
However the purchaser held a contrary position that GST was included in the purchase price and relied on the contract terms.
The purchaser also received legal advice prior to the auction, suggesting clarification should be obtained prior to the auction, but this never happened.
Another issue that arose during the auction took place when a potential purchaser took a counterpart contract at the end of the auction which was the only copy.
Court decision
Justice Stevenson ruled in favour of the vendor and ordered GST of $332,500 be paid to them by the purchaser.
The decision was based on the evidence of four witnesses. This included what the auctioneer said, together with an email from them six days after the auction to the vendor’s agent, which remained unchallenged by the purchaser.
This evidence was corroborated by the reserve price letter shown to the purchaser’s agent during the auction and given to the vendor’s agent prior to the auction showing that the sale price was “+ GST”.
Court of Appeal’s decision
The purchaser appealed the decision, but Justice Stevenson dismissed it and stated that the Contract for Sale of Land be rectified to add GST to the sale price and interest for the delayed settlement should also be paid.
The Court of Appeal confirmed that the decisive piece of evidence, which remained unchallenged by the purchaser, was set out in the email between the auctioneer and vendor’s agent.
The email stated the auctioneer said at the commencement of the auction “the sale is deemed to be a taxable supply and GST is payable by the purchasers”.
Do’s and don’ts at a commercial property auction
Do’s
- Prior to exchange of contracts, seek written clarification from solicitors/conveyancers how the treatment of GST should be recorded on the front page of the Contract for Sale of Land (whether at auction or by private treaty)
- At the end of an auction, fill in the GST option box, even if it is nil
- Take notes, particularly if the auctioneer makes any changes at the commencement of the auction which could alter the Contract for Sale of Land
- Ensure sales advice is issued to all parties within 24 hours of the auction and refers to the treatment of GST in the sale price.
Don’ts
- Don’t allow any counterpart contracts to be handed to potential purchasers at the auction and take a spare copy with you
- Don’t say anything to potential purchasers during the auction that is different to what is set out in the Contract for Sale of Land. If unsure, say that you will obtain instructions from the vendor